Sample Credit Application with Personal Guarantee
The most often overlooked aspect of the credit approval process is the use of a credit application with a personal guarantee. This document is important for several reasons. First, the credit application is a formal request for credit that requires the potential customer to answer a series of questions about his business. This information helps your company during the credit granting process, but can also be used as supporting documentation should the account be placed for collections in the future. While the main goal of all businesses is to increase and maintain sales volume, it is important to have all the available information prior to granting credit. The Sales department often pressures the Credit department to grant credit quickly. Although these two departments work closely, there is often a strained relationship that exists for this reason. Use a credit application as a standard operating procedure and you will see your Days Sales Outstanding decrease and the stability of your client base increase.
What information should a credit application include?
More often than not, larger companies with thorough credit history will refuse to sign the personal guarantee portion of the application. However you will find that customers are willing to sign a personal guarantee in cases where there is little or no credit history. This important aspect of the credit application allows you to pursue the guarantor individually should the extended credit go unpaid. It also enables our agency to pursue the guarantor's personal assets upon placement. This can be used as leverage even if the company is not in operation.
- Business name, history and references
- Company officers' names and titles
- Allowance for credit grantor to add interest on past due accounts and add legal/collection costs should the account go unpaid
- Personal Guarantee with SSN and signature without a title
(When a guarantee is signed with a title, it is only valid as long as that individual maintains the title listed on the signature page. This is very important!)
It is also important to have these applications updated with new information every year. The economy's landscape has changed drastically over the past several years and it is not uncommon to see formerly stable companies "fall from grace". Additionally, with increase volume of mergers and acquisitions it is vital that this information be kept current. Bank accounts, headquarters, and owners can change very quickly. This will allow the credit team to have their "thumb" on the constantly changing economy's pulse, and therefore, make better credit decisions in the future.
Please click, below, to view a sample of the IRG Credit Application and Personal Guarantee. Clients who wish to be able to print and/or edit the credit application should contact their IRG representative for instructions. The credit application is intended for the sole use of IRG's clients and should not be re-printed or altered without the expressed written consent of an authorized IRG representative.
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