Risk Ratings & Recommendations
Understanding Risk Ratings & Credit Recommendations: At CCA, our mission is to provide members with tools and insights to help them make more informed credit decisions. Our Credit Reports include a proprietary Risk Rating system that simplifies how you view potential and existing customer creditworthiness.
Each rating—from Very Low Risk to Very High Risk—reflects an analysis of payment history and other relevant factors. Alongside these ratings, we provide general considerations and examples of how businesses in the industry may choose to approach credit decisions. These examples are not directives and should not be interpreted as instructions or requirements. Every member should apply their own judgment, business policies, and legal advice when making credit decisions.
Example Considerations by Risk Category
Description: Customers with strong credit profiles, minimal risk, and excellent payment history.
Possible considerations:
Many businesses choose to offer standard credit terms (e.g., Net 30).
Some businesses extend longer terms for trusted or repeat customers.
Incentives like early-payment discounts (e.g., 2%/10 Net 30) are sometimes used to encourage timely payment.
Very Low Risk
Description: Customers with minor risks or occasional delays but generally reliable payment behavior.
Possible considerations:
Businesses may offer shorter terms (e.g., Net 14–30) with periodic reviews.
For larger orders, some require partial deposits as an added precaution.
First-time buyers are sometimes offered shorter terms to build trust.
Low Risk
Description: Customers with noticeable risks or inconsistent payment behavior.
Possible considerations:
Common approaches include COD for new orders or deposits for larger purchases.
Some businesses gradually expand credit terms after consistent performance.
Additional protections such as guarantees are sometimes used.
Medium Risk
Description: Customers with significant financial or payment concerns.
Possible considerations:
Many businesses limit exposure to upfront payment or COD until reliability is established.
Extra protections (e.g., guarantees, liens) are sometimes used for larger transactions.
Regular reviews of accounts help determine whether to continue doing business.
High Risk
Description: Customers with severe and unresolved issues, such as ongoing debts, habitual late payments, or disputes.
Possible considerations:
Common industry practice is to require payment in advance or COD.
Some businesses may decline new orders until prior issues are resolved.
Ongoing reviews are used to determine whether stricter measures are appropriate.
Very High Risk
Important Reminder
CCA’s Risk Ratings and accompanying considerations are for informational purposes only. They are designed to provide a framework to help members think about risk in their own credit policies. They do not constitute instructions, mandates, or agreements among members. Each member is solely responsible for determining appropriate credit decisions for their business, based on their unique circumstances, policies, and applicable law.
For questions about how to interpret the ratings or apply them within your accounts receivable processes, contact us at [email protected].
Disclaimer
The Cannabiz Credit Association (CCA) provides independent credit information tools to assist members in making their own business decisions. CCA does not set industry standards, dictate credit terms, or coordinate member actions. Any examples or considerations included in our reports are provided solely for informational purposes and should not be viewed as recommendations to act in concert with other businesses. Each member is responsible for applying its own independent judgment and policies when extending credit.