This is one of the most frequently asked questions by our Policyholders and potential prospects. Unless they are willing to share audited financial statements with a third party, companies (Buyers) in Middle East have no obligation to furnish their financial performance. Banks and Tax authorities only have the potential power to access such data. The Buyers may not yet ready to disclose their financial performance to a wider scope of stakeholders.

Private companies owned by family members or close partners are not comfortable to disclose the details of their source of income and business profitability. SME’s and startups, are promising business models, yet many of them are not spending time to maintain proper financial documentations, especially in their early business life, rather than ledger books recorded by their accountants.

Both types constitute 80% of business in Middle East.

Although audited financial statements are important documents to assess the financial capacity of the buyers, yet it is not the only tool that we can use to build our credit expert judgement. Annually or quarterly produced statements are still historical, it may reflect the present performance of the company, but it might not drive-thru the future safely, considering the fast change environment we are experiencing today!

At times of high uncertainty, back to principles will really help to keep the pace and maintain safe growth. One of the commonly known principles to determine creditworthiness of the buyers is the “5Cs Principle”: Capacity, Capital, Character, Collateral, and Conditions. 


  • Capacity: We are interested to know the buyer's financial capacity to pay its invoices and bills, the size of cash flow generated by the business, and the time taken to complete a successful business cycle. (i.e., the time it takes from initiating purchasing order, till cash materialized and invoice paid). This can be indicated in Trade experience, Bank statement, reliable references and Business Credit reports.
  • Capital: We are referring to the size and value financial assets hold, invested and deployed by the buyer in his business.  Level of ownership of such assets imply a lower risk of non-payment. (Example; for wholesalers and distributors, owning a warehouse instead of renting a warehouse). Some sectors are more capital intensive than others, those sectors that require major investments in inventory and equipment may seem riskier than those that operate with a lower overhead and fixed cost, here, our expert's judgment can play a role as are our knowledge in various industry trends can help in assessing the implicit financial risk.
  • Character: Very critical and many creditors consider it the most important 'C' principle that indicate the level of payment performance and honoring of debt. Buyers' visit or calls, Trade history, payment experience, clean legal history, clear legal status of the buyer, and Management style /structure help illustrate the character of the buyer. A buyer that doesn’t return phone calls or emails may wind up having their invoice sent to collections, which can hurt the business’s chances for future credit requests.
  • Collateral: Usually, buyers with questionable credit history, or has a fresh credit application, may be asked to put up or submit collaterals to secure their debt. At Allianz trade we always prefer to setup payment plan at certain terms to solve cash block incidents, rather than holding an asset to secure business transactions. Buyer's intrinsic value is always being our focus to approve credit line. Holding a collateral can be valued for Banks to secure their money against funds extended to borrowers. Banks can liquidate those assets at non-payment events.
  • Conditions: In This 'C' we are examining the macro/ micro-economic indications, competitive position of the buyer in the sector, and the growth potential of the buyer under certain circumstances. 2 Buyers operating in the same sector and have same business size, but operating in different market conditions that impacting growth opportunities. Certain risk calculations must be considered to extend the safe credit line.


Malek El Khatib,  Risk underwriter Allianz Trade in Middle east