Any business owner seeking credit would benefit from understanding the parameters by which his credit-worthiness is determined by a financing institution. More popularly known as the Cs of Credit – data related to the applicant’s character, capacity, capital, conditions and collateral help make credit risk evaluation systematic and objective. On this month’s BUSINESS 101, learn about the Cs of Credit Management, and know how a financing institution decides to put its money on you and your business.
To start with, it is easy to recognize how in any lending situation, one only wants to deal with someone trustworthy and reliable. CHARACTER, the first C of credit management, is intangible but may also be judged based on facts.
What it means:
The financing company needs to know that they are dealing with people and businesses that are honorable and who always act in good faith. They need to know that if business goes awry, the applicant would still carry on his credit responsibilities.
What they will do to assess your character:
- Review your business’ credit reports; if you’re a small company, they may also look at the owner’s personal credit report. The assumption is that the way a person conducts himself in his personal life translates into how he conducts business.
- Communicate with your banks, customers and suppliers to get testimonials on how you have dealt with them in the past and how you deal with them now.
- If your business has gone through a trying phase, review how you dealt with the situation – whether you were proactive and forthright, instead of just reactive and passive.
What the www can do for your business