Collection Alternatives to MoneyCollections Training Resource
May 17, 2013 — 952 views
Collection professionals are usually responsible for collecting the credit from their customers in the form of money. While this is the traditional credit collection method followed, one should understand that there are many alternatives to this process. One such alternative involves the process of business to business credit. This is considered to be the largest source of money lending in the world. Failure to repay the credit on time will put the assets of the business at risk.
A business credit or a trade credit is said to be established when one business issues another business a loan or a credit. The goods obtained in this manner are not personally guaranteed by the representative of the organization. Instead, the credit allows you to borrow goods and services against the assets of the organization. This type of credit helps other lenders to determine your chances of paying back the debt. The details about the credit transaction will be collected by business credit bureaus so as to create your business credit report. This credit report is a measure of the ability of a business or an organization to obtain goods or services by agreeing to pay it back on a later date. The business credit report will enable lenders to make a decision on whether to lend you money or not.
The Basics of Business Credit
Business credits pose less risk to the debtor than personal credits. But in some cases, it will be necessary to obtain the personal guarantee of the owner and a non-business credit check to get along with the business. Before giving out credit, check for all the licenses and permits that are relevant to the business. Also, check the telephone listings, investment name, domain name, business name, capital invested, and other investment details. The business experience, work history, and personal references will also affect your chances of getting business credit.
Having a co-signer increases your chance of obtaining a business credit. By cosigning the loan, the other person allows the debtor to use his/her credit rating so as to qualify for the loan. In this way, the co-signer also makes an agreement to repay the loan incase you fail in your endeavor.
A good business credit can be considered as the lifeline of a business. The credit can be obtained for almost all utilities like office furniture, employee uniforms, as well as manufacturing equipment. The credit can also be used for research, development, and staffing purposes. At times, business credit can be used to obtain cash to start up new endeavors. It is a prime factor which contributes to a business’s success and growth.
For obtaining business credit, organizations will need to submit a credit application. The credit application should be submitted separately for each individual creditor. The rules and guidelines for giving out credit and credit collection will differ from one organization to another.
Usually business credits are not a form of personal liability, and help to keep the debtor’s personal assets safe—but, the business owner will be held responsible for the debts that are incurred by the business. In such a scenario, the owner’s personal property may come under risk, in case the debt goes unpaid. To avoid such liability issues, the collector and the business owner should reach a legal agreement, well before starting with the credit dealings.