Creditors’ Rights 3
A: Your guidelines should be based on what is called the Three Cs of Credit: Character, Capacity, and Capital:
Character . For our purposes, character is determined by how a person has handled past debt obligations. Credit history and personal background come into play. So do less tangible qualities like the honesty and reliability of the borrower.
Capacity . This means how much debt a borrower can comfortably handle. You should analyze all of the borrower’s income streams and look into any legal obligations that could potentially interfere with repayment.
Capital . You must have a firm grasp on the current available assets of the borrower, such as real estate holdings, savings, or investments that could be used to repay debt if income should be unavailable.
You should make certain that your risk assessment protocol takes all three Cs into account. Then, incorporate the spirit of the Three Cs into all of your business practices. This will help you keep your credit people and your salespeople-as well as all other key players in your company-on the same page.
