Creditors' Rights 40
Q: How can I predict if a credit applicant is likely to pay?
A: Determining whether a customer is a good candidate to receive credit before you approve
them can make or break your business. I recommend that you follow the three Cs of credit:
Character, Capacity and Capital. The three Cs take into account the character of the borrower/customer, the capacity of the company to shoulder additional debt and the amount of capital the company needs to maintain a favorable asset-to-liability ratio. The first two Cs are easier to research; the third can only be approximated by outsiders. Be sure to get both business and bank references to find out if the company has the means to handle more credit. Business references will help you determine the character of the company, and bank references will help you determine the company’s capacity to handle more debt. In addition, carefully go over the credit application and make sure that the information provided on the application matches up with the company’s listing in the white or yellow pages. (All addresses and contact information should match up!) It also never hurts to obtain a credit bureau report or financial statement.
*Learn more about credit policies and the Payment Gap with Bob Bernstein’s new book, Get P.A.I.D.TM A Guide to Getting Paid Faster (and What to Do if You Don’t!) at www.getpaidsystem.com
