Non-Financial and Qualitative Factors in Credit Decision

Financial ratio have always been used to evaluate the credit worthiness of a new customer.

But, how about non-financial and qualitative factors that you as a Credit Manager might want to look for?

This should at least include the following:

1. Payment History (rating: mostly prompt, prompt-slow and mostly slow),

2. Need of Customer’s business(rating: great, average and small),

3. Character of Management (rating: above average, average and below average),

4. Years in Business: (rating: more than 5 years, 1-5 years and less than 1 year),

5. Bank Borrowing (rating: unsecured, none, unknown, secured by fixed assets, secured by current assets),

6. Competition (rating: heavy, average and below average),

7. Product Profitability (rating: high, average and low),

8. Credit’s manager assessment: (rating: comfortable, uncomfortable, very uncomfortable)