A mercantile agency is an institution which maintains records on businesses 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. Ratings from a mercantile agency influence whether or not a company can get loans, the amount a company is able to borrow, and what kinds of repayment terms business loans will have, just like credit ratings on consumers have an impact on interest rates and money available for borrowing.
The origins of the mercantile agency appear to lie in the United States of the mid-1800s. In 1837, a financial crisis caused by a number of different factors exploded across the United States, causing considerable hardship in some areas of the country. One cause which was pinpointed was that the sheer size of the United States made it difficult for expanding business to evaluate creditworthiness because it was difficult to obtain information on distant companies. This in turn led to risky loans which backfired on lenders along with unwise business partnerships created by people who lacked information about their partners.
In New York City in 1841, The Mercantile Agency was founded response to the need for a way to get information about companies in the United States. This business eventually merged with another agency to create Dun & Bradstreet, one of the largest and most well known mercantile agencies, in 1933. Reflecting the success of this agency, a number of other agencies sprang up to provide information to potential corporate lenders and businesspeople.
Some mercantile agencies focus on specific trades while others are more general in nature. These organizations often publish a general annual report providing basic information on the ratings of the companies they track. In addition, they can provide in depth reports by request from customers. When someone gets a report from a mercantile agency, it provides comprehensive information about the company's history, including the company's history of credit activities, to explain how the mercantile agency rated the company.
Unlike credit bureaus, mercantile agencies do not maintain records on individual consumers and do not provide credit ratings which pertain to personal loans and similar activities. They focus solely on companies large and small across their area of interest. When general reports are released they may be tracked by the media, because credit ratings of individual companies can reflect on the health of specific industries and the economy as a whole.