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B2B Credit Application: A Complete Guide for Mid-Sized Businesses [With Templates]

What you’ll learn


  • Learn about credit application and its importance
  • Find out the key factors to consider in the credit approval process
  • Get access to ready-made credit application templates

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In the B2B space, most businesses operate on credit, but this system has its drawbacks. Granting credit without a thorough review of customers could be risky, especially for mid-sized companies.

Like a car needs fuel to run, a mid-sized business needs a healthy cash flow to survive. A single delinquent account can result in a significant disruption of the cash flow. Therefore, businesses must ensure that their customers pay according to the agreed terms and conditions.

Read on to get a comprehensive overview of the credit application and approval process in mid-sized businesses. Furthermore, you can try out some ready-made credit application templates for faster onboarding of customers.

What is a B2B credit application?

Businesses use credit applications to collect the required information from the customer to review their creditworthiness. It protects businesses from delinquent accounts, obligation defaults, and nonpayments.

Essential elements that should be present in a business credit application form

A graphic showing all the essential components of a business credit application form

The credit application form determines whether the customer can be sold goods on credit and the extent to which the credit can be extended in terms of the amount, credit period, and more. Therefore, businesses need to ensure that customers provide all the required information, and once captured, the details need to be verified.

Below mentioned are the essential fields a credit application must include:

  • Date of application: Specifying the date is essential to determine when the agreement begins.
  • Applicant’s complete legal name: The applicant’s correct legal name ensures that the credit application is legally binding. Moreover, obtaining credit reports and tracking down lawsuits (if any), tax liens, or judgments are tied with the same legal name.
  • Address information: Mailing address, physical address, P.O. Box must be mentioned to reduce the chances of fraud.
  • Contact information: Telephone number, fax number, email, and website details are essential to uncover any irregularities and get in touch with the customer in case of payment defaults.
  • Accounts payable contact information: This information will come in handy when your collections team wants to contact the person responsible for authorizing payments.
  • Amount of credit requested: You need to be clear on how much credit the customer has requested will allow the credit manager to process the application more efficiently.
  • Annual sales: You can set a workable credit limit when you have a comprehensive view of the company’s net income and a snapshot of the company’s financial details.
  • Ownership details: It is important to know the details of principals, owners, officers, and members to help the credit department gain confidence in the management of the business entity.
  • Bank details: Account number and bank contact details help the credit department compare the amount of the open account credit requested with the average bank balance typically held in the customer’s account.
  • Trade reference information: Trade references are detailed information about a company or contact who has a relationship with the beneficiary and can be used to prove the beneficiary’s creditworthiness to a third party.

Credit application form template

Here is a list of templates that will come in handy when you send out credit applications to customers.

A graphic featuring a credit application form

Download Template

A graphic showing a sample credit application form

Download Template

A graphic showing a credit application form

Download Template

B2B credit application approval process

Once the details are filled in, the application form must be cross-checked. Afterward, the credit department follows several steps to verify and approve the application. The steps are as follows:

  • Step 1: Verify that all details are filled in
    Every detail is crucial for the approval process. To avoid missing data, you must verify whether all the required information is provided in the credit application form.
  • Step 2: Check customer trade reference
    Before proceeding further in the credit approval process, you need to cross-check all the trade references that the customer has provided. It helps in early fraud detection.
  • Step 3: Analyze credit bureau’s data
    Check the customer’s credit bureau report to approve the amount of credit requested. Credit agencies like D&B and NACM provide the customer’s credit reports to determine their credit score and credit history.
  • Step 4: Initiate credit approval
    It is the last step in the customer onboarding process. The required credit amount is approved if all the provided information checks out and the customer’s credit score is acceptable.

Four quick steps to consider before granting credit

One must follow a structured process when granting credit to customers. Here are some quick and easy steps to guide you to make the right judgment:

  • Step 1: Create a credit policy
    A credit application is a contractual agreement; however, a credit policy demonstrates your company’s gravity and gives you a legal foundation.
  • Step 2: Perform a credit check
    It is essential to review the customer’s financial background as it will provide you with the entire credit history and financial health.
  • Step 3: Sign an agreement
    To avoid potential contract disputes, signing a contract with a promise to pay can reduce the risk of payment defaults.
  • Step 4: Set credit limits
    Set a credit limit according to the credit score sent by the credit agency; this will ensure a smooth onboarding and a lower credit risk.

Next steps

The role of credit analysts doesn’t stop once the customer gets onboard. Periodic reviews are necessary to monitor the credit health of the company. Just like the new customers, long-term customers may also struggle with payments; therefore, customer credit limits need to be reviewed at regular intervals.

Conclusion

Like Hawking’s ‘Theory of Everything,’ mid-sized businesses need to have one integrated credit application to counter the misfortune of a delinquent account, obligation default, or payment failures. A ready-to-use Excel-based Credit Application Template might come in handy for effectively collecting customers’ data and creditworthiness checks.

Sending out credit applications manually and verifying them for credit approval requires time and effort. The possibility of human error also needs to be considered. As a result, businesses worldwide leverage automation to ease the process. Solutions such as RadiusOne Credit Risk Management Application help mid-sized businesses with their real-time credit management to lower bad debt and improve cash inflows.

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