Title: Define the elements of creditworthiness of a business.
Course: Principles of Business and Marketing (12051-36) > Section: Making Sound Business Decisions

Defining should include meanings of the following terms:

- Creditworthiness—a valuation performed by lenders that determines the possibility a borrower may default on debt obligations; it considers factors such as repayment history and credit score
- Credit score (personal and business)—a numerical expression based on a level analysis of a person's or business’s credit files, to represent the creditworthiness of an individual or business; primarily based on a credit report, information typically sourced from credit bureaus
- Credit score—the numerical value calculated from information in a credit file that is used by lenders and landlords to assess “credit risk” at that time
- Credit report—a summary of financial reliability (i.e., history of paying debts and other bills)
- Capacity to repay—the financial capacity of an individual or an institution to make good on their repayment of a debt or loan
- Character—a borrower’s reputation or track record for repaying debts and living up to financial and credit agreements
- Collateral—any property or possession that can be used as security for a payment of a debt

Process/Skill Questions:

- Why does a lender look at a business’s credit history to determine future creditworthiness?
- How do interest rates correlate to creditworthiness?
- How can a business establish credit?
- What items can be used as collateral for a loan?
- What factors are considered when assessing a business’s capacity to repay a loan?
- What is considered a perfect credit score for a business?