The Holy Grail: Financial Information From Private Companies – Michael Dennis, CBF

The Holy Grail

Customer financial statement analysis is an integral part of the credit decision making process.  Many creditors now routinely update financial information on their publicly traded customers.  Creditors are now more willing to ask privately held customers to provide financial information notwithstanding the often heard warning that asking for financial data from privately held companies is asking for trouble.

In my experience, the reaction from 95% of privately held companies is to simply ignore the request.  For many years, I have worked for companies that require rather than request privately held companies requesting credit limits over a specific dollar amount to provide financial information.  I cannot remember the last time any customer or applicant was shocked and appalled that I would request financial statements.  In my opinion, every creditor should require regular financial statement updates from privately held customers with credit limits of a specific amount.  Time after time, access to privately held customers’ confidential financial information has enabled me to limit losses.

To avoid pushback, my suggestion is to make a request for financial data appear routine.  If a customer contacts you, explain that requesting financial information is a standard policy.  If that response fails, the next response I use is to explain that financial data will help me to approve their credit limit now and in the future.

Michael Dennis, CBF

A word to the wise: If a customer fails and files and you do not have current financial information on file, it will be far more difficult to explain the rationale for your decision to extend them credit.

Michael Dennis’ Covering Credit Commentary. Michael’s website is

The opinions presented are those of the author.  The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors.  Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.

4 Replies to “The Holy Grail: Financial Information From Private Companies – Michael Dennis, CBF”

  1. I agree–the more of us that request the statements, the more reasonable the requests will be to our customer’s. This is an under utilized resource the many trade creditors overlook.

  2. This is one of the issues that my area struggles with. It was great to hear that other companies are dealing with the same issue.

  3. I agree that it can be difficult to get financial statements from privately held customers.

    I think it is worth emphasizing Michael Dennis’ comment above. There are times when you request financial statements and there are times when you require them…. meaning that there are times when the only way you can consider offering a customer the credit limit they need is if they provide financial statements.

    Also, the only way you can continue to offer the credit limit required is if the customer continues to provide updated financial statements when you request them.

    Michael Zininberg

  4. Yes, if you are extending any significant credit to privately held companies financial statements should be required. You, as the creditor, should also be willing to sign a non-disclosure agreement. A couple of simple points to consider:
    • If you can’t get the financials, is the prospect/client unable or unwilling to provide the information?
    • Obtaining and analyzing financials should be a recurring event. The more risk, the more frequent (quarterly to annually).
    • If the sale is for a nominal amount, require a credit card, sell Cash in Advance or COD. Otherwise you are probably wasting resources.
    Make it a requirement of your Credit Application. Maybe I was in banking too long, but if someone is asking to “borrow” YOUR MONEY, they should be willing to demonstrate that they can pay you back.

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