A step-by-step guide for freight brokers running credit checks on shippers.
Running credit checks on shippers is very important for freight brokers and trucking companies to keep themselves safe from dishonest customers and bad debt. If you want to do credit checks on possible clients before doing business with them, here are the steps you need to take:
Choose a Reputable Credit Reporting Agency:
Choose companies that specialize in running credit checks on shippersr credit to get accurate and thorough records. Think about things like:
- Reputation: Pick a service that has been around for a long time and has a history of being reliable and giving correct information.
- Coverage: Make sure the service gives you reports for the type of business you have (for example, an LLC or a corporation).
- Cost: Look at how much different companies charge for their services and compare them to find the best deal.
Skip to 6 Resources for Pulling Credit on Shippers/Freight Brokers
Gather Client Information:
To get a credit score, you’ll need the following from the client:
- Full legal name: Use the exact name that is on file with the government office.
- Address of the business: Make sure that the address given for the business is correct.
- Number used for tax purposes (TIN): Depending on how the business is set up, this could be the Employer Identification Number (EIN) or the Social Security Number (SSN).
Obtain Authorization:
You’ll need writing permission from the client before you can do a credit check. You can have this on a different form or as part of your contract.
Make sure that the permission clearly says:
- The plan you have to do a credit check
- The reason for the check (for example, figuring out if the person is creditworthy for possible business deals)
- You’ll get a certain kind of record, like a full business credit report.
Run the Report:
Send the request to the credit reporting service once you have all the information and permission you need.
Carefully read the report and think about:
- Credit score: A low score could mean that you might be at risk.
- Check the payment records to see if there are any patterns of late or missed payments.
- You can look at public records to see if the company has any bankruptcies, liens, or orders against it.
- Business age and experience of the business: Look at the company’s long past and track record.
Interpret the Report:
- Don’t just look at the credit score. Take a broad look at the report, taking into account the specifics of your partnership and the standards of the business.
- If you need help figuring out what the report means or evaluating the risks, talk to financial experts or a lawyer.
Make an Informed Decision:
Compare the information on the credit report with other things, like reviews and references from past clients.
- Client or vendor references and reviews
- Performance and reputation in the industry
- Personal interactions and history
Based on your thorough evaluation, make an informed choice about whether to go ahead with the business deal.
Follow Up and Maintain Communication:
- If you decide not to move forward because of worries from the credit report, tell the client in a clear and professional way.
- If you go ahead with the deal, you might want to add credit monitoring terms to keep an eye on the client’s finances.
Don’t forget:
- Please be considerate of the client’s privacy and only use the credit report information for what it was meant for.
- Follow the laws and rules about fair credit reports that apply to you.
- Take an honest and moral attitude to credit checks to build trust and good business relationships.
- If businesses follow these steps, they can use credit checks to lower their risk, make smart choices, and protect their financial interests before forming new relationships.
5 Stats of Business Failure/Success
- 80% of businesses survive their 1st year
- 66% of businesses survive 2 years
- 50% survive 5 years
- 30% survive 10 years
- 82% of businesses fail due to CASH FLOW problems.
SOURCE: https://advocacy.sba.gov/wp-content/uploads/2021/12/Small-Business-FAQ-Revised-December-2021.pdf
6 Resources for Pulling Credit on Shippers/Freight Brokers
Did this post help you out? If so, I’d greatly appreciate it if you’d comment below or SHARE on Facebook, Twitter or LinkedIn and be sure to click the g+1 logo and let Google know too!
Cheers,
Dennis Brown
Owner/Trainer, www.FreightBrokerBootcamp.com
