Conducting a business involves having financial resources and, if there are not enough of them, also taking out loans. It is worth knowing that banks assess the creditworthiness of companies differently from that of individuals. So how can creditworthiness be calculated when we do business?
What is creditworthiness?
Creditworthiness is the ability to repay the credit on a specified date together with all its costs. All banks conduct thorough analyses of customers' creditworthiness before granting credit to both companies and individuals.
In carrying out a credit analysis, depending on whether the applicant for credit is a natural person or an undertaking, other factors are taken into account. In the case of natural persons, the following factors are taken into account: amount and sources of income, liabilities, number of dependent children and even marital status or housing and property status. The credit history is also checked. A natural person can even estimate his or her own creditworthiness. A creditworthiness calculator is used for this purpose.
The credit analysis for companies is carried out in a completely different way. In this case, the company's assets, capital structure, sources of financing, revenues and costs of the company are taken into account. Sometimes the bank can also take into account other aspects, such as the qualifications of managers and employees or the competitiveness of the company.
If you are running a business that is your only source of income, your bank may require you to present your net income for the past 12 months. In the case of running a business for less than a year, a bank may refuse to grant a loan due to uncertainty and unstable situation of a young company. In the eyes of the bank, this entails a high credit risk, which in turn reduces the chances of a loan.
In such a situation, an entrepreneur may take out a so-called quick non-bank loan. In some situations, this can help the company all the more so as such loans for the first time are free of charge.
Of course, novice entrepreneurs have a chance to get a mortgage, but it will never be on such favourable terms as in the case of companies with a certain position in the market.
It is worth remembering that banks, when applying for a loan, also check the method of settlement with the treasury and whether all obligations related to it are paid on time.