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A Credit Policy outlines how a company manages lending and payment terms with its customers. It sets clear rules for evaluating creditworthiness, approving credit limits, and handling collections - essential for Hong Kong businesses to maintain healthy cash flow and minimize bad debt risks.

Under Hong Kong's financial regulations, particularly those from the HKMA, a robust Credit Policy helps organizations comply with risk management requirements while protecting their interests. The policy typically includes credit assessment criteria, required documentation, approval levels, monitoring procedures, and steps for dealing with overdue payments. Banks and financial institutions must have especially detailed policies to meet strict regulatory standards.

A Credit Policy becomes essential when your business starts offering payment terms or credit facilities to customers. This is especially critical for Hong Kong companies expanding their B2B operations, launching trade credit programs, or seeing increased requests for delayed payment terms from clients.

Put your Credit Policy in place before extending significant credit - particularly when dealing with new market segments or increasing transaction volumes. For regulated entities in Hong Kong's financial sector, having this policy ready helps meet HKMA requirements and supports quick responses to audit requests. It's also crucial when your accounts receivable start growing or when planning to scale operations across different customer segments.

• Credit Authorization Form: Basic policy format for small businesses, focusing on customer credit checks and initial approval processes
• Credit Card Payment Authorization Form: Specialized version for recurring payment arrangements and card-based transactions
• Employee Covenant Agreement: Internal policy variant that governs staff authority levels for credit decisions and maintains operational control

• Finance Directors and CFOs: Set overall credit strategy and risk tolerance levels, approve major policy changes
• Credit Managers: Handle day-to-day implementation, customer assessments, and credit limit decisions
• Legal Teams: Ensure compliance with Hong Kong banking regulations and draft policy terms
• Sales Teams: Work within policy guidelines when negotiating payment terms with customers
• Compliance Officers: Monitor adherence to credit policies and report to regulatory bodies like HKMA
• External Auditors: Review credit policies during annual audits to verify risk management practices

• Business Profile Analysis: Review your customer base, transaction volumes, and typical payment terms
• Risk Assessment: Document your company's risk tolerance and current bad debt ratios
• Industry Standards: Research common credit terms in your Hong Kong market sector
• Internal Processes: Map out your credit approval hierarchy and collection procedures
• Compliance Check: Verify HKMA requirements if you're a regulated entity
• Documentation Systems: List required forms and tracking methods for credit applications
• Automated Generation: Use our platform to create a legally sound Credit Policy that includes all mandatory elements

• Policy Scope: Clear definition of covered transactions and customer types
• Credit Assessment Criteria: Specific factors and scoring methods for evaluating creditworthiness
• Authority Matrix: Detailed approval levels and decision-making hierarchy
• Documentation Requirements: List of mandatory forms and supporting documents
• Risk Controls: Credit limits, review periods, and monitoring procedures
• Collection Procedures: Steps for handling overdue accounts and enforcement
• Data Protection Clauses: Compliance with Hong Kong's PDPO requirements
• Legal Framework: Reference to applicable Hong Kong banking and finance laws

While both documents deal with financial arrangements, a Credit Policy differs significantly from a Credit Agreement. A Credit Policy sets company-wide rules and procedures for managing credit risks, while a Credit Agreement is a specific contract between lender and borrower for a particular credit facility.

• Scope and Application: Credit Policies are internal governance documents that guide all credit decisions, while Credit Agreements are bilateral contracts for specific transactions
• Legal Enforceability: Credit Policies serve as operational guidelines without direct enforceability against customers, whereas Credit Agreements are legally binding contracts
• Content Focus: Credit Policies outline assessment criteria and procedures, while Credit Agreements specify loan terms, interest rates, and repayment schedules
• Flexibility: Credit Policies can be updated internally as needed, but Credit Agreements require mutual consent to modify once signed