High credit limits make it possible for both you and your customer to sell more, which can be a win-win situation for any small business.
Credit Makes Buying Easier
Many small businesses will face challenges related to cash flow at times. This could be true for you, and is almost certainly true for at least one of your customers. If you can offer your customers and any potential customers reasonable credit terms, you may find that your customer will be able to do more business with you.
Paying you on credit will allow them time to make the sales, and increase their own cash flow. Credit could also be a factor that induces a customer to increase the amount of business that they do with you.
You may need to seek credit terms from your vendors in order to make it possible for you to extend credit to your customers. This might be easier to obtain if you can demonstrate to your vendors that you and your customers are good credit risks.
Monitor Your Risk
In order to benefit from the increased sales that credit terms make possible, you will need to ensure that your customers pay according to the terms of the agreement. There is no way to be absolutely certain that any contract terms will ever be met, but it is possible to minimize the risk of nonpayment by using business credit reports. These reports will provide detailed information about potential customers, their credit scores, and recommended credit limits, along with other information.
After extending credit, it is important to monitor the credit scores of your customers to identify changes in their creditworthiness. You may spot a decline in their credit score, or perhaps their recommended credit limit is lowered. Any changes should prompt action on your part in order to minimize the risks that credit poses for your small business.