Updated: Jan 26, 2022
When you submit an application for credit, you are providing only the basic information a potential creditor needs to make a preliminary decision, but there are many factors that need to be synchronized for the credit process to work.
Lenders need more than basic data to convert that initial application into a high-dollar approval. They also need “R-E-S-P-E-C-T”.
Seven Factors in Funding
R- Responsibility E- Endurance S- Scoring P- Performance E- Expenses C- Creditworthiness T- Trustworthiness
Let’s break down the seven elements creditors are looking for when making a determination about your company.
Has your company responsibly managed credit in the past? Are you aware of your company’s reputation in the credit world? Are you proactive in managing and maintaining that reputation?
ENDURANCE Has your company endured growing pains and thrived? Will your company be capable of taking on increased debt? Is there evidence of struggle and instability?
SCORING Does your company have full scores and ratings in the business credit profile? Is there positive proof of credit history in many areas? Is there derogatory information in your file?
PERFORMANCE Is your company showing consistent growth? Are your numbers improving over time? Do you have an established record of performance with prior vendors and suppliers?
EXPENSES Does your company require additional funding to succeed? Are you borrowing to keep up with current expenses or to grow your business? Are you self-financed?
CREDITWORTHINESS Has your company proven it’s creditworthiness across a variety of platforms? Have you filed your taxes? Do you readily know your sales, profit and growth numbers off the top of your head?
TRUSTWORTHINESS Does your company exhibit trustworthiness? Is your contact information and corporate history consistent and verifiable? Are their liens, suits, or judgments against your company?
Understanding how your business credit profile impacts your ability to achieve approvals is crucial in today’s tough credit environment. Even though you cannot control every piece of information in your credit file, there are many elements you can self-manage to provide the best possible picture of your corporate strength and creditworthiness.
LESSON: By successfully managing the business credit profile, you are showing you have a vested interest in your company and your willingness to proactively work toward the betterment of the business.