Share, , Google Plus, Pinterest,

Posted in:

Extending small business credit

Article by provided by Omnisol Information Technology

Managing small business credit risk is important to any small business growing its financial strength. I mean access to cash and credit is a small business’s lifeline. Small business credit allows a business to borrow money that can be used to purchase products or services. It is based on the trust that payment will be made in the future.

This is where your risk analyse strategy needs to come into play. When extending credit to your customers ask yourself these questions.

  • How will you know if a customer is a good credit risk?
  • How will you know if your customer will be able to pay you back?
  • Will it cost extra to sell on credit?
  • Will I stay profitable by giving my customers credit?

Make sure you know the answers to all these questions before you decide to proceed.

Fortunately, with the right risk management tools and a bit of discipline, any small business can achieve this goal. This is where VerifyID can help your small business because with our credit data and business history we can give you a good indication of your customer’s intentions and ability to pay.

When businesses apply for credit with you, processing their credit application is very easy, we recommend you request their banking details, business certificates, directors’ ID documents, and three trade references. With these bits of information, you will be able to use the VerifyID system to analyse your client’s credit risk with the following steps.

STEP 1

To start with we recommend you do a real-time home affairs ID Verification on each of the directors to makes sure their information matches with that of home affairs (ID Photo is essential). This will make sure the directors are who they say they are and will provide you with traceable contact details in the event your customer is not able to pay.

STEP 2

In this step, we recommend you do a company information search to makes sure the information on the business certificates matches that at CIPC (Companies and Intellectual Property Commission).

STEP 3

Thirdly, we recommend you do a bank account verification this will make sure the business banking details are correct and valid at the bank saving you time and money in the event you need to pay them or need to debit their account.

STEP 4

Making sure your customer has enough money to pay you is what this step is about, in this step we recommend you do a Back Code Update, this will let your customers bank know you wish to provide them with credit and the bank will let you know if they are good for the amount you are planning on giving them in credit.

STEP 5

And finally, we recommend you do a business credit report, this will provide you with a business credit score which lets you know how reliable your customer is in paying their debts. It will also provide you with business information like if they have any default payments, judgement against them, notices and other credit information that will help you in your decision to provide credit to your customer. Also, remember to contact those trade references as these references may just tip you off to some important payment habits your new customer may have. Using the steps above you will be able to secure your business and safeguard it against making bad business decisions that could make or break you. Remember that your general sense about a customer is always a good starting point. Put the right tools, technologies, and processes into place to manage your risk in the most cost-effective manner. With VerifyID you can achieve this and can be confident that you’re striking the right balance between risk and reward

Omnisol Information Technology is a Premier Member of the NSBC.