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May 20, 2021

No more preconceptions: an SME can have a better credit rating than an IBEX 35 company

It is time for medium-sized companies to shed the stigma of weakness that financiers often attribute to them because of their size. Almost half of INBONIS Rating’s ratings of SMEs to date have received a BB rating (46%) and 16% have a rating equal to or higher than BBB. These positive ratings are better than those obtained by some well-known Ibex 35 companies.

The INBONIS statistics also show that most of the ratings are above the average rating for Spanish SMEs, which would be B- if the default rate for bank credit is taken as a reference (4.6% in December 2020). Therefore, if a company wants to differentiate itself from the banks and attract new investors, it can use a positive credit rating as a tool to demonstrate its solvency.

This differentiation is decisive for its future in times like the present, when it is difficult for banks to finance SMEs because it is difficult to discern which companies are in a position to repay their debt. Companies must try to “make it easy” for the bank when asking for financing.

Now that the worst of the pandemic is over, companies need to look to the future and, in addition to having adequate lines to manage their working capital, take advantage of new financing opportunities linked to European recovery funds and the growing interest of private capital in medium-sized companies.

In this sense, a positive credit rating report can help to demonstrate the solvency of viable companies to investors or detect possible flaws in companies in difficulties that allow measures to be taken to improve the sale price.  In addition, a credit rating is often essential for accessing financing supported by public funds.