Question

Is it possible for a company’s credit approval procedures to be too strict? 200 words please

Answer 1

The approval of Business credit / loan should have to proceed through strict procedures because only through analytical and critical appraisal of results and performance, the bank or financial institution would able to assess company and approve save credit without any risk.

The credit rating agencies would help the bank or financial institutions to have in-depth assessment of the company. The past records of the company are kept intact by the Credit rating agencies and updated on periodical basis.

The Procedure of the approval includes assessing the liquidity, profitability and performance of the company through analyzing past and present results. The collateral properties towards the securities for the credit so provided is assessed.

The quantum of the credit provision is calculated according to the assets possessed by the company which could be mortgaged by the company to the credit approving bank or financial institution.

The personal guarantee of the owner or associates is checked with the credit agencies and assets possessed by the guarantor.

The whole procedure is taken up to stop the credit so provided to become a bad credit in future.

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