Small businesses often find it difficult to create their products and build their brand while also soliciting investors and building their initial savings. Starting a business and creating something valuable to the market often takes time and money. While everyone has the same 24 hours in a day, the financial aspects of starting and running a small business are often hard to take on.
Almost every small business at some point or another needs funding to move their business forward. Most small businesses start this process by looking online for commercial credit applications. This is why it is so important for commercial credit vendors to implement a frictionless online credit application process so small businesses can immediately view their options. It leads to increased sales and higher conversion rates. So, let’s see the best way to get through this process.
How to create the best online commercial credit application form for your business customers?
If you are looking to help a small business open a line of credit, you will need them to first fill out a credit application form. These forms ask for rather basic business and owner information so that a line of credit can be established once the application’s information can be verified.
To create an online commercial credit application for customers, you want to make sure it follows the necessary guidelines that will make the application valid and legal. You can utilize third-party online software services to provide real-time verification and speed up the entire process. Essential things like owner credentials and business information are all part of what is needed to set up an account. To cross-check this information and conduct a credit check, you can utilize a credit checking and background checking service.
Wherever possible, always automate these steps to ensure a smooth and quick process. Always clearly spell out all payment terms and conditions to ensure both parties are on the same page. This should include information such as any deposits required, late penalty fees, interest fees, early payment fees, etc. You also want to make sure your online application is easy to use, so offer various payment methods and flexible payment plans whenever possible.
What information should be required on a commercial credit application?
A credit application is a document that needs to uphold certain legal and financial information, so it is essential that you include all relevant parts of a commercial credit application on yours. Offering trade credit to other businesses is something that you need to make sure has a clear and concise outline for so that all parties know what they are getting involved with.
Typically, a commercial credit application includes the following information:
- All company information including the company’s legal name, DBAs, billing and shipping addresses, phone number, tax ID, industry, and company status.
- Authorized officers and contacts such as the A/P contact person, business owners, or authorized officers.
- Bank references
- Trade references
- Financial information
- Credit request amount
- Payment terms and conditions
To make sure you are setting up an agreement that is safe for both parties, you want to make sure the other business signs off on all their assets and credit history to prevent issues down the line. Additionally, establishing personal guarantees makes for a great way to safely lend to risky customers.
Who might be qualified to sign on the online commercial credit application?
Making sure that the person filling out the application meets the necessary qualifications will be important to ensure that you get your money back in the future. You can ensure the person filling out the application is an authorized officer or owner through any of the following documents:
- Certificate of Good Standing from the Secretary of State
- Certified articles of incorporation and any relevant amendments
- Corporate resolutions approving authorized officers
- Certificate of Incumbency
- The corporation’s attorney
- Affidavit of a corporate officer
Making the most out of online applications will involve you checking the other party’s credit history and assets to make sure you are not getting a bad deal. Working with someone who has a poor credit score and no assets to provide as collateral should be a serious red flag. You want to make sure the businesses you are working with have qualifications that meet or exceed what you would expect from someone you want to provide credit to.
How to verify the commercial credit application?
Just like a large bank, you need to make sure you can verify a potential credit applicant’s background and banking information to make sure you are dealing with the right people. To verify a commercial credit application, you will need access to the applicant’s credit score and other banking information to understand how many accounts and assets they have access to. You can utilize third-party software to automate the process of verifying banking data and pulling credit reports. After the credit report is pulled, you can use it to verify their payment history and other background information about their business.
Alongside the banking and financial information of the applicant, you will also need to make sure they can provide the necessary personal information so that you can verify you are talking to the real owner of the accounts checked on. This can be tricky with online applications, so you need to make sure you are covering all of your bases when doing this.
What are the important considerations before extending credit?
Once a business to business (B2B) credit application is filled out, you want to make sure you are only providing credit to reputable businesses and people. No business wants to extend credit to someone who is spending out of the agreed terms and is not showing any signs of returning the credit later on. To help avoid this situation, always be sure to extend credit terms that are in-line with the customer’s ability to pay.
Before you extend credit, you need to make sure that there are clear and concise outlines about the credit that will be extended. Making sure customers know when and how much credit can be given is essential to making sure the relationship is positive and mutually beneficial.
Should you extend credit to businesses with no or bad credit history?
Many people are hesitant to extend credit to those with bad or low credit scores, and for good reason. In nearly all cases, a low credit score indicated that someone was not responsible with previous credit engagements and missed or neglected to pay payments. Unless you want your money to come back late or not at all, working with these people should be avoided. However, you can still loan to people with low credit scores while minimizing your risks by requiring an upfront deposit or implementing invoice protection by a fintech company.
While someone with no credit can be risky to work with, you need to obtain all of their information before completely dismissing their case.
How to make commercial credit applications for new businesses?
Making a commercial credit application for new businesses has gotten much easier in the digital age. There is a wide array of effective and qualified templates that you can find that will make creating a new credit application a breeze. Even better, most of these templates are free and offer easy integration into your website and mobile experience.
Many people think you need completely unique applications for every credit extension, but that is just not the case. A credit application is simply a formal way of declaring information that can be collected elsewhere. As long as you have the essential information covered, the application does not have to be anything too crazy.
