How to Make Business Credit Applications for New Customers
What’s the process for when a new customer applies for business credit at your company? Do you email them a PDF of your credit application with instructions to fill it out, sign it, scan it, and send it back?
Do you wish there were a better way?
As many companies consider digital workflows to eliminate paper-based processes, applications for business credit are getting a second look. While some companies still rely on fax machines to accept hand-signed applications and some accept emailed attachments, the companies that really want to improve their business processes are implementing online business credit applications.
Much has already been written about the benefits of creating an online credit application form: how such forms make it easier for your customers to place orders, get approved, and do business with you in general, and how they decrease turnaround times and reduce errors for credit teams. And if your company operates in a high-volume industry, an online credit application is almost a necessity.
Yet companies that are undergoing such digital transformation initiatives may be so focused on the technology aspect of implementation that they forget about what’s actually in the credit application template. If and when your company is going through the process of allowing customers to submit the application online, it’s also a great time to review and reassess the application’s form fields. You want to make sure you’re capturing all the data you need to make an informed business credit decision and provide the best possible terms. Consider that you’ve probably had years of collecting this information via paper-based applications: Where have you been successful, and what fields did your customers often leave blank?
Everything You Need to Know About What to Put in Your Online Credit Application
Contact Information. First off, the basics. Pertinent contact information should be mandatory fields. You need to know the company’s name (don’t forget to ask for both legal name and DBA name), its billing and shipping address, its tax ID, the purchaser’s (accounts payable or accounts receivable) contact information, the business owner(s) and officer(s) information, and the company’s Dun & Bradstreet D‑U‑N‑S® Number.
Next, learn more about the business – industry, age, legal status, parent company, whether it’s exempt from sales tax, and of course, how much credit they are requesting. Some fields can be industry-specific. For example, wholesalers/distributors and manufacturers might want to know the size of their customers’ warehouses and their expected annual spend. In addition, the contact information section is also a good place to establish a “Preference Center” of how your customers want to receive their invoices, statements, and other forms of communication.
Bank References. These used to be critical to an application for trade credit, but unless the customer uploads them alongside the application, you’ll need a signed agreement in order to check the bank’s reference. Some applicants are finding it harder to get banks to release financial statements due to privacy concerns, says Jocelyn Sharrar, a Trade Credit Consultant here at Dun & Bradstreet, and can’t rely on being able to collect that information.
Trade References. When it comes to trade references, you can require that the references include others in your industry. After all, if you’re a high-volume lumber distributor, you need to know that your construction customers can pay you back on time, not whether they can pay back that low-ticket specialty widget manufacturer. In addition, some companies only accept certain types of trade references – for example, references from a credit card or a utility might not be accepted (because a company is likely to pay those business-critical bills before suppliers). There is a concern that, just as with personal job references, companies only submit their positive references. This is why many credit professionals cross-check self-reported trade references against other trade payments found in a business credit report.
Financial Information. When requesting financial information, it’s important to be specific. Sharrar says that some companies don’t ask for financial statements for smaller lines of credit, and if they do, they don’t expect audited statements. If you’re happy to just get a recent statement reviewed by an accounting firm, be sure to define that in the application (as well as which types of financial statements are acceptable and which are preferred for various credit amounts). Otherwise you run the risk of it being left blank and you have to manually follow up – which can defeat the purpose of the faster processing times that the online credit application is supposed to achieve.
Terms and Conditions (Ts & Cs). The “fine print” of the business credit application is crucial but controversial. It’s important that your customers read and understand the Ts & Cs, but let’s face it, the legalese can throw people off. Not everyone reads it, often quickly scrolling to the bottom of the terms-of-use window and clicking “accept.” It should go without saying that anything involving Ts & Cs should be finalized by your company’s legal team; however, there’s an opportunity at this point for the credit team to work with legal to improve readability, in order to increase the likelihood your customers will read and understand the disclaimers. For example, you might ask legal about putting the information most important to your customers at the top: your standard payment terms and late payment fees, say, rather than a paragraph about infringement.
There you have it. This guide to the basics for online business credit applications should get you started in reimagining how your company’s credit application could be updated and converted to a digital application.