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The Credit Application: Controlling the business relationship

On Behalf of | Sep 11, 2023 | Aggressive Collections, Commercial Debt Collection

Your company’s sales numbers only matter if you are getting paid for all of your sales. The credit application outlines payment terms for the sale of goods and services.

But, just as important, it also establishes your protocols in the event of unforeseen circumstances.  There are three powerful ways to make sure your company gets paid for every transaction. These protections lurk quietly in a well-crafted credit application.

Defining credit control

Retaining the power to deny or reduce credit is crucial. This is especially true in today’s unpredictable economic climate. A business might be thriving now, but unforeseen financial challenges could easily arise within the year, thanks to a variety of unpredictable unknowns.

Incorporating language into the credit application that grants your company the ability to reduce or terminate a customer’s credit line due to nonpayment will protect you. It ensures that their financial distress will not affect your own business operations.

Include a personal guarantee

A personal guarantee is a clause that guarantees that the business owner will personally cover their business debts to your company. It states that the owner will use personal funds to pay their bill in the event their business faces financial struggles.

This provision is important. It will essentially allow you to pierce the corporate veil of an LLC or other business entity. Should financial trouble develop for the business, you will be able to pursue collection efforts by going after the owner’s personal accounts and property.

Incorporate legal disclaimers

Using disclaimer language in your credit application will allow you to investigate the credit history of your applicant. You can also use disclaimer language to set forth the terms of future litigation in the event it becomes necessary.

We regularly assist companies with the creation of contracts and credit applications and can incorporate tailored legal disclaimers that are relevant to your business, trade or industry.

Let our experience work for you

Law Offices of Alan M. Cohen & Associates LLC has worked with businesses to provide ethical, relentless and aggressive commercial collections since 1994. With over 50 years of combined experience, we can review your existing credit applications, revise necessary provisions or draft a credit application that is appropriate for protecting your business lending interests and needs. Call us today at 508-763-6604 or send us an email inquiry using our website form.