One of the most useful tools in deciding the credit terms you offer !
At the heart of the information contained in a Business Information Report is the D&B Rating. This is a coded guide to the risk associated with doing business with a specific company.
Example Part 1 : D&B Rating 5A 4
The Dun and Bradstreet Rating consists of two parts :
(a) Financial Strength Indicator (shown in the example as 5A)
(b) Condition Code or Risk Indicator (shown in the example as 4)
Financial Strength Indicator
The Financial Strength Indicator is calculated using either the Net Worth or Issued Capital of the Subject Company. If both figures are available, then the Net Worth is always used to calculate the Financial Strength.
|Based on Net Worth||Based on Issued Capital Figure|
|5A||Financial Strength of 60 + million||5AA||Financial Strength of 60 million +|
|4A||Financial Strength of 25 - 60 million||4AA||Financial Strength of 25 - 60 million|
|3A||Financial Strength of 12 - 25 million||3AA||Financial Strength of 12 - 25 million|
|2A||Financial Strength of 2.5 - 12 million||2AA||Financial Strength of 2.5 - 12 million|
|1A||Financial Strength of 1.2 - 2.5 million||1AA||Financial Strength of 1.2 - 2.5 million|
|A||Financial Strength of 600,000 - 1.2 million||AA||Financial Strength of 600,000 - 1.2 million|
|B||Financial Strength of 345,000 - 600,000||BB||Financial Strength of 345,000 - 600,000|
|C||Financial Strength of 175,000 - 345,000||CC||Financial Strength of 175,000 - 345,000|
|D||Financial Strength of 120,000 - 175,000||DD||Financial Strength of 175,000 - 345,000|
|E||Financial Strength of 60,000 - 120,000||EE||Financial Strength of 60,000 - 120,000|
|F||Financial Strength of 35,000 - 60,000||FF||Financial Strength of 35,000 - 60,000|
|G||Financial Strength of 15,000 - 35,000||GG||Financial Strength of 15,000 - 35,000|
|H||Financial Strength of 0 - 15,000||HH||Financial Strength of 0 - 15,000|
|Other codes used:
The Condition Code or Risk Indicator
This is calculated by taking into account key items within the Business Information report which are used to predict the likelihood of a business failure.
|Probability of failure||Guide to interpretation|
|1||Minimal risk||Proceed with transaction - offer terms required|
|2||Low risk||Proceed with transaction|
|3||Greater than average risk||Proceed with transaction but monitor closely|
|4||Significant level of risk||Take suitable assurances before extending credit|
|-||Insufficient information to assign a risk indicator||No public information or D&B proprietary information available to indicate trading activity|
The Risk Indicator in more detail :
- Strong Condition ( 1 )
This is assigned to companies of undoubted credit standing and financial strength. The risk associated with being a creditor of these concerns would be negligible or zero, the concern which pays bills promptly or discount.
- Good Condition ( 2 )
This is assigned to financially sound concerns, having no known record of bad payments and paying suppliers quickly. The risk of being associated with being a creditor of these concerns would be low and they would be classified as an ordinary trade risk.
- Fair Condition ( 3 )
This would be assigned to concerns believed to be financially sound but with a history of slow payments or some losses or working capital deficit. The risk associated with being a creditor of these concerns is higher and would be classified as potentially slow payers or fair trade risk.
- Poor Condition ( 4 )
This would be assigned to concerns of known financial weakness. A number of years losses, higher than normal working capital deficit, a negative tangible net worth which is worsening, court judgments, bad payments etc. This risk is associated with being a creditor of these concerns is high or significant.
- Undetermined ( - )
This is assigned to concerns where there is insufficient information available to express any opinion on the condition, financial soundness or payment history of the concern. A concern with no telephone number will also be assigned a “ – “ condition.
Example Part 2: D&B Rating 5A 4
Thus, the example rating shows a Company with a Financial Strength of 60 + million (probably based on Net Worth), in a poor condition with a significant level of risk. The supplier is advised to take suitable assurances before extending credit.