Keep Your Credit Under Control

It may seem as though it’s tougher to get credit, but there are steps you can take to ensure that your current credit facilities are up to date, to make your company look better to financial institutions, understand how the lending climate has changed and prepare yourself appropriately. During the “Where to Get Credit Now” panel discussion at CFO magazine’s recent CFO Rising West conference, several experts outlined keys to ensuring that your credit facility is where it should be. One panelist exhorted borrowers to, “take a close look at their prior arrangements with banks because the economy has undergone a sea change in the past year.” He counsels determining if the covenants on three-year or five-year credit facilities arranged before the financial crisis are still accurate. If they’re not, you might be able to avert disaster by pointing out to lenders conditions that, for example, might push you into default. Get a good grasp on the pressure your lenders are under in order to know what borrowers should expect when seeking credit. Credit officials aren’t “big bad evil entities in a private room deciding whether to do a deal or not. These credit approvers are the same people that have lost their consumer confidence and are not spending as much money on cars or TVs. They’re a little bit more skeptical on the credit they’re underwriting. It’s very difficult for them to understand where the economy is going. So they want a lot more attention to detail and a much clearer, transparent understanding of the borrower,” stated another panelist. Work harder to sell yourself as acceptable risk to your financial institution. “If you as a borrower can’t present a package to your lender that has that kind of necessary detail, it’s going to be harder for the lender to get his or her superiors to approve it,” a panelist concluded.

Sources: “Top Tips for Getting Credit,” CFOCE