The Unequivocal Importance of a Credit Application

There are many intelligent, strategic and legal reasons why your customers should sign a credit application. A signed credit application should be considered as the cornerstone of a credit relationship. However what constitutes a good credit application form, information disclosure clause, validity of information, contractual debt reconnaissance and legal implications. This confidential and voluntary source of information is critical however there is a syntax order to follow; A good credit application contains the following;

The Technical Elements

  • Written in the official language or at the choice of the debtor
  • Use a professional looking application
  • Information disclosure clause
  • Key information captured is; exact corporate names, bank, trades and officers

The Strategic Element

  • How aggressively should a customer get sales/credit penetrated
  • What credit terms can bump the competition
  • Based on the ability to pay, should product price get adjusted to absorb slow payment costs
  • Risk-Neutral or Risk-Aggressive credit adjudication policies

The Legal Element

  • Did the debtor officially and legally ask for trade credit
  • Legal reconnaissance from the debtor requesting trade credit
  • Terms and conditions
  • Creditor security

A successful Credit Application Treatment Process should be tooled for speed and efficiency to enhance order flow. The quality of your credit decisions is in direct correlation to the quality, accuracy, age and dependability of your sources of credit information.

The application can also request financial statements. Financial statements can contain inaccuracies or questionable information but it also helps in corroborating information provided by the applicant on the credit application. In general practices; all the accounts should be opened after receiving and evaluating a satisfactory Credit Application. A well-reviewed account will help save valuable time in attempting to either collect or enforce in the event of a default.

A Credit Application serves the following purposes:

  • It is an information gathering tool
  • It is an assessment tool to determine amount and duration of credit
  • It is a collection tool
  • It is a legal document that binds the applicant to your terms and conditions
  • It is an enforcement tool
  • It is a monitoring tool. Revisit the credit applications of your important customer

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