When to Extend Credit and When You Never Should
If you are a small business owner, it’s highly likely you will have to extend credit. It may be your own, or it may be that you extend credit to others or expect payment in some form. If this sounds like you (and it probably does), there are some things you should be doing to protect yourself, and there are some things that you should not be doing for the same reason. As much as we may not want to admit it, money is what makes businesses succeed or fail, and you have to be careful with your finances as a small business owner. Let’s take a look at some things to do and not do when you extend credit.
What To Do:
- Check credit – It is important to check a company’s credit report before extending a line of credit. Credit.net can help you with this by providing thorough, accurate, well-researched data through credit reports on the companies you intend to do business with. It’s a good idea to check credit upfront so you know what you are getting into and can make well-informed decisions.
- Take precautions – As tempting as it may be to do business with a company that seems like it could be a good match on the surface; it’s essential to take precautions. Fraud is prevalent in the business world. Use common sense and a credit report to make wise business decisions.
- Cut your losses when you have to – Unfortunately, sometimes a company just can’t deliver. You may wish you never did business with them when they can’t pay what is due. If they really can’t pay, you may have to cut your losses, call it a day and learn from your mistakes.
What Not To Do:
- Don’t judge a book by its cover – A company can seem put together and financially stable outwardly, but when you take a deeper look at their financial story, it may say something else. This is why credit checking is important; appearances don’t tell all.
- Don’t take someone’s word for it – According to Nav.com, fraud occurs all too often. It can happen when a business owner knows how to talk the talk, covering up the fact that he has nothing to back up his word. What this means for you is no delivery of the funds you should have coming to you.
- Don’t repeat your mistakes – Maybe you had a bad experience where you had to cut your losses, and there was not much else to do. One thing you can do is learn from this and avoid making the same mistakes. Take that credit report and apply it so that you can make smart business decisions in the future.
The best thing you can do to make the right decisions when it comes to extending credit is read the credit reports. You can work with Credit.net to get the information you need on the companies you may be working with. Remember, it’s a lot easier to prevent a bad decision than to try to remedy it. Don’t hesitate to contact us for information on how we can help your business succeed.