Crypto Companies and Credit Ratings: What You Need to Know

Credit rating or creditworthiness plays an important role in a business. It can be pivotal in deciding the fate of a business in the long run. Because no matter what, every business, sooner or later, needs financing from financial institutions. When they do need it, the credit rating of the business is the first thing financial entities evaluate.

Hence, businesses are required to keep a tab on the credit ratings so that it does not fall below the average — 700 to 750. This keeps them in the good books of banks and helps them easily secure loans at lower interest rates.

What is Credit Rating or Creditworthiness?

As already said, most businesses at some point need debt to grow further. To receive this debt from a lender, a business must prove that it is capable of returning it in time. The simplest way to do that is to analyze the creditworthiness of the business. It’s a direct indicator of how likely the business is to pay the debt in time.

Banks determine a business’s creditworthiness by assessing a number of factors such as financial history, business model, credit score and so on. Traditionally, banks rate business based on the 5Cs — Capacity, Collateral, Capital, Character, and Conditions.

This system works well with usual businesses that operate in fiat money.

For blockchain and cryptocurrency businesses such as crypto exchanges and crypto mining firms, however, it does not. That’s because these businesses operate in digital assets, whose prices often fluctuate. And it’s a tough task for banks to calculate their credit rating using the traditional method.

This calls for a new method that specifically solves the problems associated with assessing the creditworthiness of crypto companies so they may easily check their qualification for loans.

And as we speak, there already is a solution — Hybrid Bank.

Hybrid Bank’s Credit Rating Solution for Crypto Companies

The advent of decentralized finance (DeFi), blockchain and cryptocurrency has substantially changed how we see finance. The financial landscape is evolving by the day and adjusting to today’s digital world.

To ensure that companies working to bring that change, i.e. crypto exchanges, mining firms, and other blockchain and crypto companies, do not face difficulty attaining debt, Hybrid Bank aims to become a credit information disclosure system for entities dealing in crypto assets.

Hybrid Bank’s Crypto Credit Information System will provide credit ratings or creditworthiness scores for cryptocurrency companies so they can use their assets as collateral to secure loans without having the need to liquidate their assets. It will register and track the wallets of a business and assess its transactions and total balance in real-time. Hybrid Bank will also assess the worth of a crypto company’s digital assets by monitoring the value of those assets listed on exchanges.

Apart from that, Hybrid Bank will also perform qualitative assessment crypto businesses to ensure that crypto companies are on track with their roadmap and will generate enough profit to pay back the debt on time.

Parting thoughts

Credit ratings of crypto companies are not as simple as that of usual businesses due to the dissimilarity between digital assets and fiat currencies. In addition, the industry is considerably new. The advent of Hybrid Bank as an expert to assess the creditworthiness of crypto businesses will tremendously help companies in this industry.

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Hybrid Bank is building a platform with Tools and Techniques to value Credit Worthiness of Companies dealing in Digital Assets.