Score blends business owner’s credit data, company’s tradelines and public registry data to increase credit risk transparency of small and medium-sized enterprises (SMEs) with a view to lessening the challenges they face in obtaining financing.

Smaller and less established firms can soon turn to a new credit rating system that will make it easier for them to get bank loans.

Supported by SPRING Singapore and partnered with FICO, a United States based consultancy to develop a credit rating system for SMEs, the SME Blended Score, the scoring system is the first of its kind in the Asia Pacific and is aimed at helping banks to make more informed credit decisions and SMEs to increase their access to financing. A good score can also enhance a firm’s business credibility and increase its access to trade credit.

At present, there is no standardised credit assessment tool in the market that assesses the creditworthiness of an SME by taking into account its tradelines, public registry data and its owner’s credit behaviour. It is difficult for lenders to holistically assess the credit risk of an SME and decide whom to extend credit to and what terms to set without a comprehensive risk assessment tool.

The new scoring process will 'blend' the personal credit behaviour of the shareholders with their companies' trade data, to provide lenders a clearer picture of the firm's creditworthiness. The SME Blended Score will leverage consumer credit data captured by CBS’ consumer credit bureau and commercial tradeline data available from its sister company Dun & Bradstreet (S) Pte Ltd.

Business financing has always been a major challenge, specially for SMEs, as banks traditionally avoid lending to firms with little or no track record.

The company data comprise commercial tradelines loaded by the company’s suppliers, litigation and bankruptcy information, macro-economic indicators such as the inherent risk associated with the business sector, how long a company has been in business as well as trends in business performance and the overall economy.

CBS Executive Director William Lim believes the SME Blended Score - what the new rating is called - could give budding entrepreneurs, who have yet to build up a credible track record, a better chance of getting bank loans.

The SME blended score has also received strong support from the Association of Small and Medium Enterprises (ASME) & Singapore Business Federation (SBF). They believe the SME Blended Score will enhance SMEs’ access to credit and trade credit especially in uncertain times when banks are likely to subject loan applications to closer scrutiny and this would increase potential trade outside Singapore.