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Offering Credit to New Customers

Never get burned again with these three tips for checking credit.

Q: How do I determine if a customer is creditworthy?

A: Offering credit to a new customer almost always prompts concern. The last thing you want is to provide goods or services for which you don't get paid. Here are three things you can do to make sure you don't get burned:

1. Check credit references. People who don't have credit problems will not object to supplying credit references. When checking references, ask about payment history, prompt payment and if there have been any collection problems. Users of Microsoft Word 97 and later can download credit application templates for free at http://office.microsoft.com.

2. Learn more from the major credit bureaus. Go to the "Business Services" or "Business Solutions" sections of Equifax, Experian or Trans-Union to check an individual's credit.

3. Consider products and services from D&B.D&B offers a number of products, including the Small Business Risk New Account Score, a way of rating new companies; the Payment Analysis Report, which provides an analysis of a company's payment history over the past year; and the Business Information Report, which provides an assessment of how much credit you should extend to the company. For instantaneous results, check out D&B's Global DecisionMaker service.

If a company or individual has no credit history, or if what they have is unfavorable, tell them you'll consider granting credit only after successfully doing business with them over a period of time.

Authors and career coaches Paul and Sarah Edwards' new book isThe Best Home Businesses for People 50+. Send them your questions at www.workingfromhome.com or in care of Entrepreneur.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the October 2005 print edition of Entrepreneur with the headline: Offering Credit to New Customers.

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