Company creditworthiness – what is it and how to increase it?

 

It’s hard to run your own business without ever taking advantage of any credit offers. The possibility of taking out a loan allows the company to constantly develop it and adapt to the constantly changing requirements of the client. However, not every entrepreneur is an attractive borrower for the bank, because not everyone has adequate creditworthiness. What is a company’s creditworthiness and how can it be increased? We will try to answer these and other questions in this field in this article.

What is the company’s creditworthiness?

What is the company

The definition of a company’s creditworthiness is extremely simple and means the ability to pay back the loan taken together with interest and any accrued commissions. It is also connected with maintaining the agreed repayment date.

Institutions such as banks carry out an assessment of the creditworthiness of anyone applying for a loan because they must be sure of getting their money back. The decision on granting the loan and its amount depends on the assessment of the company’s creditworthiness.

 

Elements that determine a company’s creditworthiness

Elements that determine a company

The company’s ability to pay its debts depends on various factors, the most important of which are:

  • the amount and source of revenues (unfortunately, entrepreneurs are in a worse position than full-time employees because their income is uncertain and irregular);
  • the amount of monthly expenses (the company’s creditworthiness is reduced by other permanent charges on the company);
  • date of birth, marital status and number of people in the family of the owner of the company;
  • company credit history (the issue of timely repayment of various types of charges).

However, the most important here is, of course, the reference of revenues to expenses incurred by a given company and the previous credit history. It is these two issues that usually determine the chances of whether you will be granted a loan for a company and what will be its amount.

How to take care of your credit standing?

How to take care of your credit standing?

Your company’s creditworthiness will increase if you take good care of it. To make it happen, first of all:

  • take care of the most regular income – this is where the paths of borrowers and lenders meet, because both care about the same, i.e. the solvency of the company;
  • do not have any outstanding loans – this is something that will most likely undermine trust in your company as a potential borrower in the eyes of the bank. Therefore, if you’re struggling to get another loan, you’ll first have to settle all of your company’s outstanding payments. What is more, it is worth avoiding situations in which arrears in the repayment of loans to the company arise. A trace of this kind of problem remains in the database for 5 years after paying off the whole amount;
  • take care of regular payments to ZUS, Tax Office and contractors of your company – having any unpaid obligations, we undermine the financial liquidity of your company in the eyes of the bank. A long delay in payment may result in our company being added to the list of debtors maintained by the Economic Information Bureau;
  • do not count on being granted a loan at the beginning of your business – obtaining a loan from a bank requires a specific length of business experience. If your business has been running smoothly on the market for several years, you should not have much trouble getting a loan;
  • watch over the maximum debt threshold of the company – the sum of all company liabilities should not exceed 50% of your company’s revenues.

Credit and business activities together may seem unattainable to you. How can you make your income regular? Everything needs to be calculated and worked out in time. Doing business is certainly not the easiest way to earn. However, making good investments, including with credit, must turn into profit.

Are you interested in a small business loan or working capital loan? Regardless of which of these forms of lending your company you choose, you must remember to above all, always take care of your creditworthiness. You never know when you’ll have to make more commitments.