The 6Ms model: How YieldRock evaluates every business to determine credit risk
In matured market economies, patient capital has always been that crucial growth pole behind entrepreneurship leading to broad-based economic development. This worldview had a great influence on YieldRock’s approach to financing startups within the first 5 years following our launch. Incidentally, we have had to pivot to a new strategy of focusing only on early-stage MSEs that have a demonstrable product-market fit as validated by revenue growth and liquidity. This simply means that the only way to successfully secure financing from YieldRock is to prove beyond doubt (with documentary evidence), that your business has actual paying customers who purchase your product or service, and that their total number is increasing (using year-on-year metrics). For us, this is the only valid proof that your business’ value proposition represents a credible solution to problems that customers face, for which they are ready, and willing to pay a reasonable price, compared to what your competitors are offering. After several lessons which we learned from past disappointing transactions, this principle has become an integral part of how we evaluate businesses. In hindsight, it is now clear to us, that every one of the MSE businesses that failed to meet their repayment obligation to YieldRock, had structural or performance inadequacies in at least one of the 6 areas that we now use to evaluate business performance and success.
These are the 6 areas we look at in every business, whether micro, small, medium, or large enterprise; macro, markets, model, moat, management, and metrics. These, we call, the 6Ms.
These principles are embedded in an AI-based proprietary tool that is used to make credit financing decisions. So, what does this have to do with you and why should you care? Here is why: knowing how YieldRock evaluates businesses should give anyone the confidence to prepare well before approaching us for financing.