What is concentration risk for a small business?

2 min read

Over-relianceOn one source

FragileIf it goes

DiversifyThe fix

What it means

Concentration risk arises when too much of your revenue comes from one customer, too much of your supply from one supplier, or too much of your profit from one product. Losing that single point — a key client leaving, a supplier failing — can threaten the whole business. Lenders notice it because it makes future cash flow less predictable.

How to reduce it

Broaden your customer base, line up alternative suppliers, and avoid depending on one product line. Where a large customer is unavoidable, tighten credit control and hold a bigger buffer. A more diversified business is more resilient and presents better to a lender — steady, spread income supports affordability more convincingly than a single big contract.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

How much reliance on one customer is too much?

There is no fixed line, but a single customer making up more than a quarter to a third of revenue is often flagged as concentration risk. The more concentrated you are, the more a buffer and diversification matter.

Does concentration risk affect borrowing?

It can. Lenders prefer predictable, diversified income because it is more resilient. Heavy reliance on one customer doesn't rule out a loan, but a spread base and a healthy buffer strengthen your case.