Customer concentration risk means too much of your revenue depends on too few customers. Funding providers weigh it because if one big customer leaves or pays late, your turnover and your repayments could take a knock.
Here's how to handle it:
- Check your own bank statements first so you know what a provider will see about where your income comes from.
- Expect closer scrutiny if a single customer makes up a large share of your monthly turnover.
- Broaden your customer base over time, even with smaller accounts, to spread the risk.
- Lock in long-term contracts with anchor customers to show the income is stable.
- Remember it's about resilience, not quality. One excellent anchor customer is still a risk if it's most of your income.
Concentration risk is one of those terms that sounds technical but is really just common sense. A business earning R200 000 a month from 40 customers is more resilient than one earning the same from two. Neither is bad, but the second one feels the loss of a single customer far more. Funding providers weigh this when they assess how comfortably your cash flow can carry repayments. If your business does rely on a few key customers, don't let that put you off applying. It's one factor among many, alongside your turnover, trading history and overall account conduct.
At GoTyme for Business, we assess each application on your business's full trading picture, with funding of up to R5 million. See how a GoTyme Business Advance works here.