Improving Credit Decisions with Merchant Statements

15 Feb

Even for the most experienced professionals, making credit decisions is a hard task. There are many factors to consider and even then there will always be a level of risk to any call you make. This is why the best credit professionals use every tool at their disposal. One of the most overlooked tools you can use is merchant statements. Here are four ways that merchant statements can aid your credit decision process. 

As a Benchmark During the Initial Credit Application 

Provided you are dealing with a customer who conducts a meaningful amount of business through credit cards, requesting a 2-3 months worth of merchant statements can prove very valuable down the line. By doing this, you are able to establish a verified benchmark for revenue that you will be able to compare to later.

Annual Monitoring
Business man on phone, Follow Up, C2C Resources

Now that you have this benchmark, you can ask for a few months of merchant statements again when you are reviewing customer’s credit limits over the course of the year. This allows you to see the direction that sales are trending. While an increase in sales is typically a good sign, a decrease does not always mean there is trouble on the horizon. Sales could have simply shifted away from credit cards and towards other forms of payments. This could be due to shifts in product focus, strategy or a host of other reasons, 

Credit Increase Requests 

Similarly to above, if your customer asks for a credit increase you can ask for a few months of merchant statements again to see how sales are doing. If sales are increasing that is a good sign, but if they are not, you should ask more about why they need a credit increase. There could be a very good reason (shift in sales strategy, growth opportunity, etc.), but it also could be a red flag. The important part is that the merchant statement comparisons allow you to ask the right question. 

Helping to Evaluate Payment Plans or Settlements

Finally, merchant statements can also help evaluate payment plans or settlements. While there are many factors to consider, a merchant statement can act as another piece of reliable information to take into account. It may not provide the whole picture, but it can give you valuable insight and allow you to make more informed decisions. 

Merchant statements will not hand you the right answer for a credit decision, but they will give you another valuable tool in order to make the best decision possible.

Leave a Reply

Your email address will not be published.