Extending Business Credit

Are you ready to extend business credit?

The Tampa, St. Petersburg area is experiencing an economic boom right now.  New Businesses are popping up all over.  Across Florida, the economic resurgence is taking hold, and Florida is once again turning into the business haven it was before the great recession.

With all this new business, there are existing businesses considering if they should again start extending credit in order to grow, and new businesses trying to decide what role extending business credit should have in their growing business.

As one of the most established debt collection attorneys in Florida, we are putting out a series of articles to help you, the business owner, evaluate the role that credit should have for your business, whether it is a startup, or one of the Florida’s long-standing businesses.  If you need help managing past due receivables, please give us a call.   We can help collect on old business debt.

When your business extends credit, your business opens itself up to the discipline of accounts receivable management, and collections policy.

We have many clients asking us to help them collecting a business debt, that had no realistic expectations of what extending credit would entail.   Sometimes, the collection process can be incredibly arduous on a small business, and one or two delinquent customers can make or break the business.

Before you begin extending credit, there are a few basic questions you should ask yourself, and should be ready to accept the honest answers for.

Questions to understand before extending business credit.

1.  Do you understand “net’ terms?  When you sell on Net Terms, do you fully understand the implication that net 30, means that your client is not obligated to pay you, and won’t be past due till 30 days from delivery?  Can your cash flow support that?

2. Is extending credit right for your company?  There are many things involved in this question.  Do you get credit from your suppliers, so that you don’t have to pay for your materials before your customer pays, or are you having to float the entire risk?  Is your customer a recurring customer that you can build a long-term rapport and receivables expectations.. or are they a one time?   Is your product something that you can “take back” if it’s not paid for?

3. What is your competitors’ stance on extending credit?  Is extending credit a “must have” to be competitive in your industry?  Does your industry not extend credit at all?  Sometimes extending credit is a way to drive new business when your competition does not offer credit, sometimes extending credit is the only way to run competitively.  Sometimes, if your industry does not offer credit to clients, it is with good reason, and the nature of your industry has too much risk, and you shouldn’t be extending credit.  Regardless, investigate the competitive climate of extending credit in your business area, and decide whether credit is right for you.

We’ll have more on this topic tomorrow.  In all, we will have somewhere around 100 excellent questions for your business to pursue when it comes to the extension, management, and collection of credit for your business.

 

 

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