In today’s society, so many purchases, both large and small, are being made with the help of credit and financing. For large businesses with the resources to manage all aspects of the customer relationship ultra effectively, this may not present as much of an issue as it may for smaller businesses or entrepreneurs just starting out a new company. Because the topic of credit and financing can be tricky and confusing, it’s best to know exactly what you’re getting yourself into when you decide to offer your customers financing options. To help on this front, here are three tips for allowing your customers certain financing choices.
Understand the Type of Credit You’ll Accept
With the current unsteady world economy, consumer portfolios are often fluctuating, making the prospect of purchasing using credit very appealing. But as a business, it’s important for you to know which forms of financing you’re comfortable working with and which ones you’d like to avoid.
According to the staff of Entrepreneur Media, credit comes in many forms that you may not traditionally think of as credit. For example, taking personal checks, debit and credit cards could all count of credit because you aren’t getting the cash for the purchase immediately. Also, other payment options such as bank transfers are a form of credit just like more traditional lines of credit.
While you may be comfortable taking debit card payments and personal checks, you may not want to take the risk of accepting bank transfers or lines of credit as a small business. Consider what you think would be the best option for your company and then stick to those forms of credit you’re comfortable with.
Look for Trade References
If you feel that you’re comfortable offering your customers lines of credit with your business, Rosalind Resnick, a contributor to Entrepreneur.com, recommends for you to seek after trade references for each of your prospective credit customers. These trade references will provide you with information from other vendors who have offered this customer credit. You can then know if giving credit to this customer will be a good risk or a bad risk for your business based off the experiences other businesses have had working with this particular customer. If everything looks sound, you should feel more confident giving financing options to customers with solid trade references.
Get Your Credit Policies and Procedures In Order
Once you’ve decided that you’re going to offer credit to someone, it’s vital that you get your policies and procedures in order as to protect your business from financial ruin. To help with this, the U.S. Small Business Administration advises for business owners to take four steps to establish their credit practices. These steps include running credit checks, developing payment guidelines and invoicing systems and more. By taking these measures, you should have an easier time keeping track of all your credit information.
Offering financing options can be a way for your company to continue conducting business even if your customer base is struggling with their finances. However, it’s best to protect yourself and your business by using the tips mentioned above to know just how to go about providing credit options to your customers.