What does a hotel portal have in common with a farmer with 500 dairy cows, a bookbindery in Skive, a nursing home in Odense, and a wind turbine supplier in Varde? They were all declared bankrupt in September 2020, along with around 183 other companies.
The number of bankruptcies resulted from the Covid19 epidemic, which ravaged the world and made it difficult for many companies to maintain a fixed income. There is, therefore, a need to focus on how your business partners, customers, competitors, suppliers, and investments are doing.
A credit rating can therefore help you. We now see the same in 2022 with an increase in bankruptcies in the construction industry. This may mean that players who have exposed industries as primary customers should keep an extra eye on their customer portfolio.
Also, companies, e.g., wholesalers for whom a large part of their customer portfolio is in the construction industry, have reason to listen because their customers can also be affected if they do not collect the money due to, among other things, a bankruptcy and so the ripples in the water spread with economic consequences both quickly and widely in a society when one industry starts to be affected.
What is a credit score?
When a loan provider receives an inquiry from you that you would like to take out a loan, the loan provider will usually carry out a credit assessment of you. A credit rating is an assessment of how likely you will be able to pay back the money that the loan provider lends you. They will also examine how your finances are in general. They will, among other things, investigate whether you owe money to different loan providers.
The loan provider will use the credit assessment to assess whether they can/will offer you the loan you want.
A credit assessment can be comprehensive or superficial, depending on how much money you want to borrow. If it is a large amount that you want to borrow, the loan provider will require more information, while a credit assessment for smaller amounts is not as extensive and only needs less detail.
Will there be more bankruptcies in 2020?
Seen through historical lenses, the winter half-year was marked by many more bankruptcies. In the airline and travel industry, the outlook was not particularly good. In 2020, the airline industry experienced a significant catastrophe, losing around 100 billion kroner.
Bankruptcies have hit the industry, and employees in the hotel, restaurant, airline, and tourism industries are being laid off in an increasing number never seen before.
The question on many minds at the time was who was next to be hit by bankruptcies, and the answer was straightforward: It was those with the worst credit ratings.
All industries are affected
As was illustrated in the introduction, bankruptcies are not reserved for a few individual industries, nor are they limited to certain regions. All of Denmark was affected by bankruptcies because all of Denmark was clearly influenced by the corona crisis.
All industries, which together amount to many hundreds of thousands employed in the Danish population, have experienced a decline in turnover from the first to the second quarter of 2020.
It helped highlight the need to know the credit status of its suppliers, business partners, and customers. The insight you get with a credit rating helps to keep an overview of other companies' financial situations. If you don't have that insight, you risk losing your balance when others fall.
Why is it essential to have a credit score?
With a credit rating, you can keep an eye on how your business partners, customers, competitors, suppliers, and investments are performing financially. In the world's crisis in 2020, it was difficult to predict how many companies would go bankrupt, and companies needed to keep an eye on how one's business partner, e.g., made it.
If you are in doubt about the risk of entering into a collaboration with a company, or if for other reasons you are interested in a specific company's financial situation, you can purchase a credit assessment from Creditro.
With this credit rating, you get an overview of the company's financial situation without the company being notified of who requested the credit rating.