The C’s of Credit have traditionally been related to 5 key subjects in credit analysis: Character, Capacity, Capital, Conditions, and Collateral. However, should there be only 5 in today’s world? Are there other C’s that should be considered? This discussion will define the traditional C’s plus additional C’s to contemplate.

Character

Character refers to the willingness of a debtor to pay its obligations and involves a level of ethics, integrity, trustworthiness, and quality of management that is related to the business customer. This involves examining the business background along with the officers.

Capacity

Capacity deals with the capability of a business to operate profitably and its ability to pay trade creditors, banks, employees, and others as those debts become due. An example would be the business customer’s ability to generate positive cash flow.

Capital

Capitalis the value of a customer’s business in excess of all liabilities and claims. This is often referred to as its equity or net worth and represents its financial strength. This doesn’t necessarily refer to cash, but to amount of wealth available and/or the possible production of more wealth.

Conditions

Conditions are the external events and occurrences that may interrupt or otherwise disturb the normal flow of business. COVID-19 would be an example of a unique condition currently affecting the business customer.

Collateral

Collateral is the assets that can be pledged as security for the satisfaction of a debt. This doesn’t just include available property. The use of security agreements and/or UCC fillings also are forms of collateral. Legal instruments such as liens and judgments are also examples.

These traditional C’s have been the primary factors for credit analysis for a long time. There are additional C’s that should be included for credit analysis in today’s economy: competition and communication.

Competition

The credit analysis process can be heavily influenced by the terms and conditions that are being offered in the marketplace. This factor could affect the value and/or weight of one of the more traditional C’s if that said component is not as positive or limited information is available in a credit analysis.

Communication

Today’s credit department needs to be able to communicate fully and clearly with all customers (internal and external). Understanding credit analysis and policy will improve the customers knowledge. Through communication tools such as (ranked in importance): in-person meetings, phone conversations, emails, and letters, customers can be better prepared to work with a credit policy if they understand it.  The credit department’s communications with different levels of management within a customer enhances that relationship and mutual understanding.

Written by: Eric Van Driel, director of corporate credit

In a speech at the NIM Sales Conference in January, I introduced the NIM Core Values.  As we look at our values, we want to get beyond those “permission to play” values that permeate so many company value statements. Honesty, integrity, character are just the starting line. They are the expectation, not something we must aspire to. Our values will set the road map for who we are as a company.

Our Core Values

Carry yourself like a pro

Represent our company professionally to the best of your ability. Treat our customers, coworkers, suppliers, and communities with the respect that they deserve. Adversity is met head on and worked through in a positive manner.

Celebrate success, but what’s next?

We are never fully satisfied. We will compete and win. We will celebrate the win while looking to our next challenge and opportunity.  We are relentless in our pursuit of improvement and success. Always looking to the future.

Empowerment for the path from A to B

Make the best decisions to accomplish our goals. Team members are expected to work within our values and culture to meet our customers expectations.

This goes hand in hand with the next value. Empowerment allows us to be NIMble in our decision making, and accountability ensures that we are meeting our customers needs.

Accountability to the standard

With empowerment comes accountability. Our customers have high expectations and it is our responsibility to meet them. 

Decisions with a long-term time horizon

Norfolk Iron & Metal is 112 years old. We intend to continue to grow the company long into the future and we want decisions made with that long time horizon in mind.  We want to capitalize on short term opportunities, but never lose sight of the big picture.

Sharing these values with you is important. Our culture is who we are as a company and it is who our customers have come to know. We hope these values will help us grow into the future and continue to strengthen our relationships with our customers.

Post by: Arnie Robinson, President, CCO