A Guide to Establishing a Trade Credit Policy
- Price: £3.60
- Published: March 2014
- Type: Business Information Factsheet
- Format: PDF
When you allow a business customer time to pay an invoice, you are offering them 'credit'. By offering them credit you are, in effect, lending them money until they have settled their bill. A trade credit policy sets out the terms by which you offer business customers credit and is essential to help you minimise the risk of late payment or bad debt.
This factsheet explains what a trade credit policy is and what it should include. It defines some frequently used payment terms and provides information on evaluating the creditworthiness of your business customers. It also covers using credit reference agencies, credit insurance and factoring services.
This factsheet only covers providing credit to business or 'trade' customers. If your business sells to consumers and you want to allow them time to pay, you will need to be authorised or exempted by the Financial Conduct Authority (FCA). See BIF 319, A Guide to Consumer Credit Authorisation for more information.