Many businesses extend credit to their clients. This means that the business provides goods or services to the client without requiring payment right away. The client then owes the business a debt. A primary cause for bad debt loss is a credit decision based on an inadequate credit investigation. Yet, prompt shipment of orders is essential. Your credit checking method should be geared for speed and efficiency to enhance the order flow.

Such information as name, address, telephone number, fax, postal code, nature, business field and number of employees of the enterprise provides a basic, general understanding of a situation of the enterprise. Different credit policies can be applied to companies of different nature. For example, individual proprietorship enterprises and company limited by shares should be treated differently. The former is established by one’s own investment, correspondingly the capital and debt of the company are just those of investor himself. If the company’s capital is not enough for repay the debt, investor should compensate the difference with his own assets, which safeguards the rights of creditors. On the other hand, this type of companies is often of small scale, having a weak financial power and can’t endure strong changes, so prudence is needed when doing business with them. As for company limited by shares, special conditions on capital and profit are required at the time of their establishment therefore, probability of getting into bad account is relatively small.

Valuable credit information is available from several sources. You can conduct a number of searches to check the credit record of the borrower and verify whether other lenders have existing claims on their assets. The type of credit search you will need depends on the type of business you are in and the amount of credit you want to offer. The most common searches include a Personal Property Registry search, a credit search at a Credit Bureau, a search under the Bank Act, a Corporate search.