Question

Avoiding Bankruptcy/Discussion Board 33 Bankruptcy is often the last resort for an individual or company that needs a fresh start. Everyone should be concerned with obtaining and maintaining a good credit rating to avoid being in financial ruin. Come up with a good list of recommendation and suggestions to obtain and maintain a good credit rating and keeping you and/or your business solvent, liquid and in a good financial situation so you can buy a car, a house, promptly pay your bills, obtain credit for business assets and sleep will at night.

Answer 1

List of suggestions and or recommendations are as follows:

1. Always pay the loan installments and or interest on or before a due date. It brings good rating to the individual paying it in personal capacity or to the company paying it on a business loan. If entities are unable to pay the loans, then at least interest amount should be paid on time and loan should be restructured to make easier installments for longer duration.

2. Maintain a liquidity ratio and acid test ratio close to the industry averages and if not, then it should be greater than  1 to develop confidence among the lenders, creditors or investors. A higher value of these rations ensures that the firm or the individual has a good payment capacity and liquidity to pay the immediate debt.

3. Give all the necessary disclosures and maintain consistent financial track records to prevent any sense of abnormalities, to be recognized by the banks or other lenders in the market. It can be done by getting rated by the rating agencies if there is a provision to get rated by the agencies in the given country.

4. Maintain expenses to be less than the income and if budgets are sanctioned for higher expenses, then it should be on profit making projects to ensure the recovery of investments.

5. Make a proper financial planning over a short term to medium term time like and stick to the planned spending. If there is a variance, then it should be regularly evaluated and corrective action should take place to put the expenditure and  income to be on track.

Implementing above suggestions and maintaining a good financial record, will not only bring new loans to the business or at a personal level, but also the person or business owner can relax during leisure hours.