Creditworthiness determines both a company's ability to raise loan financing and its overall financial health. It is worth thinking about it even if the company does not need additional financing right now, because solid foundations can significantly facilitate attracting such financing in the future. Based on our experience with the financing of more than 5,000 companies in the Baltic States, we have compiled the main criteria from the lender's point of view that determine the creditworthiness of each company.

1. Build a stable capital structure
A stable and industry-appropriate amount of equity capital helps the company withstand any shocks and crises. Make sure your company's debt-to-equity ratio is appropriate for the industry and size of the company. Based on Lursoft data, we have compiled the average amount of equity capital to assets of Latvian companies in each sector.

2. Maintain a positive credit history
Credit history is one of the most important indicators by which a company's ability to repay a loan is evaluated. Timely payment of loans and bills helps to build a positive credit history, which can significantly increase the creditworthiness of the company. On the other hand, historical delays in tax payments or other debts can significantly limit or disqualify a business from receiving new financing or state support.

3. Diversify your sources of income
The wider the company's range of income sources, the lower the risk that difficulties in one industry or with one customer will cause problems for the whole business. Diversification of income not only increases stability, but also improves the company's creditworthiness and is one of the main factors evaluated by financiers when deciding on granting a loan.

4. Organize financial statements and documentation
Transparent and accurate financial documents help investors and creditors assess the company's financial position. Organized financial statements with clear and provable data show that the company is reliable and responsible. Misrepresentation of financial data (eg, uncollectibility of receivables, poor inventory records) is a frequent reason for loan denials.

5. Build good relationships with funders
Long-term and reliable relationships with financiers such as banks and other investors can facilitate more favorable terms and faster access to financing. Therefore, we recommend that you regularly communicate with financiers about your company's progress and plans, even if the business does not need financing immediately.

By improving creditworthiness, the company not only expands financing options, but also contributes to its overall sustainability and stability in the market.