Learn How to Set Business Credit Limits
The use of business credit limits or credit availability guidelines is an area of great controversy. There are as many arguments for setting or not setting as there are for assigning blanket guidelines. Each of these approaches can create as many problems as they are designed to eliminate.
The best method is to assign limits/availability based upon the customer’s ability to repay their debt as determined during your business credit evaluation. Here are the two best sources to use when making business credit decisions:
- The best data will come from financial information.
- Second best data will come from trade references.
The goal should be to set appropriate business credit limits, providing freedom to lower risk customers with the ability and desire to pay on time and more conservative limits for your slower paying customers. If your business credit limits are set correctly, then slower paying customers will pop up for potential credit hold review while strong payers will not.
The best method is to assign limits/availability based upon the customer’s ability to repay their debt
Business Takeways
- Learn the two best sources to leverage while making critical business credit decisions.
- See how D&B can help you with setting appropriate business credit limits and making other critical credit decisions at: https://www.dnb.com/risk-management/dnbi-professional/16700068-1.html
