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In some industries, business is conducted with only a few large contracts and a few major clients. One client may make up almost half of a company’s business dealings. While having so few customers can make things simpler, it can also be dangerous if any one of them pulls out of their contract for financial reasons. In order to limit exposure to these kind of catastrophes, business owners can take steps to check out a potential client’s credit-worthiness before signing a contract. Here are the first couple:

Run Credit Reports
Perhaps the most basic way to get an idea of a potential customer’s credit quality is to run a business credit report. Dun & Bradstreet collect credit data specifically about businesses, but some information is also available about most companies at the three major credit-reporting agencies: Equifax, Experian and TransUnion. Pulling an individual report can cost roughly $50 and getting a subscription for unlimited reports can cost up to about $200 a month. These credit reports will tell a business owners what the potential client’s credit rating is and how it most recent payments to other companies were handled. This overall view of a business’ credit can be very revealing about their potential for making good on their financial promises. It is necessary to ask potential clients for some personal information in order to pull their business credit report, so be prepared with the proper legal document to request that data.

So Some Legwork Yourself
Not everything there is to know about a business is laid out in its credit report. It may be handy to poke around a little on the internet. Taking a look at a company’s website can be very telling about its size, it resources, its professionalism. It is also helpful to look up reviews of the company on places like Yelp or Facebook. Paying attention to negative comment can sometimes provide some extra insight into the company’s dealings with credit.

These first steps can help business owners avoid getting into contracts with companies that do not have sound credit histories and may not be good future clients.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
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