KUCHING: CTOS Data Systems Sdn Bhd recently launched the CTOS SME Score to empower Small and Medium Enterprises (SME) with the confidence to make quick, consistent and objective decisions as they assess the businesses and owners to whom they will potentially extend loans, leases and trade credit.
Moreover, the solution will serve to drive SME growth in Malaysia by providing an easy and universal assessment of creditworthiness for SMEs to get the best terms and offers from potential creditors and other SMEs.
The CTOS SME Score is a three-digit representation of an SME’s credit risk, ranging from 100 to 400, developed in partnership with FICO, a global leader in analytics and developer of the de facto standard for credit scoring in the United States.
With the advent of this solution, all Malaysian businesses working with SMEs on credit terms now have access to a standard rating scale and a single point of reference with which to assess an SME’s financial position and generate individually tailored credit decisions.
“Knowledge creates confidence,” said Dennis Martin, Group CEO of CTOS.
“With the launch of the CTOS SME Score we are bringing this confidence to SMEs in Malaysia. By providing access to a single point of SME credit reference at a glance, the CTOS SME Score allows businesses to make credit decisions within minutes rather than several days.
“In an increasingly congested SME financing segment, we also anticipate that the quick turnaround time and comprehensive access to data offered by the solution will be the trigger point for SME decision makers when looking for financing.”
In addition, the CTOS SME Score is able to provide updates on an SME’s current financial standing, allowing for pre-emptive action to be taken against potential bad debts or late payments.
In addition to reducing an SMEs exposure by flagging high-risk customers in an existing portfolio the CTOS SME Score is also able to generate business leads by identifying potential customers. Pre-screening of potential customers will improve prospecting, sales and operational efficiency.
SMEs will also be able to use the CTOS SME Score to quickly and accurately ascertain a customer’s creditworthiness and thus provide better turnaround times on credit decisions in the current competitive economy.
Currently, there are almost a million SMEs in Malaysia contributing 37 per cent to the national GDP and that figure is expected to rise to 41 per cent by 2020. SMEs also make up 98 per cent of local businesses and create employment for two-thirds of all working Malaysians.
Segment growth is steadily increasing, with entrepreneurs who are new to the SME segment as well as existing businesses looking for financing partners or lenders to raise capital.
However, unlike larger businesses, SMEs often lack large cash reserves, nor do they typically enjoy unobstructed cash flow, essential factors to any businesses’ long-term success.
As a result, SMEs typically have less cash on hand to manage operations, pay employees and ultimately grow their business.
Based on CTOS SME Score analyses of one million SMEs in Malaysia, 54 per cent of companies, 60 per cent of partnerships and 52 per cent of sole proprietors have recorded a CTOS SME Score of 290 or more, indicating average to excellent creditworthiness.
Therefore, in efforts to support the currently thriving SME landscape, the Government and Bank Negara Malaysia are actively promoting alternative avenues of SME financing, including equity crowdfunding, P2P, private equites and venture capitals, which also stand to benefit greatly from financial insights generated by the CTOS SME Score and consequently pass on those benefits to their SME customers.
As a comprehensive industry score, the CTOS SME Score is made up of CCRIS Company Credit Data and CCRIS Consumer Credit Data from Bank Negara Malaysia, filing data maintained at national registrars as well as financial data and ratio and business information and proprietary CTOS Data maintained by bureau partners.