- 1 What is a credit application?
- 2 What to include in your credit application?
- 3 Important terms to understand before signing an application:
- 4 Conclusion:
A credit application template is a significant tool used to control credit risks when extended to customers. This document also protects the company at the same time.
What is a credit application?
A credit application is a very important document used to request for a credit extension. You can accomplish this in the form of writing via a credit application form as well as verbally. The application should legally contain information that is relevant to the credit cost to the borrower.
Moreover, credit applications now have faster processes due to the advancement in electronic technology. Nowadays, new automated financial systems is used in the credit market. The system allows lenders to recommend their customer’s different kinds of credit applications.
What to include in your credit application?
A business credit application template doesn’t really guarantee payment for the loan when you have secured it. But, it is the essential document that you may receive in helping a credit decision and the collectable of collection fees and past-due accounts obtainable.
An effective credit application template assist you in getting to the point you want to be at. In collection information regarding a prospective customer, the credit application form is an initial step. By knowing them, you can easily make a sound decision and via the collected information, you can identify the amount of credit to extend.
Definitely, it is essential to keep in mind that not all of the information in the application form is completely accurate. It will be up to you to verify the validity of such provided information on the generic credit application via due conscientiousness before granting credit. Due to this, it is important that the company’s sales department should make it compulsory that every client fills out the business credit application template as well as signs it before delivering any products or services. You should also check Business Expense Spreadsheets.
However, the standard application usually includes the following information;
- Name of the applicant
- Complete address
- Name of the parent company
- Complete address of the parent company
- All contact details
- Entity type
- The principals, directors or officers names
- Trade references and bank references
- DUNS number and Tax ID
- Financial statements
- Requested credit limit
- The applicant’s agreement to the payment terms
- On any past due payments, the applicant’s agreement to pay interest
- For collection and legal costs, the agreement of the applicant to pay
- The personal guarantee of the applicant with partners
- To pull a personal credit report, an authorization statement
- An officer or an authorized person’s signature
Important terms to understand before signing an application:
The document states that both parties should agree to arbitration if there any disputes arise regarding payments. The costly approach of litigation is eliminated by having this.
An applicant can make a claim specifying that the authorized individual who signs the application doesn’t really have the authority.
By allowing the company to automatically debit the customer’s bank account, the applicant pays the lending company. After a specific time period or on a specific date each month, this happens through an ACH debit transaction.
If there’s a requirement for the company to hire a third party, the latter agrees to shoulder these fees.
The applicant agrees to analyze the goods upon delivery and issue complaints regarding any issues found.
The litigation of the case will get dealt within the company’s state of residency in case there is requirement to take legal action.
This indicates that the individual who signs the generic credit application should agree to guarantee the debts the applicant owes personally.
Returned check fees
The company can charge the applicant the associated bank charges amount if the applicant issue a check for payment for which there aren’t enough funds.
For goods sold, the company grants the applicant a security interest.
In conclusion, a credit application form is a very essential tool used for data collection. It serves as a contract that outlines the obligations and rights of the creditor and the customer.