EUROCERTIF
Solvency is the most important criterion in EuroCertif’s scoring: it carries 30 points out of 100, nearly a third of the final score. It measures the share of equity in total assets, in other words the company’s ability to absorb setbacks without relying entirely on its debts. It is also the indicator that banks, suppliers and clients look at first when assessing a partner’s strength.
Good news: solvency is not a matter of fate, it can be worked on. Here is how to strengthen it sustainably in the months before your certification application, and why this effort pays off well beyond the label.
What is solvency, in concrete terms?
Solvency is calculated by dividing equity by total assets. The higher this ratio, the more the company relies on its own resources and the less it depends on its creditors. In concrete terms, high equity means that in the event of a downturn — a project that goes off track, a client who does not pay, a lean spell — the company has a cushion to absorb the shock without ending up in default.
In the EuroCertif grid, the scale is clear: above 40% equity, the situation is excellent and earns the maximum points; between 25 and 40%, it is solid; between 15 and 25%, it becomes fragile; below 15%, it is worrying and earns no points on this criterion. Knowing your current ratio is therefore the first step: it can be read directly in your annual accounts.
Why is this criterion the most scrutinised?
A company may show strong revenue and healthy profits, yet remain fragile if it is heavily indebted. Solvency corrects this illusion: it shows what would really be left if activity slowed. That is why a client entrusting a project worth tens of thousands of euros pays as much attention to it as a bank before granting a loan. Strengthening your solvency is therefore not only about gaining certification points: it reassures your entire ecosystem.
Strengthening your equity
The most direct lever is to increase the numerator of the ratio: equity. Several ways exist, from the simplest to the most committing:
- Put part of the profit into reserves rather than distributing everything as dividends: this is the healthiest and most sustainable method.
- Make a capital contribution from the partners when personal funds allow.
- Convert a partner’s current account (money lent to the company) into capital, turning a debt into equity.
- Limit drawings and dividends during growth years, to let the structure consolidate.
Reducing and structuring your debt
The other lever is to act on the denominator by controlling debt. The aim is not to remove all debt — borrowing to invest is healthy — but to organise it intelligently:
- Repay or renegotiate the most expensive debts first (overdrafts, high-interest loans).
- Replace short-term financing with long-term financing suited to the lifespan of the investment.
- Avoid financing durable purchases (equipment, vehicles) with working cash, which must stay available for projects.
Optimising the balance sheet
- Clean up trade receivables: firmly chase unpaid invoices, and use factoring if needed to turn invoices into cash.
- Remove from the balance sheet non-productive assets that needlessly tie up resources.
- Spread large investments over time so as not to artificially inflate debt in a given year.
A worked example
Take a company with total assets of €500,000 and equity of €60,000, i.e. a solvency of 12% — insufficient. By putting €25,000 of profit into reserves and converting a €20,000 partner’s current account into capital, equity rises to €105,000. The ratio then climbs to 21%, moving the company into a higher band of the grid. The same result could have been achieved by combining reserves with the reduction of an expensive debt.
Mistakes to avoid
- Emptying the cash at year-end to cut tax, at the cost of a weakened balance sheet.
- Systematically distributing all profit, which prevents the company from strengthening.
- Piling up short-term credit to fund day-to-day operations, a sign of a structure under strain.
How long does it take?
Solvency does not improve in a few days: it is the result of prudent management over one to three financial years. The more you plan ahead, the better placed you are when you apply for certification. Ideally, monitor your ratio each year at the close of accounts and adjust your distribution policy accordingly.
In summary
Strengthening your equity, structurer son endettement et assainir son bilan : ces trois réflexes améliorent mécaniquement votre solvabilité, et donc votre lettre Eurocertif. Au-delà du label, c’est un signal de fiabilité fort envoyé à vos clients et à vos partenaires financiers. Lorsque votre situation est consolidée, vous pouvez demander votre certification en toute sérénité.