Before your business extends credit to a new customer it is important to determine whether or not they are creditworthy. Many businesses make this determination via a credit application. However, the information that a potential customer provides on their credit application can be useful to your business in a number of different ways. Yes the information can help you determine whether it is a good idea to extend credit in the first place, but it can also serve as a very helpful tool for collecting outstanding debt. Collecting accounts receivable for business-to-business transactions (B2B) can be a complicated task, however, a well drafted credit application can make the process a whole lot less painful.

Credit Applications

A ‘credit application’ is a formal request for credit. This generally consists of a written form outlining important terms of the transaction such as the amount and type of credit, the debtor’s Personally Identifiable Information (PII), how the loan will be secured, and other various terms and conditions of the agreement. While this is the information that is generally included on credit applications, it is important to keep in mind that a properly drafted application form should be tailored to suit the specific needs of your business. Therefore, it is a good idea to consult with an experienced creditors’ rights attorney to ensure that your credit application form is appropriate and will give your business the best possible chance of collecting all debts that it is owed.

How Can A Customer’s Credit Application Help My Business Recover Unpaid Debt?

A B2B collections article from the International Association of Commercial Collectors, Inc. (IACC) points out that a customer’s credit application can be very helpful to your business when collecting accounts receivable. The IACC notes that properly drafted credit applications likely contain useful information that can help you ascertain both the parameters of the debt obligation at issue as well as detailed information that can help you track down the debtor if they try to skip out on their debt obligation.

For example, a customer’s credit application can help you track down a debtor or a bank account that has vanished. Even with business-to-business debt it can be complicated to find the person who is legally obligated to repay a particular debt. Therefore, a credit application that contains plenty of Personally Identifiable Information (PII) can be very helpful when searching for an obligated party. For instance, if the credit application contains the responsible party’s driver’s license number then you will likely be able to obtain their home address. In most instances, the Drivers Privacy Protection Act (18 U.S.C. § 2721 et. seq.) allows you to obtain information about a debtor’s license and registration, including their home address, from your state’s Department of Motor Vehicles once you initiate litigation against them. Additionally, if you want to recover payment from a debtor’s bank account you must know the debtor’s bank account information. This information should be included on the customer’s credit application form, however, before issuing credit you may want to consider contacting your customer’s bank in order to verify that the bank information provided is correct.

How Can We Help?

Your business’ credit application form plays a critical role both when determining whether a new customer is creditworthy and again when attempting to recover outstanding debt if the customer defaults. The experienced creditors’ rights attorneys at Cloud Willis & Ellis, LLC are happy to help draft a credit application that is tailored to meet your business’ unique requirements. Call our Birmingham office at (205) 322-6060 or our Mobile office at (251) 545-4844 today.