If you are a business owner that deals only with other businesses then it is obvious that you will be offering services and product on credit. But the biggest tragedy of running a business and lending money or offering service before payment is that you never know whether you are getting the money back or not. It might feel like this is just a one-time incident, but trust me it is not. When you are thinking of providing one customer with such a facility, be rest assured, you will be doing it all over again. And at some point in time, the stalled money will create a disruption in the cash flow. This will eventually affect the production as well as the salary of your employees.
That is why it is necessary that you think of considering a few things before you extend this kind of facility to anyone or think of offering credit to another business. Here, in the blog, I am going to tell you about 5 “C”s that are going to help you understand whether you are lending to the right people or not. Take a look.
It is necessary that you think of understanding the character of the business organization before you lend the money or offer the service before payment. Here, the character refers to the credit rating. When you are dealing with another business you can think of going through their credit reports and get an idea from there about how trustworthy they are and whether they have the reputation of not giving the money. Once you are sure that the company you are lending to is trustworthy enough for you.
Though you might say that even if the debt becomes pending, debt collections agency is there to help you, yet I will suggest you look for these factors. When you are providing a company with some money or product before payment, it is necessary that you think of knowing what the capacity of the company is. Try to know what is the turnover and get an idea of how fast you can recover the money when it is necessary. If you get to know that the capacity of the company is not too much, it is necessary that you think twice before lending to them.
When you are lending money and this is for the first time for such dealings, it is necessary that you ask for capital. Here, capital is referred to the down payment. So, when you are offering a service or lending money, make sure that the other business owner is ready to make a notable down payment. If the company refuses to pay the money, think again before lend or provide them with the service.
This is the most important thing that you need to do. Before you are lending the money or offering the services, make sure you are laying down your conditions. Here, the condition is referred to as contracts. So, make sure that you are thinking of adding all the necessary clauses that will ensure that the company will return your money immediately.
To make sure you are thinking of setting a clear credit policy for your company. In fact, any reputed debt collection service will also suggest you set a definite credit policy so that you can lay your terms in the first place when the other businesses are asking for similar facilities.
So, now as you know about these factors that you have to keep in mind, what are you waiting for? Follow them or if there are already debts in the market, hire the best collection agency in your town to take care of it.