Companies pay rating agencies such as Moodys and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to...

Companies
pay rating agencies to rate their bonds because it increases their chances of getting investment
funds. Here is how it works.

Imagine a scenario where you need a loan from
the bank for investment purposes. The first thing that your bank will look at before giving you
money is your credit score. Your ratings are usually updated according to your borrowing
history. If you are always on time with your loan repayments, your credit rating will be high.
The bank may also look at your account activity. If the account has been active, it increases
your chances of getting a loan. The bank may also want copies of your utilities bill and
employment records. I am sure you have noticed that the bank needs a lot of information before
they can give you a loan.

Companies also need loans to expand. These firms
need millions to carry out their expansion projects. To borrow that kind of money, companies
also need to reassure the lenders that they can repay their loans. Unlike
individuals,...