Trade credit application: what to ask before you give terms
Five minutes of questions before the first order saves hours of chasing after it. Here is what a good credit application asks, how to check it and what to do with the answers.
In short
- Ask for the legal entity, the people, the bank, two trade references and the terms and limit they want.
- Check the entity exists, who runs it and whether it has court judgments; phone the references.
- Set the first limit from the evidence, not the request, and review it after three payments.
- Make the form part of your wholesale sign-up so nobody gets terms by accident.
What the form is for
A credit application does three jobs. It tells you who you are lending to, so you can check them. It gets the buyer to accept your trade terms before they order. And it sets expectations: a buyer who has filled in a form knows that credit is something you decide, not something they are owed.
It does not need to be long. A page is plenty for most trade accounts, and a longer form mostly means fewer completed forms.
What to ask
| Section | Fields | Why |
|---|---|---|
| The business | Legal name, trading name, company number, registered address, trading address, years trading, type of business | So you know exactly who owes you and can look them up |
| The people | Owner or director names, accounts contact with email and mobile, buyer contact | Who to text, who to call and who is responsible |
| The bank | Bank name and account holder name (not the number) | Confirms the entity matches the one paying you |
| Trade references | Two suppliers with contact details and how long they have supplied | The best predictor of how they will pay you is how they pay others |
| What they want | Expected monthly order value, terms requested, limit requested | Sizes the limit and flags anyone asking for much more than they will order |
| Agreement | Tick box accepting your trade terms, name, date, signature | Your terms are now agreed in writing |
| Optional, larger accounts | Last filed accounts, a personal guarantee for new companies | For limits above a few thousand |
Checking the answers
Look up the entity
In the UK, Companies House shows incorporation date, directors, filed accounts and whether filings are overdue. In the US, the state's Secretary of State business search shows registration and good standing.
Check for judgments
A business credit report shows county court judgments, charges and a score. For accounts over a few thousand it is worth the fee. Unpaid judgments are the clearest red flag there is.
Phone the references
Email gets a polite nothing. On the phone ask three questions: how long have you supplied them, what terms, and do they pay within them. Thirty seconds each.
Match the names
The company on the form, the account holder on the bank and the name on the first payment should match. If they do not, ask why before shipping.
Set the limit
From the evidence: one month of expected orders for a clean new account with good references, less if anything is thin, first order upfront if anything is wrong. Our credit limits guide has a table.
Red flags
- A limit requested far above the expected monthly order value.
- Overdue filings at Companies House, or a company registered weeks ago.
- References that are both new suppliers, or that do not answer the phone.
- A trading name with no legal entity behind it.
- Pressure to ship before the form is complete.
- A buyer who has recently moved from another supplier and will not say why.
- Bank account in a different name from the company.
Worked example
Two applications, two outcomes
A garden centre applies for Net 30 with a $4,000 limit and expects to order $2,500 a month. Companies House shows twelve years of trading and accounts filed on time; both references say paid within terms. You set $4,000, hard block, review in three months. They are a good account from the first order.
A new online gift shop applies for Net 60 with a $10,000 limit and expects to order $1,500 a month. The company was registered six weeks ago, one reference is a web designer and the bank account is in the director's own name. You offer the first two orders on a card and Net 30 with a $1,500 limit after that. They take it, pay on time, and in six months have a $4,000 limit they have earned.
| Garden centre | Net 30, $4,000, review in 3 months |
|---|---|
| New gift shop | Two orders upfront, then Net 30 at $1,500 |
With a form, and without one
No form
- Terms given to whoever asks confidently.
- No idea who the legal entity is until you need to recover a debt.
- Trade terms never formally accepted.
- Limit set by the size of the first order.
With a form
- Every account checked to the same standard.
- Entity, directors and contacts on file from day one.
- Terms accepted in writing before the first order.
- Limit set from evidence and reviewed on a date.
Making it part of sign-up
Put the form behind your wholesale enquiry page and make completing it the way a buyer gets a Shopify company account. When you approve them, create the company and location in Shopify, set their terms, give them a limit in Terms Due and send the welcome email with the trade terms attached. The whole thing takes ten minutes per account, and it is ten minutes you only spend once.
Questions
Should I ask for a personal guarantee?
For a new limited company asking for a meaningful limit, it is reasonable. Many buyers will decline, which tells you something; those who agree are usually good accounts.
Can I run a credit check without telling the buyer?
Business credit reports on companies are public-record based and do not need consent in most countries, but say on the form that you may check, which is good manners and removes doubt.
What if a reference will not comment?
Treat it as no reference. Ask for another, or start the account on a lower limit.
How often should I re-check an existing account?
At each limit increase, and once a year for your largest accounts. Your own aging report is the best evidence for everyone else.
Do I need a form for a buyer who pays upfront?
Not for credit. You still want the entity and contact details, which the Shopify company record holds.
Related
Trade terms template
What to put in wholesale terms and conditions: payment terms, credit limits, holds, saved card charges, late payment interest and disputes, with wording.
Read moreSetting credit limits
How to decide credit limits and payment terms for wholesale buyers: order value, trade references, credit checks, starting limits and when to review.
Read moreCredit limits
Set a credit limit for each Shopify B2B company. Terms Due checks open balance plus the new order before checkout, so no buyer runs up more than you agreed.
Read moreStop chasing wholesale invoices by hand
Install Terms Due, set a credit limit for each buyer and let the app hold, remind and collect.
Install on Shopify