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Give 'Em Credit

Extending credit to your customers can be a boon to your business, but only if you do it wisely.

This story appears in the April 2004 issue of Entrepreneur. Subscribe »

"Let's face it-North America runs on credit, so it's a disadvantage if a business doesn't offer some form of it," says Frances McGuckin, CEO of in Langley, British Columbia, and author of Big Ideas for Growing Your Small Business: How to Build Profits and Manage Growth (McGraw-Hill Ryerson). And yet, in tough times-which is precisely when business owners begin extending credit to lure those customers reluctant to part with cash-bankruptcies abound, and it can be riskier than ever to accept incremental payments. Just one or two deadbeat customers can push some businesses dangerously close to the dark side, and other business owners can find themselves so consumed with collections, they're left with little time to run their businesses.

"Extending credit is a [double]-edged sword," admits Robert Smith, 30, president of Robert Smith & Associates, a 5-year-old PR firm in Rockford, Illinois. "I give credit terms so more people can afford my publicity services. I also have people who still owe me money-and who will probably never pay."

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