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A Credit Policy sets the rules and standards an organization uses to make lending decisions and manage credit risk. It guides how businesses evaluate customer creditworthiness, set payment terms, and handle overdue accounts while staying compliant with NZ's Credit Contracts and Consumer Finance Act.

Good credit policies protect businesses from financial losses and help maintain healthy cash flow. They typically include credit assessment criteria, credit limits, payment terms, collection procedures, and dispute resolution steps. For Kiwi businesses, these policies must align with the Commerce Commission's responsible lending guidelines and fair trading requirements.

Use a Credit Policy when your business starts offering payment terms, credit accounts, or financing to customers. This becomes essential as your organization grows beyond cash-only transactions and needs clear rules for managing credit risk under NZ's consumer credit laws.

A Credit Policy proves particularly valuable during economic uncertainty, when expanding into new markets, or if your bad debt levels increase. It helps finance teams make consistent decisions, protects against defaults, and demonstrates responsible lending practices to regulators. Many businesses create or update their policy when preparing for audits or responding to Commerce Commission requirements.

• Consumer Credit Policies: Focus on retail lending, personal loans, and credit cards, with strict adherence to NZ's responsible lending code
• Commercial Credit Policies: Cover B2B transactions, trade credit, and payment terms for business customers
• Industry-Specific Policies: Tailored for sectors like construction or retail, addressing unique credit risks and payment practices
• Group-Level Policies: Used by larger organizations to set overarching credit principles while allowing subsidiary-specific procedures
• Microfinance Policies: Designed for small-scale lending, often with simplified assessment criteria and specific social responsibility elements

• Finance Directors: Create and oversee the Credit Policy, setting risk tolerance levels and approval limits
• Credit Managers: Apply policy guidelines daily when assessing applications and managing credit accounts
• Sales Teams: Must understand and follow credit terms when negotiating with customers
• Legal Advisors: Review policies for compliance with NZ credit laws and Commerce Commission requirements
• Accounts Staff: Handle credit checks, payment processing, and collections according to policy rules
• Business Owners: Approve final policies and bear ultimate responsibility for credit risk management

• Business Analysis: Review your current credit processes, risk appetite, and customer payment patterns
• Legal Research: Check NZ's Credit Contracts Act requirements and Commerce Commission guidelines
• Industry Standards: Gather information about typical credit terms in your sector
• Internal Input: Consult finance, sales, and collections teams about practical needs
• Risk Assessment: Define credit limits, assessment criteria, and collection procedures
• Documentation: Draft using our platform to ensure all mandatory elements are included correctly
• Review Process: Set up approval channels and regular policy review dates

• Purpose Statement: Clear outline of policy objectives and scope of credit operations
• Credit Assessment Criteria: Specific factors used to evaluate creditworthiness under CCCFA guidelines
• Credit Limits: Defined authority levels and approval processes for different credit amounts
• Payment Terms: Clear statement of payment timeframes, methods, and late payment consequences
• Collection Procedures: Step-by-step process for managing overdue accounts
• Privacy Protection: Rules for handling customer information under NZ Privacy Act
• Review Process: Specified timeframes for policy updates and compliance checks
• Dispute Resolution: Clear procedures aligned with NZ consumer protection laws

A Credit Policy differs significantly from a Credit Agreement. While both deal with credit relationships, they serve distinct purposes in your business operations.

• Scope and Purpose: Credit Policies provide internal guidelines for managing all credit relationships, while Credit Agreements are specific contracts between your business and individual borrowers
• Legal Status: Credit Policies are internal governance documents, whereas Credit Agreements are legally binding contracts that can be enforced in court
• Content Focus: Policies outline assessment criteria and procedures, while Agreements specify exact terms, interest rates, and repayment schedules
• Audience: Policies guide staff decision-making, while Agreements communicate obligations directly to customers
• Flexibility: Policies can be updated internally as needed, but Agreements require mutual consent to modify once signed