Making Wise Credit Decisions

When you extend credit to a customer, you are in essence the customer's banker. If that same customer went to a bank for financing, they would be asked to supply certain information which would be forwarded to the underwriting department. They would check credit references, run a D&B report, and perform other due diligence that would allow them to make a logical decision as to whether or not to grant a loan.

As a business owner, you should take the same approach. Even though you don't have a large underwriting departement, you can still take the time to require that a credit application be filed out. You can call the customer's credit references to determine if timely payments have been made. You can require a personal guaranty of the owners of the business and run credit checks on them.

Finally, don't assume that a business that has been in existence for a long time is automatically a good credit risk.

Kent Harlan, CPA
Ozarks Capital Funding, LLC
www.ocflink.com
417.849.7394