How to Do a Company Credit Investigation Effectively?

Nowadays, it’s necessary for all the business man to do a credit investigation/inquiry in order to get a comprehensive understanding of the company which you are going to cooperate with.

Individuals aren't hesitant to approach the banks and monetary establishments for the aim of availing some types of finance. underneath such circumstances, the banks and monetary establishments are in a very position to require utmost care in judging somebody for the aim of obtaining eligibility for a loan.

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There are 5 easy and inexpensive steps to investigating your customer’s credit.

1. Collect Information and Get Permission

Before you can investigate your customer, you need to get some basic data, such as their business name, contact information, bank and trade references. Normally this is done on a credit application. Typically this is a one or two-page document that your customer fills out, signs, and returns. The credit application will include language to give you permission to check their credit.

If you don’t have a credit application, you can find samples on the Internet by searching for credit application templates or forms. The credit app can be used to set legal terms to protect you in the event that your customer does not pay on time.

2. Confirm Legal Name of Business

It is important to know the legal entity you are actually dealing with. This can be easily checked online for free. All states have Secretary of State websites where you can search for “business entity” or “business name” to confirm the exact legal name of corporations, LLCs (limited liability company), and partnerships. If the name you check doesn’t come up in the search, ask your customer if they have a different legal name or are registered in a different state, which you can then verify.

3. Run A Business Credit Report

A typical business credit report will tell you if your customer has outstanding judgments or tax liens for unpaid bills. You should be concerned about getting paid if they aren’t paying others. You can get reports from many web’s which are various of internet. The cost can range from $8 to $188 for an individual report, or as low as 3 cents each with a subscription. Reports can include information on how your customer pays other vendors and a credit risk rating.

4. Check Trade References

Contact the vendors that your customer named on the credit application. Ask how long they have done business together, the maximum amount of credit they have extended in the last year, and the average amount of time it takes for the customer to pay. You may also want to ask separately if they have been late on any invoices during the last 6 months.

5. Check the Bank Reference

Banks won’t tell you much, but they usually confirm when the account was opened and the approximate average balance. You may want to specify that you are seeking the average balance during the last 6 or 12 months. The banks will ask to see whether you got permission from your customer to release information.

Once you have a process in place, it should take 15 minutes or less to check a company’s credit.  That’s a small investment to dramatically reduce the chances of not getting paid.

How to get a reliable and professional investigation on Chinese suppliers?
eGTCP.com offers free credit reports to clients to help avoid trade risks.


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