Credit checking/Personal Guarantees
This blog covers the main things to consider when opening a credit account with a client for your services. What do you need to know and how to not get caught out.
Offering credit accounts to clients can be an effective way of gaining a competitive advantage in the marketplace. It can also encourage clients to increase the amount of spending with the company and encourage swifter purchasing decisions. Builder’s merchants, office supplies companies and taxi firms are just a few of the industries who regularly offer credit accounts to their clients.
Balancing the potential for increased sales with the risk of reduced cash flow is an important part of managing risk in your business and, depending on the nature of your business and size of transactions, you may choose not to automatically offer credit to new customers. How do you make sure that you’ve made an informed decision about who to supply credit to?
Credit checking and securing personal guarantees are one way of ensuring added security and more peace of mind for your business. This can be time consuming for businesses who want to open multiple credit accounts as there are multiple steps you should take to add this security and peace of mind.
The main steps to consider are:
• Credit check every proposed customer you are considering allowing credit to.
• Adding a personal guarantee will provide an added layer of security. While not suitable for every industry, it can assist if a company defaults on payment terms.
• The personal guarantee must be incorporated correctly in order for it to benefit you. Do not accept personal guarantees at face value, always do your due diligence.
• Check the personal identification of the guarantor to verify name and address.
• Check the land registry to see if the property is owned by them.
• Check to see if the proposed guarantor is a director of the company who want to set up the account.
• If the company defaults or enters into insolvency then the personal guarantor can be pursued, in some cases the directors have more assets than the company.
Should the worst happen and the company defaults, then Daniels Silverman are available to help you to pursue the companies and personal guarantors to recover your monies quickly and efficiently. With years of experience in the industry, we are a diligent and discrete partner whose priority is our client.
For a helping hand reconnecting with your customers and getting back on track, get in touch with us today on 0800 953 3631 or visit our website and start a chat session with one of our Business Development team.