A new credit applicant company refused to sign our credit agreement or list bank and trade references, or provide financial statements, or sign a personal guarantee. The VP of Sales stopped in to tell me that this applicant was “important” and could become one of our larger customers. He added that he would have to “pull out all the stops” if this applicant was rejected.
With this conversation in mind, I met with my manager and explained the situation. I said I was uncertain how to proceed, but based our standard tools for credit evaluation; the applicant clearly would not qualify for open account terms. Even if they did, the credit limit I might assign on a good day would be perhaps one-tenth of the credit limit our salesperson had requested.
My manager told me to:
- stop straddling the fence,
- stop hoping that she would make the decision for me,
- stop worrying about the Sales VP’s comments,
- start thinking logically,
- start doing my job.
Later that day, she asked what my decision was. I told her I refused to extend credit. Her only comment was that if an applicant is unwilling to provide basic information to a new creditor that there is good reason for concern. In my opinion, this company either (a) had something to hide, or (b) had an inflated opinion about
their creditworthiness. In hindsight, I realized she was right. I had all the information I needed to reject the application. Her approach was a great way for her to reinforce my role and my responsibilities.
That’s my opinion. What’s yours?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
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.