There is a lot written about the tension between the sales department and the credit department. Of course sales wants to close the deal only to have credit question the validity of the customer.
I have stressed this over and over here in the blog – the company is the lender. And the company should treat credit the same way a lender does – with due diligence. What makes a company think that extending $50K of credit to a customer who couldn’t qualify for $5K of credit from a bank is going to turn out ok? Generally small businesses use the “gut check” method of deciding when to offer credit terms.
Better sales divisions train sales people to come to the credit department early in the sales cycle to have the customer pre-qualified for an impending sale. This way there isn’t a lot of time wasted on a deal that has no chance of closing. A business banker is doing the same thing when considering a potential loan.
One of the benefits of using a factoring company like ours is the ability to have a potential customer’s credit checked anytime as part of the approval process. We use multiple sophisticated credit vendors to cross check the credit availability of any account debtor (customer.) This becomes an ongoing resource built into the invoice funding process. A reminder that factoring is more than the money.