Should You Request a Merchant Statement when Extending Credit

21 May

Before establishing a line of credit with a customer, you should always require a thorough credit evaluation. It is key to mitigating risk to your bottom line and provides the foundation for a good business relationship. Every good credit application should require the following information:

1.Business name and Officer name(s)

2.Type of entity (i.e., partnership, sole proprietorship, S-Corp, etc.)

3.Address of business and length of time at that address and phone number(s)

4.Banks where business accounts are kept, including phone numbers and address

5.Credit references

6.Applicant’s accountant

What should you do with this information?

The first thing you should do is verify that the information provided is accurate. Next, you should begin to call the references listed. This can sometimes lead to what I like to call a false positive. Applicants typically list their best references and thus they will most likely get a positive review from those contacts. While this may mean they are outstanding customers, you should also ask other people in your professional network about any experience they may have had with the applicant. Identifying the customers product lines on their website can be another source of potential references.  The larger the credit limit, the deeper you should investigate. Experian, D&B, Cortera, Accurint, and InfoUsa are some of the best known services for gathering additional information.

Once you have verified that that the information is correct and thoroughly vetted the applicant, make sure to keep copies (either digital or physical) of all the information provided.

Businessman making collection call, C2C ResourcesIs there any additional information that you should request?

While this can vary from business to business, consider requesting two to three months worth of Merchant Statements from your new customer. You should do this in the very beginning, when the customer is most receptive to the idea. Here is why you should do this:

The information found on your customer’s Merchant Statements gives you a baseline of their business as it pertains to their credit card sales. While you will have little use for this in the beginning of your relationship, down the line they can prove very valuable. If you encounter slower payments or nonpayment from your customer you can compare the original set of statements with a set of current ones. This will allow you to verify any claims made about those late payments and help determine the best course of action. The same baseline can be used to help understand credit increase requests.

I’ve included a link to our ebook that includes two sample credit applications. One includes a personal guarantee.


How To Extend Business Credit


2 Replies to “Should You Request a Merchant Statement when Extending Credit

    • Thank you for pointing this out! We must have forgotten to add it at the end. All should be fixed now

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