If you are a lender, or another company who extends credit to other companies as part of your business model, then you know that you can’t offer money to just anybody; you’d quickly go out of business yourself. So how do you decline credit terms to a company?
Do You Want to Decline Credit Terms to a Company?
The first thing to do is decide whether or not you want to decline credit terms to a company. A number of factors will go into this decision, but the biggest one should be your assessment of the company’s business credit report. You can get a business credit report from Dun & Bradstreet with comprehensive information on the company’s financial history, along with a PAYDEX® score, a credit limit recommendation, and other useful data.
If this report indicates the company is not a good credit risk, then you will want to decline, unless you think you can offer high enough repayment terms so that it will be worth that risk. You may want to sign up for credit monitoring for that company, so you can track the company over a few months, in order to get a more accurate picture of the way they handle credit.
If you do decide to decline credit terms, then you should do so gently, and as succinctly as possible. A detailed explanation of what you found in their credit report is neither necessary nor desirable. A simple letter explaining that your evaluation of their business model and credit profile suggests that it is not in your interests to extend them credit at this time will be sufficient. If you see potential in the company, then you may want to suggest they reapply a few months down the road, and keep an eye on their credit during that time.