SME/VSE Solvency: Assess and Anticipate Risk

SMEs and VSEs represent the majority of the European economic fabric, but also one of the most vulnerable categories to business failures. Assessing their solvency is a major challenge: sometimes incomplete data, simplified balance sheets, heavy dependence on a few clients. Yet, adapted scoring can significantly reduce payment defaults and secure business relationships.

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Why SME/VSE Solvency is a Specific Challenge?

Fragile Life Cycle

High mortality rate in the first 5 years

Limited Access to Financing

Fewer guarantees, bank dependence

Customer Concentration

One or two strategic clients can represent > 50% of revenue

Simplified Accounting

Less detail in balance sheets

👉 Consequence:

A "classic" scoring model based solely on financial ratios is often insufficient.

Essential Data to Collect

1. Banking Flows

Regular collections?
Cash flow peaks or chronic tensions?
Dependence on 1 or 2 large payers?

2. Accounting

Recurring or volatile net results?
Positive or negative equity?
Revenue evolution

3. Payment History

Average payment terms
Past disputes
Industry reputation

4. Public Data

Recent registration?
Experienced or beginner executives?
Past insolvency proceedings

5. Transactional Behavior

Order frequency

Average ticket

Complaint rate

Building an SME-Adapted Score

Liquidity Score

Based on banking flows, to assess immediate payment capacity

Structural Score

Simplified balance sheet analysis (debt, equity)

Behavioral Score

Payment habits and regularity of business relationships

Sector Score

Sector exposure (construction, catering, retail)

👉 Aggregating these partial scores

provides a more refined view than a simple financial ratio.

Practical Use Cases

Fast Onboarding

Automate credit decision for new SME clients

Continuous Monitoring

Trigger alerts in case of sudden cash drop in VSE receivables

Smart Collection

Prioritize reminders to small businesses at highest risk

Credit Insurance

Complement internal analysis with predictive scoring

Limitations and Best Practices

Beware of False Negatives

A solid VSE may appear fragile if only financial ratios are considered

Frequent Updates

Implement monthly or quarterly updates

Quantitative and Qualitative Data

An experienced executive or customer diversification can compensate for an average balance sheet

Explainability

Make the score readable for sales teams who manage customer relationships

FAQ

Can we score a company with little data?

Yes, by starting with public data and banking flows, then enriching over time.

Is SME/VSE scoring reliable?

With multi-source data, we achieve very good prediction levels (> 80% accuracy over 12 months).

Should we use a specific model for VSEs?

Yes, because their financial structure differs from mid-caps or large accounts: low capitalization, dependence on immediate cash flow.

Conclusion

SMEs/VSEs are essential but fragile. An adapted scoring model, combining banking, accounting, and behavioral data, reduces default risk and builds more sustainable business relationships. With modern tools like RocketFin, it becomes possible to automate this assessment and make fast, transparent, and reliable decisions.

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