Risk Ratings & Recommendations
Understanding Risk Ratings & Credit Recommendations: At the Cannabiz Credit Association (CCA), we help members make smart, informed credit decisions with confidence. Our Credit Reports include a proprietary Risk Rating system designed to simplify how you assess potential and existing customers. Each rating—from Very Low Risk to Very High Risk—comes with clear, actionable recommendations tailored to that level of risk. Whether you're determining payment terms, setting deposit requirements, or deciding how much credit to extend, our guidelines help you protect your cash flow while supporting healthy business relationships in the cannabis industry.
Description: Customers with a strong credit profile, minimal risk, and excellent payment history.
Recommendations:
Offer standard credit terms like Net 30 for both new and existing sales.
Allow flexibility to extend terms to Net 45 for high-value or repeat customers.
No deposit or COD requirements; full trust in customer payment reliability.
Provide incentives such as early payment discounts (e.g., 2%/10 Net 30).
Approve higher credit limits for bulk orders with minimal approval processes.
Very Low Risk
Description: Customers with minor risks or occasional delays but generally reliable payment behavior.
Recommendations:
Offer standard credit terms like Net 14 or Net 30, depending on the customer's past behavior.
Require a 50% deposit for large orders exceeding a predefined credit limit.
Consider offering Net 7 terms for first-time orders as a trust-building measure.
Conduct periodic reviews of payment behavior to maintain credit terms.
Provide the option for COD (Cash on Delivery) for customers with occasional late payments.
Low Risk
Description: Noticeable risks or payment issues, but the customer has the potential to improve their standing.
Recommendations:
Limit credit terms to Net 7 for all new and existing orders.
Require a 50% deposit upfront for medium-sized orders or a 100% deposit for larger orders.
Enforce COD terms for customers with inconsistent payment behavior.
Use a personal guarantee or letter of credit for orders exceeding a specific dollar threshold.
Reduce the credit limit for existing accounts and reevaluate terms quarterly.
Medium Risk
Description: Customers with significant concerns but potential for improvement. They may have inconsistent payment patterns, but the risk isn't extreme.
Recommendations:
COD for new orders, but consider small order limits for established customers with strict payment tracking.
Require 100% deposit upfront for custom or high-value orders.
Allow smaller repeat orders with Net 7 terms after evaluating a consistent payment record.
Use a personal or corporate guarantee for orders exceeding a predefined credit limit.
Engage in a probationary period where payment terms are reassessed quarterly, reducing or increasing restrictions based on behavior.
Focus: Limited flexibility for proven accounts; emphasis on deposits or guarantees for larger transactions
High Risk
Description: Customers with severe and unresolved financial issues, such as ongoing debts, habitual late payments, or legal disputes. Extremely high likelihood of non-payment.
Recommendations:
No credit terms allowed—only accept prepayment in full or COD for local orders.
Reject any new orders from customers with unresolved debts or an extensive history of unpaid balances.
Require 100% upfront payment for all transactions, regardless of size or frequency.
Secure additional layers of protection, such as a personal guarantee from the owner or lien rights on assets, before accepting any orders.
Review the customer's account quarterly to determine whether to blacklist them or continue operating on strict pre-payment terms.
Focus: Mitigate risk completely with no flexibility for credit; only accept fully secured payments.
Very High Risk
To download the Risk Ratings guide, click the link below. We recommend including this PDF in your credit evaluation SOP and sharing it with anyone responsible for assessing risk using the CCA Credit Reports.
Download the Risk Ratings Guide
For quick decision-making and consistent internal processes, we recommend saving or printing the Risk Ratings & Recommendations guide and incorporating it into your team's standard operating procedures. This ensures that everyone reviewing CCA Credit Reports uses the same criteria when evaluating customer risk and extending credit terms.
If you or anyone on your team has questions about how to interpret the ratings or apply the recommendations to your accounts receivable process, we're here to help. Reach out to Emory at [email protected] for support, best practices, or help integrating this framework into your workflow.