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Credit Policy Template

Image 1

Prepared by:

​[Sender.FirstName][Sender.LastName]​

​[Sender.Company]​

Prepared for:

​[Client.FirstName][Client.LastName]​

​[Client.Company]​

A credit policy helps to establish a company’s standards and procedures for issuing credit and collecting unpaid debts. These policies clarify the types of customers whose credit will be issued, the terms of the credit issued and payments to be made, the responsibilities of the team, and how unpaid debts should be collected. You can use this free credit policy template to build your own comprehensive credit policy.

Purpose

The goal of this credit policy is to outline the requirements for issuing credit to qualifying clients of [Sender.Company] and how the credit will be monitored thereafter. It also explains which teams at [Sender.Company] are responsible for issuing credit and how unpaid debts will be collected.

This is a general introduction to a credit policy that outlines the purpose of the policy, but if you have a specific goal in mind for your company’s policy, feel free to specify accordingly.

Scope

This policy applies to every employee of [Sender.Company] and is valid for all sales within [Sender.Country].

If this policy doesn’t apply to specific departments, regions, or teams, make sure to add that to the scope.

Credit and Payment Terms

The credit department will collectively review new credit applications to approve applicants and determine credit amounts to be issued. The amount of credit issued to an applicant may be lower than the maximum if credit reports reveal limited credit histories of less than five years, low credit scores, or ratios below 1:1. Current accounts may be subject to credit modification based on the results of intermittent credit reviews.

In terms of specific credit terms, [Sender.Company] will provide a credit of no more than ($ insert dollar amount) to qualified applicants at an interest rate of (interest rate number)% applied to each payment.

The head of [Sender.Company]'s credit department can increase or decrease a credit line and demand a guarantee on a personal, corporate, or bank level from particular clients before issuing credit. All credit repayment terms are net 60 days, barring exceptional situations approved by the head of the credit department.

Sales terms

All client terms of sale are standardized according to [Sender.Company]’s current sales programs and promotions. The credit department head is responsible for approving all modifications of the terms of these promotions and programs on a case-by-case basis to maximize sales outcomes wherever possible. The sales terms for all clients are 60 days unless otherwise specified.

Roles and responsibilities

The [Sender.Company] credit manager has sole authority to approve the issuing of credit to clients and to speak with clients about their credit status. The credit manager can delegate this authority to other credit officers in the credit department with written consent. The remainder of the credit team will only contact clients with the intent of providing instructions for paying their debts.

The [Sender.Company] sales department bears the responsibility of ensuring that the credit application form of prospective new customers is provided to the credit department in advance of order acceptance. Sales representatives are also responsible for instructing each customer regarding the respective requirements of the credit and order administration, as well as for introducing the customer to the appropriate representative of each department that they will be in contact with.

It’s important to state which department is responsible for each task associated with the issuing of credit so that everyone is clear on what their role is and the customer can be better served. If there are more departments to account for within your company, you can add specific department names and titles as needed.

Signatures

The following parties agree to this credit policy as evidenced by their signatures below:

​

Signature
MM / DD / YYYY

​

Signature
MM / DD / YYYY

​[Sender.FirstName][Sender.LastName]​

​[Sender.Company][Sender.Title]​

​[Client.FirstName][Client.LastName]​

​[Client.Company]​

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FAQ

  • The three core components of a credit policy are credit standards, credit terms, and collection efforts. The credit standards determine to whom credit will be offered. The credit terms represent the terms of payment and the duration of the credit. The collection efforts indicate what the approach will be to collect debts owed from customers who are delinquent on their payments.

  • You can create an effective credit policy by including a purpose statement, defining the scope, explaining the credit and payment terms, elaborating on the terms of the sale, and clearly stating the roles of each person on the team and their primary responsibilities. You can also use a free credit policy template like this one to make sure you’re covering all of the necessary bases.

  • A credit policy determines the type of customer your company will offer credit to, what the terms of that credit will be, and how unpaid debts will be collected. It also explains the roles and responsibilities of each team member or department. Credit policies are important tools that can be used to improve the quality of the credit being offered and enhance the lending company’s financial performance.

  • The beneficiary in a credit policy is the person who is designated by the applicant to receive the benefits and responsibilities of the credit agreement. Typically, the beneficiary receives these benefits and responsibilities should the applicant pass away.

  • A firm’s credit policy can have a significant effect, positive or negative, on the company’s sales, bad debts, and accounts receivable. In terms of sales, the credit policy can make it easier for credit to be issued to a wider range of applicants. A thoughtful and well-structured credit policy can minimize losses by making sure credit is issued to credit-worthy customers that meet the specified standards. Considering accounts receivable, a company’s credit policy can help unpaid debts be collected more effectively with clearly defined procedures.

Disclaimer

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Credit Policy

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This policy defines the sorts of clients to whom credit will be extended, the conditions of that credit and the required payments, the duties of the team, and the procedures for collecting delinquent debts.

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