Creditworthiness

Creditworthiness is the condition of a company in which a bank is willing to give it a loan. For this, the company must be viable. Be able to show own funds. You should have sufficient revenue and it should be probable that it will continue. The company also undertakes to repay the loan together with its costs on time.

In everyday life, we often joke that the one who can prove that he doesn't need a loan gets a loan. Thinking about the situation more calmly, it turns out that it is not so complicated to meet the banks' expectations. Everyone would give a credit to someone who could say what they would spend the money on. In addition, you have regular income from which you can make payments may be made. He also undertakes the conditions related to the for the loan, above all that he will repay the money on time. This is the creditworthiness. 

Creditworthiness is therefore the state in which someone can get a loan, be it an individual or a company. In other words, we say that someone is creditworthy when we consider them suitable to give them a loan. We have good reason to believe that you will be able to pay back the loan money together with the with interests. 

On the other hand, an actor who has neither savings nor income is uncreditworthy. Therefore, it is not clear what you can use to repay the money. It is also not clear what he would like to spend the loan money on.

It is no different with companies. Proving your creditworthiness is basically convincing the bank that you're a good guy (or a good girl). We already have some money, because we have been forward-looking until now, this is self-own funds. We have plans for what we would spend the loan on, for example, on investment or even on current assets. The company has a regular revenue, namely enough that it will presumably cover the for instalments. 

Finally, we agree to the terms of the contract, the repayment method and deadline. If even this is not enough, the bank may ask us to provide some kind of collateral or involve a guarantor. 

A company that has been operating stably and profitably for a long time, but for at least a few years, is usually creditworthy if it can demonstrate its own funds and ask for money for a well-calculated, well-founded development. However, the assessment of creditworthiness often changes due to external factors. If things are going very badly in an industry, then the person working in it who was still creditworthy yesterday may be knocking for money at the bank in vain tomorrow. Sometimes lending and the economy take such a turn that it is more difficult for banks to give loan because they see repayment as more risky. If the economy and our company are doing well, it will be easier to meet the conditions for creditworthiness.