Ideas for extending credit to a new business.(Credit Basics)

Business Credit, January, 2004 by Dennis, Michael C.

From time to time, credit professionals will receive a credit application from a newly formed company. In some cases, the company in question is well financed, the owners or senior managers have a wealth of experience in the industry and, as a consequence, the company has a certain amount of credibility with customers and vendors.

However, a more difficult situation arises when the applicant is new to the business and has no trade references, a non-borrowing bank relationship and reports that the company has no financial information to share with creditors. The question to then consider is this:

How can vendors sell to this second type of credit applicant while controlling and limiting credit risk? Limiting risk in this scenario will not be easy....