Trade Credit Applications and Due Diligence
In many business-to-business transactions, clients and customers will opt to pay for goods and/or services on account, that is, on trade credit.
The trade credit documents in this subfolder provide a complete process for managing trade credit from the application stage through to the unfortunate eventuality of a breach of the trade credit terms.
Two versions of the Trade Credit Application Form are available. They provide a mechanism for you to collect and record information relevant to the grant of credit terms to customers. Both versions include a field for you to add your business/company name and one also enables you to add your business/company logo.
The Trade Credit Application Form is suited to any size of customer business or transaction and may be used whether your customer is a company, partnership or sole trader. We have also included a form of covering letter for you to use when sending the form to your customers to complete and a template letter to use when you accept the application.
We have also included in this subfolder a brief guidance note on credit control and the grant of trade credit to customers.
Trade Credit Applications and Due Diligence is part of Business . Just £38.50 + VAT provides unlimited downloads from Business for 1 year.
Frequently Asked Questions
A customer wants to buy from me on credit. How do I decide whether to offer it? +
Gather the facts first. A trade credit application form lets you collect and record the information you need about the customer, and you can then run due diligence such as checking Companies House, taking up trade references and reviewing a credit report. Use that to decide whether to offer credit and on what limit and terms. This sub-folder provides the application form and a guidance note on credit control to support the decision.
What is a trade credit application form for? +
It gives you a consistent way to collect and record the information relevant to granting credit to a customer, so you are not relying on informal promises. The form suits any size of customer and works whether the customer is a company, a partnership or a sole trader. Two versions are available, one of which also lets you add your business logo, and both let you add your business name.
What should I check before giving a new customer credit? +
Check who you are really dealing with and whether they can pay. That usually means confirming the correct legal name and status, looking at Companies House for a company's filings and accounts, obtaining a credit reference and taking up trade references. For larger exposures set a credit limit and review it over time. The guidance note in this sub-folder explains sensible credit control steps.
If a customer pays late, what can I charge on a commercial debt? +
For a business to business debt you can usually charge statutory interest of 8% above the Bank of England base rate, unless your contract sets a different rate, plus fixed compensation for recovery costs. The fixed sum is £40 for debts under £1,000, £70 for debts of £1,000 up to £9,999.99 and £100 for debts of £10,000 or more. Setting this out in your credit terms makes it easier to apply.
What comes with the trade credit application form? +
As well as the application form, this sub-folder includes a covering letter to send to customers with the form, a letter to use when you accept an application and a short guidance note on credit control and granting trade credit. Together they give you a simple process, from requesting information to confirming the credit you are prepared to offer.
