Merchant agencies maintain business records and develop credit ratings for companies, which are used by other businesses to determine creditworthiness. The first agency, The Mercantile Agency, was founded in New York City in 1841. Merchant agencies provide comprehensive information about a company’s credit history and do not focus on personal loans. Their reports can reflect on the health of specific sectors and the economy as a whole.
A merchant agency is an institution that maintains business records and uses these records to develop credit ratings for the companies it tracks. These credit ratings are in turn used by other businesses to determine whether or not a business is credit worthy. Merchant agency ratings affect whether a company can get loans, the amount a company is able to borrow, and what kind of repayment terms business loans will have, just like consumer credit ratings have a impact on interest rates and money available to borrow.
The origins of merchant agency appear to lie in the United States in the mid-1800s. In 1837, a financial crisis caused by a number of different factors erupted throughout the United States, causing considerable disruption in some areas of the country. One reason that has been identified is that the vastness of the United States made it difficult to expand creditworthiness activities because it was difficult to obtain information about distant companies. This in turn led to risky loans that backfired on lenders along with unwise business partnerships created by people with no information about their partners.
In New York City in 1841, The Mercantile Agency was founded to address the need for a way to obtain information about companies in the United States. This business eventually merged with another agency to create Dun & Bradstreet, one of the largest and best known merchant agencies, in 1933. Reflecting this agency’s success, a number of other agencies sprung up to provide information to prospective lenders and corporate entrepreneurs.
Some merchant agencies focus on specific operations while others are more general in nature. These organizations often publish a comprehensive annual report that provides background information on the ratings of the companies they follow. Additionally, they can provide in-depth reports upon customer request. When someone receives a report from a merchant agency, they provide comprehensive information about the company’s history, including credit history, to explain how the merchant agency valued the company.
Unlike credit bureaus, merchant agencies do not keep records on individual consumers and do not provide credit ratings related to personal loans and similar businesses. They focus exclusively on companies large and small in their area of interest. When general reports are released, they can be monitored by the media, as individual company credit ratings can reflect on the health of specific sectors and the economy as a whole.
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