Credit checking potential customers ?

Mr_Poves

Hi everyone , I'm a small business (sole trader) flooring installer .
And I'm looking at offering payment plans to my customers .
I've done all the research and contacted
the relevant authorities for advice (FCA)
I've had a credit agreement drafted which should cover me if the need arises to pursue a delinquent account , however I'm wondering is there any way I can check an individual's credit worthiness ?
I'm hoping to be taking on 3 - 6 new accounts per week on 3 month term's .
there will be an initial deposit which covers the cost of materials ,
So essentially I stand to lose on labour hours only
should I get a bad payer .
I know there will be % of non payers but I'm trying to limit this .
If anyone can advise me on anything else I can do to reduce the risks I would be very grateful , Thanks In advance .

paddyrg

You could always talk to a finance provider, and get them to pony up your fee upfront in exchange for them owning the debt and managing the client and doing their own credit checks. They specialise in this stuff, it'll be quiet distracting for you to manage alongside the day job if you've say 12 clients outstanding, some paying off early, some late with a payment, some already 2 payments late, some needing stern letters, some trying to sue you (people are idiots) and refusing to pay because they've changed their mind about the colour, etc.

Staying on top of that is a job in itself, even if you can get 90% upfront, but that 90% is guaranteed and you have no hassle (reduced hassle at least), it's worth it. By the same measure you can also offer a 5% non-credit discount and still both parties win!

Mr_Poves

That sounds like a good plan Paddy , can you suggest any companies that would be willing to offer me such services ?

phill99

Padyrg is cortect. Let someone else deal with finance. There are plenty of finance suppliers: Tricity Finance, Black Horse Finance etc. All provide fiancing services to shops, window installers etc.

Mr_Poves

Just been having a read and alot of the providers require a huge turnover , which I just don't have , also I'm thinking that a good few of my potential customers will be declined anyway .
In honesty we are not talking a huge amount of credit , maybe £250 maximum - with the option to make further purchases along the line .
I do understand there will be people who have no intention of paying from day 1 , however I will be allowing a percentage on the base price of every job to cover this shortfall .
I'm going to be letting the Mrs handle the collections and admin side of things , so I can concentrate on the hands on stuff .
I know it's a gamble , but potentially I only stand to lose out on my labour hours .
I'm thinking of doing a test run of 10 jobs and see what problems I encounter and work out a ratio from there .
I take on board what you have said , but I may be too much of a small fish at the minute to offer finance through a 3rd party .

fishybusiness

Do you need a licence to offer credit - not sure but it does spring to mind when reading your idea.

You can request a credit check of a residential consumer, you need to register with the ICO for data protection purposes, and then use one of the companies that offer consumer credit checks.

First one I found was this one

http://www.creditserve.co.uk/Products-and-Services/Consumer-reports

I needed to use a credit check agent maybe 5 or 6 years ago, can't remember which company I used, quick read tells me the rules are much the same.

Oh, and you'll need to have signed permission from the customer to do a credit check.

Mr_Poves

fishybusiness wrote: »

Do you need a licence to offer credit - not sure but it does spring to mind when reading your idea.

You can request a credit check of a residential consumer, you need to register with the ICO for data protection purposes, and then use one of the companies that offer consumer credit checks.

First one I found was this one

http://www.creditserve.co.uk/Products-and-Services/Consumer-reports

I needed to use a credit check agent maybe 5 or 6 years ago, can't remember which company I used, quick read tells me the rules are much the same.

Oh, and you'll need to have signed permission from the customer to do a credit check.

Thanks for the info , and as far as I'm aware I don't need a credit licence , the way I will be operating falls outside the box , I've actually spoken to the fca who confirmed this .

paddyrg

If the big finance companies aren't interested, maybe look smaller/locally. Go to your local pawn shop (ideally an independent) and discuss the idea with them - they are in the money-lending business and frankly have the systems in place. But certainly offer a discount for upfront payment in full, far more valuable to you!

Mistral001

Just a general point. You cannot be selective with customers with regards to what you say to them about credit checks and financing. It can cause great offense, if you hint that some people perhaps because they live in lowly surroundings needs to take out finance. I have found over the years that you can never tell which customers will be difficult when it comes to paying, often they will be the ones who have all the trappings of wealth and in fact might actually be quite wealthy, while the people living in lowly surroundings will not let you leave without cash or a cheque in your hand.

Mr_Poves

Yes another good suggestion Paddy , it really is appreciated and taken on board .
Mistral , I can't agree more , it's always the customers who appear to have nothing who go out of their way to pay you , the ones who have the big flash cars etc seem to need chasing .....

bingo_bango

Mr_Poves wrote: »

Just been having a read and alot of the providers require a huge turnover , which I just don't have , also I'm thinking that a good few of my potential customers will be declined anyway .
In honesty we are not talking a huge amount of credit , maybe £250 maximum - with the option to make further purchases along the line .
I do understand there will be people who have no intention of paying from day 1 , however I will be allowing a percentage on the base price of every job to cover this shortfall .
I'm going to be letting the Mrs handle the collections and admin side of things , so I can concentrate on the hands on stuff .
I know it's a gamble , but potentially I only stand to lose out on my labour hours .
I'm thinking of doing a test run of 10 jobs and see what problems I encounter and work out a ratio from there .
I take on board what you have said , but I may be too much of a small fish at the minute to offer finance through a 3rd party .

If you suspect that a lot of them will have poor credit do you really need to bother credit checking?
It might just be easier to factor a % of non payments into your overall pricing structure. Does away with the need for ICO compliance, nobody gets turned down for credit and you can start the job as soon as you're ready as well. It would likely keep your Mrs happier as well if she doesn't have to keep on top of all that