If you are a business owner who deals only with other businesses, then it is obvious that you will be offering services and products on credit. But the biggest tragedy of running a business and lending money or providing service before payment is that you never know whether or not your debt is getting the money back. It might feel like this is a one-time incident, but it is not. When you think of providing one customer with such a facility, rest assured you will be doing it all over again. And at some point in time, the stalled money will disrupt the cash flow. This will eventually affect the production as well as the salary of your employees.
That is why you must consider a few things before you extend this kind of facility to anyone or think of offering credit to another business. Here, in the blog, I will tell you about 5 “C” s that will help you understand whether you are lending to the right people. Take a look.
You must understand the business organization’s character before you lend the money or offer the service before payment. Here, the symbol refers to the credit rating. When you are dealing with another business, you can think of going through their credit reports and get an idea from there about how trustworthy they are and whether they have a reputation of not giving the money once you are sure that the company you are lending to is reliable enough for you.
Though you might say that even if the debt becomes pending, a debt collection agency is there to help you, I will suggest you look for these factors. When you provide a company with some money or a product before payment, it is necessary to think of knowing the company’s capacity. Try to see the turnover and get an idea of how fast you can recover the money when necessary. If you get to know that the capacity of the company is not too much, you must think twice before lending to them.
When you are lending money, and this is the first time for such dealings, you must ask for capital. Here, capital is referred to as the down payment. So, when offering a service or lending money, ensure the other business owner is ready to make a notable down payment. If the company refuses to pay the money, think again before lending or providing them with the service.
This is the most essential thing that you need to do. Before lending the money or offering the services, ensure you are laying down your conditions. Here, the situation is referred to as contracts. So, make sure you consider adding all the necessary clauses to ensure the company will return your money immediately.
Credit Policy debt
Ensure you are thinking of setting a clear credit policy for your company. Any reputed debt collection service will also suggest you put a definite credit policy so that you can lay your terms in the first place when the other businesses are asking for similar facilities.
So, now that you know about these factors that you have to keep in mind, what are you waiting for? Follow them, or if debts are already in the market, hire the best collection agency in your town to take care of them.