It is relatively easy to find investments and capitals to run your business, but repayments often encounter unforeseen financial problems. This is why some financial organizations, banks and private investors are experiencing significant arrears. Here are some of the solutions and practices that can be adapted to manage the risk of non-payment: obtaining accurate customer statements, drawing up the contract with the necessary documents, taking out credit insurance and adapting the surety bonds…
Obtaining accurate client statements
It is essential for any investor-lessor to make some preliminary enquiries before accepting a financial loan for a customer or supplying important goods for later payment. This helps avoid the risk of non-payment. Indeed, obtaining accurate information about a person or company’s financial situation and arrears from commercial intelligence agencies is a necessary precaution.
The investor can also visit all relevant registers of the company in question by contacting the various departments’ staff or professionals in order to assess the solvency of the business to be financed. This practice is mandatory to control customer risks and a good solution against the dangers of non-payment. Drafting the contract with all the necessary documents is also an appropriate procedure.
Drawing up the contract with the necessary documents
The drafting of an agreement is significantly decisive. Before drawing up the financing contract or filling in a delivery note for supplies or goods lent by a borrowing customer or legal entity, it is important to get them to sign a purchase order. This is to initiate a collection procedure later. A retention of title clause in the contract can also be considered as a solution in case of non-payment risks. Late payment penalties specified in the general terms and conditions are also considered as a precaution against the pitfalls of non-payment. Taking out credit insurance and other guarantees are appropriate solutions against the threat of non-payment too.
Taking out credit insurance and adjusting the surety bond
Taking out credit insurance is a recommended practice to avoid the risk of non-payment. This guarantee is a suitable solution against the risk of irrevocable debtor insolvency. Compensation is provided if the client is legally insolvent. Other guarantees such as a surety bond, pledge and loan collateral are also possible to limit this risk. Payment by factoring is also a good solution for dealing with such constraint.