Selling without Financials

We are in the process of ev aluating the credit worthine ss of a custom er who is refusing to sub mit financials. An indepe ndent credit report has returned stating that no information is av ailable. Our sale s department is pressing for approv al, while manag ement is resi stiv e, giv en the circumstances. As a credit professional, what can I do to dev elop a more complete ris k profile for this customer? It ap p ears th at you h ave c om e up on a s itu ati on t h at all t oo of ten c onf ronts c omp ani es d oin g bus in es s in th e int ern ati on al m ar k etpl ac e - dif f ic ulty in obt ai ning wh at you need in or d er t o m ak e an inf orm ed c red it d ec is ion. W hen the pr es s ure is on t o appr ove c redit in ord er t o t ak e ad vant ag e of a s ignif ic ant s al es opp ort unit y, it is tempting t o b y-p as s us ual c r edit p olic y pr oc edur e an d as s um e an i nc reas ed ris k b as ed on l es s than ad eq u at e inf orm ati on. Sell ing on c r edit is al ways a ris k, but you c an mini miz e th at ris k by c ar ef ull y c ons id eri ng all th e avail abl e d at a and treati ng eac h ac c ou nt as a p ot enti al c oll ec ti on pr obl em. You didn't m enti on wh eth er or n ot you wer e abl e t o obt ai n a c r edit ap plic at i on f rom th e pr os p ec ti ve c us tom er. If you h ave n ot r ec ei ved this d oc um ent, d o s o. It is an i mp ort ant s ourc e of inf orm ati on wh en c ons id ering ext end ing c redit f ac iliti es . If your c us tom er is unwil ling t o f ill out s uc h an app lic ati on, th ey m ay well b e h iding s om ethin g. You mus t c ons id er wh eth er or n ot you c an t ak e th at c h anc e. Verif y, p ers on all y or t hr ough a third p art y, t h e inf or m ati on provid ed in th e c r edit ap plic at i on. Ch ec k all t h e tr ad e an d b an k r ef er enc es . You h ave s t at ed t h at your att em pt t o s ec ur e inf orm ati on th rou gh an i nd ep end ent c r edit r ep ort pr oved dis app ointin g. Alth ou gh th e r ep ort indic at ed th at n o inf orm ati on was avail abl e, it m ay, in f ac t, be pr ovidi ng s om et hing ver y im p ort ant t o c ons id er. If the ag enc y did its job well, th at r ep ort m ay b e c ruc ial t o m aki ng your c redit d ec is ion. In our c omp an y's exp eri enc e, appr oxi m at el y 10 % of the r eports on U.S. bu yers s ought b y overs eas s uppli ers c om e up bl an k. T hat m eans , th e c omp an y d oes n ot exis t at th e g iven ad dr es s , phon e and f ax nu mb ers . But, wh at els e does it m ean ? T he c omp an y is n ot r egis t er ed with t h e s tat e i n whic h it s upp os ed l y exis ts . T her e is n o lis ting with the ph on e c omp an y in th at c it y or th e l oc al c h amb er of c omm erc e. O th er bus in es s es in th e n eighb or h ood h ave never h ear d of it. In oth er wor ds , if the c om p an y exis ts at all, it is ver y p os s ibl y a s m all, u nr egis t er ed op er ati on worki ng out of th e own er's r es id enc e. I n eith er c as e, you h ave dis c over ed th at t his c omp an y m ay r epr es ent a p oor c redit ris k. G iven th e abs enc e of s ubs tanti ve inf orm at i on f rom th e c redit rep ort, t og eth er wit h th e c us tom er's ref us al t o pr ovid e f inanc i als , if inter es t in this ac c ou nt s till exis ts , it would b e ad vis abl e f or you t o s ugg es t th at S al es /Cr edit s c hedul e a j oint s it e vis it wit h th e pr os p ec ti ve c us tom er. At this meet ing, you will b e abl e t o m eet f ac e-t o-f ac e with the c us t om er and f ram e your q u es ti ons reg ar ding abilit y to p ay in a m an n er th at m ay s eem l es s threat ening th an r equ es ting f inanc i als . T his will als o gi ve t h e c us tom er t h e op p ortunit y t o expl ain t h e r eas on h e will n ot f urnis h f inanc ials . You c an als o t ak e th e opp ortunit y t o as k f or c urrent trad e r ef er enc es , bank r ef er enc es , etc . Suc h a vis it will all ow you t o s iz e- up th e c us tom er's bus in es s . T his mor e p ers on al s etti ng s om eti m es puts the

c us tom er m or e at eas e and m ay r es ult in his of f ering s om ething s h ort of f ull f inanc ials , s uc h as a b al anc e s heet. Com bin ed wit h addit i on al tr ad e an d b an k r ef er enc es , up on c hec king f urth er, this m ay s uppl y you wit h s uff ic ient inf orm ati on on whic h t o b as e a d ec is i on. You m ay b e ab l e to of f er a c ompr om is e - p erh aps h alf op en ac c ount and half c as h in ad vanc e. A word of c auti on. W hile an on-s it e vis it is a g ood t ac tic in the s itu ati on you d es c ribe, you s h oul d b e ad vis ed th at even s uc h vis its ar e n ot c onc lus i ve pr oof of c reditworthi n es s in thems el ves . T he f ol l owing is a c as e in p oint. Som etim e ag o, an As ian exp ort er c am e t o our c om p an y s eeking as s is tanc e t o c oll ec t a ver y l ar g e d ebt (US $1 milli on). B ef or e ext ending c r edit, th e exp ort er h ad c om e t o the St at es to m eet th e bu yer. H e was s h own an impr es s ive of f ic e and dri ven ar ou nd t own in a M erc ed es c ar. Bas ed on th e vis it, c redit was ext end ed. But, wh en the ac c ount c am e du e, th e m on ey di d n ot. As it turned out, th e bu yer h ad r ent ed th at l arg e of f ic e (inc luding all th e f urnitur e) and th e M erc ed es c ar f or onl y a week, expr es s l y t o im pr es s the exp ort er and g et th e g oods . He n ever h ad an y i nt enti on of paying and, b y th e tim e the bill was du e, h ad dis app ear ed with out a tr ac e. If th e export er h ad g ott en a c redit r ep ort af ter h is vis it, h e would have dis c over ed th at n eith er was th e c om p an y r egis ter ed, nor did it oc c up y th e of f ic es he h ad s een. And, h e m os t prob abl y would n ot h ave l os t his $1 milli on. As you c an s ee, th er e ar e s ever al s ourc es of inf orm ati on t hat c an and s h ould b e l ook ed i nt o, b ef or e you arri ve at a c redit d ec is ion. It is good pr ac tic e n ot t o b as e your entir e dec is i on on on e s ourc e al on e. A c r edit ap plic ati on, c redit rep ort, tr ad e and b an k r ef er enc es , f inanc ials , an d a vis it t o the c us t om er al l pr ovi d e im p ort ant in put wh en devel oping th e ris k pr of ile of a pr os p ec tive c us tom er. M os t imp ort antl y, onc e you ext end c redit and es t abl is h a c redit l imit, d on't tr eat it as if it wer e writt en in s t on e. You s hould c ons is tentl y m onit or th e c us t om er and adj us t the li mit as n ec es s ar y, b as ed on c h ang ing c onditi ons and your ong oing exp eri enc e. *****