The power to obtain goods or services by means of the promise of payment on a determined date to a determined term to a determined term the present right to future payment.
Use that is given to the word credit in a company.
1. "buying on credit" or "extending on credit" implies a transaction on credit, or the change of a present value with a promise of payment. The buyer demonstrates his power of influence and confidence for his goods and / or capital. The obligation to pay is both moral and legal; The laws of all the countries of the world protect the credit grantor and prevent legal action against the delinquent debtor (the person who owes and does not pay).
2.Credit established by the company: here credit means the acceptance of the payment promise omitted by the buyer or the willingness on the part of the seller to believe in the buyer.
3. Being a credit instrument or object: it means obtaining the trust of the sellers to obtain a purchase.
4. Credit instruments or documents: it consists of the documented payment promise that manifests a formal credit transaction (checks, pagars, and credit contracts).
Advantages of a credit for me:
- That you can pay something in installments and take something else and thus pay. That you can easily get a loan.
Uses given to a credit in a company:
- To start the company, to buy everything the company needs.
Classification of credits:
1.By its passability or payment terms:
- In the short term (less than one year). In the medium term (from 1 to 5 years). In the long term (from 5 years onwards)
NOTE: it is important to note that the denomination is given according to the credit policies of each institution.
2. By its origin:
- Sales credit Commercial credits
3. By its nature:
- With guarantee: credit with a guaranteed bill of exchange: it is a security that guarantees compliance with the obligation. Plain letter credit: it is a security that lacks the security guarantee. Credit backed with promissory note: debt recognition contract with solidary guarantee to give it greater solidity. Without guarantee: here are the credits that are granted without any guarantee of promise of payment only with the good reputation of the debtor. It is widely used in small shops.
4. For its modality:
- Direct: according to the type of treatment to obtain the credit. The credit applicant and the company or person that is going to grant the credit intervene. Indirect: in this type of credit a third person or institution intervenes, which is the case of financial leases, secured trusts.
Types of credits
Classification of credits according to their use.
a) Investment credit: this type of credit can be defined as one that is granted especially for the purpose of placing capital in the hands of third parties, to recover them on a date distant from that in which the presentation was made, additionally receiving interest in the amount.
NOTE: factors that must be taken into account for credit dediction.
- Interest rate (fixed rate or variable rate) Term Payment system (deferred payments or unpaid balances with amortization to principal)
b) Bank credit: it is one that is granted by a financial institution to its clients after an established contract that stipulates, among others, the contract clauses that indicate the amount and expiration dates or term.
c) Commercial credits: are those granted by companies to the general public and are intended to satisfy consumer needs.
d) Commercial credits: are those granted by companies to the general public and are intended to satisfy consumer needs.
e) Business credits: are those between companies, whether of the same or a different line of business, with the purpose or purpose of supplying raw materials, supplies or capital.
f) Open credit: it is one that is granted to clients to dispose of it when they need it up to a certain established limit.
g) Room or car credit: it is the one that is granted to the borrower to buy raw material with the condition that the first fruits of this matter are direct to the creditor (creditor).
h) Refactional credit: it is also used for the purchase of raw materials or the acquisition of fixed assets (its main function and is guaranteed with the value of said assets)
i) Mortgage credit: it is used for the purchase of real estate and is guaranteed with them.
10. Frozen credit: this term is used in two ways:
- They are the clients who have difficult collection and their credit is suspended They are those in which a client is handled by the same interest rate during his payments (fixed payments)
j) Agricultural credit: there are two types: long-term: that is used to finance farmland or improvements therein; and in the short term: that is used to buy inputs for production or to buy crops and livestock.
k) Public credit: it is the one that directs financial operations the government, be it national, state or local.
Credit policies
It is defined as a general course of action for concurrent situations aimed at achieving the established objectives. In short, it is a rule that regulates performance and that abiding by it allows achieving the proposed ends.
These are the steps that must be followed and these can be flexible.
Characteristics of a credit policy.
1.The policies serve as a guide to determine or manage different types of problems but never provide a definitive solution.
2.The policies extend to the point of being applicable to most problem situations presented over a long period. But even with that there are exceptions.
The policies are also intended to apply to recurring situations. Not all the decisions expected of an executive (who handles credit) will fall into existing policies.
Compositions of a credit
1. Credit applicant.
2. Grantor of credit.
3. Documents to collect: invoices, payments, letters, etc.
4. Real or pledge guarantees.
5. Agreed interest rate.
6. Credit amount.
7. Terms and methods of payment.
Bases for the granting of a credit.
Credit analysts frequently use the 5 “c's” to focus their analysis on the main aspects of the credit worthiness of the client.
1. Character (reputation): is the record of compliance with the applicant's past obligations. It is the history of previous payments, it is used to assess your reputation.
2. Capacity: the applicant's possibility to pay the credit.
3. Capital: the financial strength of the applicant. Sometimes the applicant's debt is analyzed in relation to stockholders equity using profitability ratios to assess his equity.
4. Collateral guarantee: the amount of assets that the applicant has available to secure the credit.
5. Conditions: the current business and economic environment affects some of the parties to the credit transaction.
Note: The credit analyst focuses all his attention on the first two "c" (character and capacity) because it represents the basic requirements to grant a credit. The last three "cs" are important for drawing up a contract and making a final credit decision that depends on the analyst's experience and judgment.
Steps for granting credits.
1. Presentation of application and credit portfolio: requirements and data…
2. Evaluation of the applicant by the credit department.
3. Preparation of the acceptance or rejection report of the applicant.
4. Presentation to the credit committee or credit risk department.
5. Provision of funds.
6. Preparation of the credit agreement based on the conditions of previous negotiations.
7. Signing of the contract by the applicant and their grantor or representative.
8. Presentation of the insurance policy for the granted property.
9. Preparation of a folder with complete customer data.
10. Preparation of the payment plan sheet which includes: date of delivery of the money and whether it is in cash or by check.
Credit request
It is one of the most important documents for the preparation of a credit based on this document, the credit process begins as it provides us with data and elements that once verified by the investigation helps us to know the applicant for the credit to, authorize, deny or modify the credit conditions.
Note: The application by itself is not highly reliable information; it is necessary to accompany it with documents that prove its veracity or a copy of them.
Five groups of data from one request
- Personal or business information. Income and expenses. Warranty. Reference. Credit data to request: amount, term and payments.
Data to be entered in a personal request.
1. Data verification date and indication of approval or non-approval and the causes shortly. The amount of the credit requested is marked in another box below the payment capacity.
