subject: Credit Line for Business and Consumers [print this page] Credit Line for Business and Consumers Credit Line for Business and Consumers
Extending credit to a customer requires careful consideration. Following are some concepts you should embrace when evaluating a debtor.
Character. Timeliness, which you can implement an action plan for your obligations, how to treat your customers and employees and how to take responsibility are the key features when considering a credit line to a company
Capacity. Frequency and record of the company's borrowing activity, payments are made according to terms? How much debt the company can manage and what their financial reasons, all related to the ability of a debtor.
Capital. Is the company have a strong commitment with its business entity?. How well capitalized, is the company? These are important questions to ask when considering granting credit
Conditions. How is the current economic condition of the company and how will face an economic downturn?. Questions any business should ask when providing credit line to other business at the end you should ask this question "Should I give credit to this company?"
Collateral. What assets does the company have that they can pledge as collateral? equipment, real estate, including inventory and accounts receivable are just a few assets we have to look in granting credit is based on a credit history less than full payment and financial situation.
Providing credit to customers or business does requires some of the above considerations. Remember that a business credit report also help you to identify future problems and help you establishing a better debt collection strategy.
What Creditors are looking
If you arrive at the situation of the client that is classified in the training situation, it is important that you understand what should and should not do.
You should insist on adequate audit procedures and also ensure that all employees are paid on time. Ensure all withholding taxes are paid and not rely on verbal comprehension. Everything must be in writing (contract). Creditors involved in training situations should also review all loan documents for accuracy and to review decisions of the guarantees provided and the material tracking possible loans. Creditors should also be aware of personal safety and to ensure that all trade creditors are treated with honesty and gave accurate and consistent answers to your questions.
Also, never, never give your opinions about the future. And make sure if you are a creditor, to attend all board meetings. While many other factors and circumstances to consider, these presented above are among the most important, as a creditor must be aware.
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