While a company’s credit history is only one aspect of the bank’s appraisal of loans, financial indiscipline can adjust its ability to borrow. According to the estimates of Fine Bank, a small or medium-sized enterprise with timely obligations to financial institutions, partners and the state can save up to 100 thousand by borrowing an investment project.
Company seeking for a loan
“The process of granting a loan to a company is complex and multifaceted, in which the bank seeks to evaluate the risk taken by the customer and the risk as well as possible. This involves analyzing various data relating to the financial position of the company, the project that the company intends to undertake, and the general economic situation. And while the bank makes the decision on the basis of data, it can sometimes be financially unsophisticated for a company seeking a loan, ”says Virginijus Dove, Vice President and Head of Retail Banking, Fine Bank.
In assessing the credit history of a company, the bank takes into account whether overdue debts are one-off or recurring, their duration, their impact on the future performance of the company, or whether there are no legal proceedings for overdue debts. According to V. Dove, in providing financing the bank analyzes not only the current financial situation of the company and its forecasts but also the data of previous years.
Average loan interest rates and other additional financing terms
“What time period the bank evaluates depends on each individual case, so companies need to be concerned about their credit history on an ongoing basis, not just a year or two before they take out a loan. In addition, credit history covers not only financial liabilities to banks but also the payment of taxes to the state and service providers, ”points out Dove.
According to Fine Bank, if a small or medium-sized company decides to borrow $ 1 million. for a 7-year investment project, financing for a high-risk company with some overdue credit history may increase up to $ 97,000 over the loan period. This would lead to up to 2 percent. higher than average loan interest rates and other additional financing terms.
“For such an amount, a small and medium-sized trading company could rent nearly 1,000 sq. M. For 7 years. meters of storage space, the production company – with its own funds, to create a job for one worker with a minimum wage, an agricultural enterprise – to acquire 26 thousand. liters of diesel, ”says Dove.
Good credit history
Anatoliy, a lawyer at the credit bureau, says credit history is a tool for everyday business relationships, starting with deciding whether to start cooperation at all and what grace periods and limits apply.
“Rarely does a company know how to use good credit history, and there are quite a few ways to do it. I would highlight a few, though there are more. First of all, it is an argument in negotiating business loan terms, paying for goods over a longer period, as well as seeking higher credit limits from suppliers. But where do we start? In order to strengthen your bargaining power, you first need to look at your credit history. And to understand that a company can look a little different from the eyes of creditors than the company itself, ”says a spokesman.
According to Fine Bank, Q1 of this year. the average loan for investment granted to small and medium-sized enterprises was LTL 820 thousand. Litas, working capital – 330 thousand. Currently, companies in the manufacturing, trading and agricultural sectors are the most interested in financing, while 6 out of 10 small and medium-sized enterprises are borrowing for working capital.