According risk element, and highlights the overall

According
to an RBI report on trends and progress in banking 2010, only 13% of the
registered SMEs have access to finance from formal sources whci clearly
indicates to the need for SMEs to rate their company but a lot of SMEs are
finding it difficult because of their lack of knowledge in the formalities to
be complied to avail bank funding for their expansion activities. There are 5-6
rating agencies actively involved in the rating of SMEs viz. CARE, ICRA, SMERA,
CRISIL and different agencies have different style of rating the companies.

Rating agencies assess a
firm’s financial feasibility by assessing all the necessary documents, the
management team and the business model etc, in terms of their capability to
repay the debt. These obligations, provides an insight into its sales,
operational and financial composition, there by assessing the risk element, and
highlights the overall health of the enterprise. Also the final decision is
based on  the benchmark set to its
performance against that of the industry. The ratings also takes in
considerations its competitors and peers in the same industry and make a final
credit score card.

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