Discuss the credit process with companies looking to borrow money. What credit application criteria do you think banks give the most consideration?

When companies look to borrow money, the credit process generally involves them submitting a loan application to one or more banks and other financial institutions. The bank or lender will then assess the company’s ability to repay this loan by looking at its current financial situation as well as its past payment behaviour.

The criteria that banks give most consideration when assessing a credit application include:

• Credit history – Banks will review the borrower’s past repayment record with other lenders, such as any late payments or defaults that may have occurred. This is done in order to gain an understanding of how reliable the borrower is in repaying their debts on time.

• Income and expenses– Banks also take into account the company’s income and expenses when assessing a loan application. This allows them to determine if they can afford to make regular repayments on any loan they borrow, while still covering costs associated with running their business.

• Collateral– Another important aspect of any loan application assessment is whether or not collateral is offered by the borrower. Collateral helps secure loans and ensures that the bank receives some form of payment in case of default on repayments.

• Business plan– Finally, having an effective business plan outlining how funds borrowed from a bank will be used for expansion/growth purposes can help increase chances of being approved for a loan as it shows that there is potential for increased profits from these investments.