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

The credit process is usually initiated by a company submitting an application for money to one or several banks. 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.

When evaluating a loan application, banks will consider the following:

• 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. The purpose of this is to determine the reliability with which the borrower repays their debts.

• Income and expenses– Banks also take into account the company’s income and expenses when assessing a loan application. They can then determine whether they are able to repay any loans they take out regularly while covering the costs of running their businesses.

• Collateral– Another important aspect of any loan application assessment is whether or not collateral is offered by the borrower. Collateral is used to secure loans, and it ensures the bank that they will receive payment in the event of default.

• 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.