Screening Out Risk: Go Beyond the Application

Credit applications are nearly identical, but there’s more to screening than collecting an application. It’s a mix of science and art as you screen out bankruptcy and fraud, and mitigate disputes and slow pay.

For almost 20 years, BlueTarp has screened thousands of customers for credit worthiness. Learn our top ten tools and tricks.

1Establish clear credit policies.

Asking for financial information can be sensitive, but your customer will understand if your requirements are the same for everyone. Make sure your sales and credit teams are enforcing the same rules. Have a clear process for if or when you will make exceptions.

2 Look at your application in a new light.

How’s that application looking? Does it seem a little too perfect? And are they extremely prompt to respond? Sometimes those are warning signs that something isn’t legitimate.

Check Google Maps Street View to verify their business address and the delivery address if it’s different. We’ve prevented fraud before by asking ourselves, “now how does a plumber conduct business in the middle of a corn field...”

3Collect personal guarantees on new or higher risk businesses.

It’s always OK to ask for a personal guarantee (PG), especially when a company doesn’t have a very solid credit history, or when you are making

exceptions to your credit qualification criteria.

Just having a PG doesn’t mean you’ll get paid. You want the PG to come from a credit quality individual - if they are not making good on the debt to you, they have something to lose.

4 Pull all the credit!

Get permission to pull the owner’s consumer credit data, not just the company’s commercial credit. When there is conflicting information, dig deeper to better understand your potential customer. Check out some of these resource links:

Experian

Dun and Bradstreet

Equifax

5 Get the full story behind unsatisfied, recent or sizable judgments/liens.

The back story may impact your impression of the situation and may shine a light on the customer’s plan to dig themselves out.

6Scrutinize ratio of outstanding balances to high credit limits.

Why are they missing payments, especially when their credit line is so high? It could be a large project impacting their cash flow or a sign of something wrong.

7Get audited financials (especially for high credit lines).

You’re about to lend out your money. It is not unreasonable to request a better understanding of their financial picture to see how it may impact yours. Rely on your clear credit policies - if you consistently request financials for a particular line size - it’s an easy answer for customers to hear.

8Request bank and trade references.

Call all references. Don’t just ask about payments, ask about any issues or complaints involving them. Ask yourself, what would it be like having them as a customer? Is it worth taking them on if so many of their purchases end up in disputes that tie up your funds for months?

9 Check with the BBB to see what their customers are saying about them.

Does the business seem reputable and resolve any issues appropriately? Often times disputes run downhill. If your customer’s payment is tied up someplace else, likely yours will be too.

10 Where in the payment hierarchy does your customer stand?

It’s great when your pro customer has sealed a large commercial or government contract - that usually means guaranteed funds. But just know, if they get paid last, you will, too.

Want to get smarter on how to protect yourself from credit risk?

Check out The Top Warning Signs That a Customer is in Trouble.