CREDIT AND FINANCE POLICY

PREPARED BY:

NERO M. DENTE
KIM ALVIN M. DENTE
Credit policy
Is a set of terms that lays out how your
company will issue credit to its clients and
collect unpaid debts. Anytime you invoice a
client for services and begin working before the
client pays you, you're technically working on
credit, even if you don't have a formal credit
policy.
 The four elements of a firm's credit policy

1. Credit period - includes the time the purchasers are

given settle their debts. For instance, the buyers may be
given 30 days to pay for their goods.

2. Discounts - discounts are often used to encourage

early payments. For instance, the buyers may be given a
discount of 2% if they pay within 10 days.

3. Credit standards - includes the requirements clients

must meet to be given credit.

4. Collection policy - refers to the mechanism put in

place by firms to ensure that customers pay their debts.
 What are the 5 Cs of credit?

1. Capacity - to evaluate capacity, or your ability to repay

a loan, lenders look at revenue, expenses, cash flow and
repayment timing in your business plan.

2. Capital - to get a line of credit, you’ll need to show that

you have capital—some of your own money or money
from partners—that you can put toward startup or
acquisition costs.

3. Collateral - if you fall behind on loan payments,

financial institutions want to make sure you have
collateral, or another source of repayment for the loan.
4. Conditions - lenders want to be sure there’s a
market for your business. Make sure your business
plan proves that you will be successful based on
economic conditions, competition, industry type
and your history as a small business owner.

5. Character - this includes your education history,

business background and personal credit history.
Include any references or other information about
your financial situation.
Finance policy
Are the rules or principles of your
business's accounting and financial practices.
They should reflect your business's values and
culture. Your procedures are the instructions
that outline what your employees must do to
abide by these policies.
 Types of Finance

Personal Finance
Personal finance is specific to an individual’s situation
and activity. Therefore, related financial strategies depend
largely on a person’s earnings, living requirements, goals,
and desires. Financial planning involves analysing the
current financial position of individuals to formulate
strategies for future needs within financial constraints.

For example, individuals must save for retirement that

requires saving or investing enough money during their
working lives to fund their long-term plans.
Corporate Finance
Corporate finance refers to the financial activities
related to running a corporation. A division or
department usually is set up to oversee those financial
activities.

For example, a large company may have to decide

whether to raise additional funds through a bond issue
or stock offering. Investment banks may advise the firm
on such considerations and help it market the
securities.
Public Finance
Public finance includes taxing, spending,
budgeting, and debt-issuance policies that affect how a
government pays for the services it provides to the
public.
REFERENCES
https://www.businessnewsdaily.com/16049-credit-
policy.html
https://www.navyfederal.org/makingcents/business/the
-5-cs-of-credit.html
https://www.investopedia.com/ask/answers/what-is-
finance/