5 C's of Credit

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Webinar on the 5 C's of business credit

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  • Dear sirs

    Credit-checks.in, India's First Trade Credit Reporter - A Joint Venture with their Foreign partner soon launches Credit Reporting Services to Industries & Trade segments (MSMLE).

    Members may report their past and present defaults, allowing defaulters to repair their bad history and improve their creditworthiness for any fresh credit. This platform will develop
    all lenders in the trade and industries to 'Know Your Borrower' habit before extending any fresh credit.

    Please visit us on: www.credit-checks.in and send us your feedback, we shall be obliged.

    We shall be very grateful to Association of Industries & Chambers of Commerce for their feedback, support & recommendation.

    You may contact us on: creditchecks111@gmail.com

    Team credit-checks.in
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  • really nice article. I think this would be of great interest to your readers, Consolidation Credit Counseling
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  • Its me ahmed.
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5 C's of Credit

  1. 1. The 5 “ C’ s” of Credit <ul><li>CMA Webinar Series </li></ul><ul><li>9 AM - 10 AM </li></ul><ul><li>Tuesday, November 28, 2006 </li></ul><ul><li>Presented by: </li></ul><ul><li>Paul Beretz </li></ul><ul><li>Pacific Business Solutions, a Q2C Partner </li></ul><ul><li>[email_address] </li></ul>
  2. 2. Risk Assessment <ul><li>Within the area of assessing risk, the credit professional faces many challenges: </li></ul><ul><li>Gathering and determining accuracy of facts </li></ul><ul><li>Evaluating and quantifying risk factors </li></ul><ul><li>Meeting product and sales expectations </li></ul><ul><li>Satisfying company financial objectives </li></ul>
  3. 3. The Credit Transaction <ul><li>Risk of non-payment </li></ul><ul><li>Timing </li></ul><ul><li>Security </li></ul><ul><li>Extra costs </li></ul><ul><li>Legal aspects </li></ul><ul><li>Economic Influences </li></ul>
  4. 4. The First “ C ” - Character <ul><li>Willingness to pay; morality; </li></ul><ul><li>Background; experience; abilities </li></ul><ul><li>Ownership: from hidden to confusing to “owner not available” </li></ul><ul><li>Distribution of functions; outside interests </li></ul><ul><li>Legal form of business </li></ul><ul><li>Favorable payment records </li></ul><ul><li>Bankruptcies; litigation; settlements </li></ul><ul><li>Examples </li></ul>
  5. 5. The Second “ C ” - Capacity <ul><li>Ability to pay bills when due </li></ul><ul><li>Cash flow awareness - past, present and future </li></ul><ul><li>How current assets are managed and utilized </li></ul><ul><li>Examples </li></ul>
  6. 6. The Third “ C ” - Capital <ul><li>Equity or net worth </li></ul><ul><li>Trend of business </li></ul><ul><li>Investment and utilization of fixed assets </li></ul><ul><li>Examples </li></ul>
  7. 7. The Fourth “ C ” - Conditions <ul><li>Industry </li></ul><ul><li>Products </li></ul><ul><li>Terms - selling and buying </li></ul><ul><li>Delivery </li></ul><ul><li>Seasonal </li></ul><ul><li>Changes in operations </li></ul><ul><li>Rent or own </li></ul><ul><li>Location(s) of business </li></ul><ul><li>Examples </li></ul>
  8. 8. The Fifth “ C ” - Collateral <ul><li>“ Hard” assets </li></ul><ul><li>Guarantees - types and applications </li></ul><ul><li>Risk mitigation options </li></ul><ul><li>Examples </li></ul>
  9. 9. Bonus C’ s! The International “ C’ s” <ul><li>“ Why do I need to be concerned about international “ C ’s” if my company only sells in the US?” </li></ul><ul><li>The 3 “ C’ s” of international risk management </li></ul><ul><ul><ul><li>C ountry </li></ul></ul></ul><ul><ul><ul><li>C urrency </li></ul></ul></ul><ul><ul><ul><li>C ultural </li></ul></ul></ul><ul><li>Examples </li></ul>
  10. 10. “ When Do I Use the “ C ’s?” <ul><li>“ It was a dark and rainy Friday….” </li></ul><ul><li>Non-financial statement analysis </li></ul><ul><li>New customer </li></ul><ul><li>New personnel in the credit function </li></ul><ul><li>As a check-list </li></ul><ul><li>When an event occurs that could impact risk assessment with an existing customer </li></ul>
  11. 11. Illusions of Credit Risk Management
  12. 12. Illusions of Credit Risk Management <ul><li>“ I have a credit policy” </li></ul><ul><li>“ For credit evaluations, I’ll get software” </li></ul><ul><li>“ My credit application always works for me!” </li></ul><ul><li>“ We hold orders when the account is past due” </li></ul><ul><li>“ I have credit insurance; no risks, no losses!” </li></ul>
  13. 13. Risk Management: Best Practices <ul><li>Education: choices; analytics; analysis; training </li></ul><ul><li>Networking </li></ul><ul><li>Attending Sales/Business meetings </li></ul><ul><li>Open to new ideas </li></ul>
  14. 14. Risk Management - Best Practices (cont) <ul><li>Don’t blame technology! </li></ul><ul><li>One-size does not work for all (think of the 5 “ C ’s”) </li></ul><ul><li>Communicate and delegate </li></ul><ul><li>Take the initiative! </li></ul>
  15. 15. Questions?

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