Why SMEs should leverage credit rating

Getting hold of a credit rating agency is essential for Small and Medium Enterprises (SMEs) considering the challenges they face when in need of business expansion capital or to cover operating expenses.

In Kenya, Metropol Credit Rating Agency (MCRA) assesses a firm’s financial viability, the risk element of the enterprise, by highlighting the overall vintage and health of the firm, internal controls, governance, and financial standing.

MCRA uses both Quantitative Data and Qualitative Data to measure the following Scores:

•        The Business Credit score

•        Business Analysis score

•        The stakeholder credit score

•        Management Analysis score

•        Financial performance score

•        Corporate governance score

•        Industry performance score

•        Strategic analysis score

Metropol rating system comprises distinct scores that cover all categories of risks that impact a business or the performance of a financial obligation.

It captures both Macro and Micro economic environments of the business and is usually country specific. But what are the benefits of SME credit rating?

Investment opportunities

Credit ratings are essential to a business as they tell potential shareholders and banks that the company is worthy investing in.

Concessional Funds

A good credit rating allows SMEs, companies and governments to easily borrow from financial institutions or public debt markets   considerably low- interest rate.

Favorable Lending Terms

With a good rating, companies can choose lenders and negotiate better lending terms. In addition, companies can use a credit rating as a marketing tool to enhance their brand and develop strategic business relationships.

Tools for self-improvement

The essence of the rating is to measure the financial strength of the SME and the probability of default(PD) on a financial obligation.

With credit rating, the highlighting of strengths and weaknesses acts as a trigger for self-correction. A regular renewal of ratings not only helps improve a firm’s performance but also builds confidence within the credit provider.

SMEs can leverage MCRA which has served the East Africa credit rating industry for over 10 years and done over 100 corporate ratings, 181 SME ratings.

MCRA is  licensed by the Capital Markets Authority of Kenya (CMA) and Rwanda Capital Market Authority as a Credit Rating Agency (CRA) based on a proven rating methodology, currently conducting credit assessments on 425 firms spread across the East Africa region. The agency

The corporation’s rating is a national scale rating and a product of research and analysis to proactively assess the credit risk of a business or a financial obligation.

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