Credit grantors should keep in mind the nature of the exchange being requested : The customer wants products , merchandise or services without having to pay for them at the time of purchase . It is prudent for the credit professional to keep this fact in mind and point it out to the recalcitrant applicant .
The credit application process is the credit professional ’ s first , and sometimes only , opportunity to protect their company from risk of loss through credit sales and / or fraud . It should be routine to ask and insist that the customer / potential customer provide all of the information being requested on the credit application .
The process of acquiring the requested information from the potential customer can also be indicative of future dealings with the customer , and should be considered in the credit review process . The most advantageous time to ask for credit information is at the beginning of any buyer / seller relationship .
Once the customer has been delivered products or services , the customer may no longer feel the need to be forthcoming with information or cooperate with the credit analyst . The opportunity to obtain information becomes inconsequential to the customer . Yet , the information that should have been obtained at the outset of the relationship is critical to the credit manager or analyst ’ s credit review .
The key goal of a credit application is to assist the seller in learning as much as possible about the applicant before making a decision to extend credit . The credit application is often considered to be the cornerstone of the customer ’ s file . It should provide basic information about the customer and be updated periodically to reflect changes in the company ’ s policy and to obtain fresh information from the customer that better reflects the market and the various legal aspects affecting the credit function .
A properly constructed credit application can also serve as a document that can be relied upon for legal actions should litigation become necessary . One thing is certain about buyer / seller relationships : nothing is certain .
A well-devised credit application is structured to assist the seller during the four stages of the buyer-seller relationship : prior to extending credit ; during the credit relationship with the buyer ; during problems in a credit relationship ; and during litigation .
It is very important for a seller to know its applicant . The credit application begins the relationship-building process and is
Through the use of a well-drafted credit application , a credit professional may accomplish the dual goals of limiting credit risk , as well as addressing numerous contingencies that may arise in a credit relationship . Gathering basic information about the customer , in compliance with current laws and regulations , is the core of the credit application process .
an initial source of information to begin a fact-finding , fact-verification endeavor about the applicant . In addition to using the credit application as an investigative tool , the credit application should create a contract between the seller and the buyer .
The application should include all of the seller ’ s desired terms and conditions of sale . A savvy customer will recognize the credit application as an agreement or contract to terms and negotiate the contract accordingly ; the credit grantor should include every condition or term that addresses what has happened historically or could possibly occur in the industry or trade that would prevent the creditor from being paid on time or at all . It is far better to include in the credit application all terms and conditions to be negotiated rather than not including them at all .
Not having a terms of sale clause included in the credit application may allow the customer ’ s purchase order agreement to prevail in the event of a lawsuit , arbitration or mediation . In other words , in the absence of language favorable to the credit grantor , the credit grantor will lose to the customer on the basis that there was no [ other ] agreement to counter the customer ’ s claim and subsequent documentation . If a creditor wins a judgment in a legal proceeding , the credit application may also become a useful tool
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