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Look for these three warning signs to find out if your creditor is bad news

by , 18 August 2014
The first step to ensuring you don't land your company with a serious bad debt problem is to do a credit check on a new client.

This will help you determine if that client is able and likely to pay you back. But how can you tell if this client is a bad debt trap? What if you make the wrong call and lose a perfectly good client?

To help you avoid that situation, we're revealing three warning signs you must look out for to find out if that creditor is bad news...

 

When it comes to checking your creditors, look for these three warning signs

 
Warning sign #1: Does your client have a history of unpaid debts?
This is a big warning sign and it's the one that'll tell you everything you need to know. If you can see that your client has a history of taking credit and not paying it back, it's best to deny them credit.
 
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Warning sign #2: No parties are willing to act as surety for your client
It's a good idea to ask shareholders in your client's business to act as surety for the creditor. This way, if your client doesn't pay, you can recoup the money for the shareholder. If no one is willing to act as surety, it may be because they know your client won't pay.
 
Warning sign #3: Your client has had to close or liquidate a business before
This may suggest very poor money management and a problem with debt. Look for more information on this kind of history to see if it was for a valid reason. 
 
These three warnings signs can give you a pretty good idea of whether or not your new client is a bad debt problem waiting to happen.
 


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