What Factors To Consider When You Increase The Credit Limit Of A Customer

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In earlier article,we have said that we need to inform the customers of their credit limits. As time pass or when the customer requests higher credit limit,what should we base on to increase or decrease his credit limit? 

Append below are some of the major factors to consider when setting up a higher credit limit: 

• Customer’s track record in terms of payment-prompt,average,slow or very slow?
• Volume of current business
• How is the industry and economy moving
• What collateral if any is available –additional guarantees,letter of credits?
• What is the volume of business of other competitors
• Credit limit of competitors
• Other market information
• What are his other business activities and how it is developing

• Why Should Credit Limit Be Imposed.Is it necessary for the company to inform the customer about its credit limit and credit terms?
• Non-Financial and Qualitative Factors in Credit Decision
• How To Be Proactive To Offer Alternatives For Marginal Customers Or Those Who Want To Increase The Credit Limit/Terms
• Use The Corporate Guarantee Form When Granting Credit Facility To Your Customer Who Belongs To A Group of Companies
• Using Trade Reference As Part Of Credit Vetting Procedures
• Balanced Scorecard:Examples Of Customer Perspective KPI
• Ratio Analysis:What Other Factors,Beyond Ratios,Need To Be Considered?