How Does My Customers' Credit Impact My Business?

Denise Messang
Posted by Denise Messang on Jul 2, 2019 8:47:00 AM

As a business, do you take the time to check the credit of every customer or client you work with? While many businesses are of the mentality that “any business is good business,” at UC Factors, we find that this is not always true.

Some potential customers may have poor credit and the risk they pose is not worth the business they may give you. While this is true for any company, it is especially relevant to young growing companies who most often need to utilize invoice factoring as their means of funding.


Young growing companies that are trying to expand their customer base logically should have a concern about checking credit on their new customers. Younger companies cannot afford to take any losses which could jeopardize future growth or put them out of business.


If a potential customer has poor credit, this could be a sign that they may not be able to or be willing to pay on their invoice, which would cause a loss for the young growing company.


However, checking credit on potential customers is expensive and time-consuming, especially for a young company that is trying to do everything they can to get new business and see growth.


A company in this position may wonder if performing credit checks are truly worth it or if they might be better off just taking the risk and working with the potential customer without running a credit check.



How can working with UC Factors help with credit checks on potential customers?

Factoring can alleviate this concern in two ways. The first way is the credit checking itself. At UC Factors, we have credit analysts with decades of experience and credit resources that are superior to most companies. UC Factors will do everything possible to steer clients away from companies that do not have adequate credit.


The second way that UC Factors helps to solve credit concerns is by guaranteeing the credit of our client’s customers after we have approved credit. This feature in factoring is called non-recourse.


Once we buy an invoice, if the customer doesn’t pay for credit reasons, we have no recourse against our client, we can only collect from the account debtor.


Collections also play a role in credit. Credit limits that are granted to our client’s customers can be maximized by staying on top of the collections.


UC Factors runs a very professional collection department that makes sure all invoices are received by the account debtors and any requests the account debtors make to ensure invoices are paid on time are taken care of. This means credit limits will not be reached for reasons of inefficiency or miscommunication.



Why is checking credit important?

Throughout our years of experience, we have found that companies that do not give credit checking the proper consideration while expanding their business are playing Russian Roulette with their future. There are plenty of companies that may look good, but in reality, are on the verge of bankruptcy. There are many predator companies that have built up phony credit profiles for the purpose of fraud and companies that do not have adequate credit checking abilities will fall prey to them.


Credit concerns are not the principal reason for most companies seeking factoring, but having a company like UC Factors taking care of credit can end up being the most valuable part of our service.


If you are considering invoice factoring as a way to fund your young business, consider that working with a company like UC Factors will provide you more than just funding - you also get the security of knowing that your potential customers are reputable and secure to do business with.


One of the best ways to make sure you get the most out of invoice factoring is to make sure you are working with the right invoice factoring company. Learn how to choose the right factor for your business here:

How Do I Choose a Factoring Company?

Topics: Factoring FAQ

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