What follows are three common types of bad applications. If any of them remind you of your application you can dramatically improve your bottom line by making a few changes.
The problem with any of these bad Applications is that they don’t do what a credit application should do. They don’t get us Information about the applicant that we can use to determine credit worthiness.
The Ghostly Apparition. The worst of these consist of a totally blank piece of paper. The Best of them contain a brief memo about providing some credit information for the files. They make the assumption that the prospect either knows what to provide or does not really have to provide additional information beyond what was seen by the salesman on his
Visits.
The first situation is usually inaccurate. A great many prospects are either uncertain of what to provide or have a reason not to provide you with damaging information. I have seen this form filled out with the name of a major New York bank but no account number, no contact person, not even a branch location. There may be three, two, one or no trade references and they are often given incorrectly.
Business information provided in this non-application is incomplete and often misleading. Trade names tend to replace legal names. Addresses do not always reflect the actual location of the business. This incomplete and misleading information is usually all that is found to describe the business on the Ghostly Apparition. Information about the
Owners is simple, clear and concise. There is none. After all, the application did not ask for it. Why give more information that you have to give?
With this customer, you don’t have enough information to get started, let alone produce a credible credit profile on the company. This prospect’s lack of understanding could lead to serious problems, but that same application in the hands of a prospect with something to hide is courting disaster.
The prospect with something to hide will use your non-application as a shield since you did not ask specific questions, you will receive only those answers that present the prospect in a positive light. Perhaps you will get a bank that the prospect doesn’t even use or a single trade reference that happens to be a friend rather than an actual vendor.
Your only business address may be a post office box. The phone number may belong to an answering service. In effect, you have given this prospect carte blanche to lie.
Those who have nothing to hide will not usually mind answering a few questions about their credit. Most of the complaints you will receive will be from those who have something to hide and don’t want you to find out just how bad a customer they can be.
Beware the ‘Ghostly Apparition’. People with good credit don’t mind providing references. Those with bad credit do mind, but you don’t want them as customers, anyway.
The Bank Application. If you’re like me, you hate the prospect of filling out those long, detailed bank applications that seem to probe uncomfortably deep into your finances. I will often refer to this type of credit application as the IRS Special because it contains so many questions about things that aren’t needed. The point is that asking too many questions is not much better than asking none. The answers will do you very little good and you will scare away
Some of your prospects.
This kind of application will not provide much additional security, but it will chase away many of your applicants. Keep the credit application as simple and easy to fill out as possible.
The Copy Cat. Your dentist may have a credit application he thinks is great. He may be right, too. The question is who is it great for? Just because it is working for someone else doesn’t mean anything when it is applied to your business. Yet copying forms is very common. There seems to be a belief that a good form is a good form, period.
The fact is that your needs are different than most other businesses, even businesses that do the same thing you do. Your credit application should reflect those differences.
Perhaps somebody with the same or similar business has a credit application that you like. It may be perfect, but the other business may have different needs, deal with a different clientele or have credit policies that are significantly different than yours.
Get several application templates and evaluate them for your credit concerns. A good application will not solve all your problems but a bad one will absolutely cause them.