Quote:
Originally Posted by Ralphy Boy
In the banking industry we do pull a D&B on a company that has been in business for a few years, but it barely weighs in on our decision to loan a company money.
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But be honest......in reality a company's credit worthiness is only a small part of making a decision when a Bank looks at making a loan to a business. Comparing credit checking when making a bank loan to credit checking B2B is apples to oranges.
Let me elaborate....when a B2B makes a credit decision most likely he is doing it with the knowledge that he is (in most cases) an unsecured creditor going in. So he has to know everything he can about that company, most assuredly their payment habits to suppliers and where he will fall in regards to importance when it comes to getting paid. (We call that Primary, Secondary and Tertiary conditions)
When a Bank makes a loan you do it with the complete knowledge that you have collateral ( inventory, A/R, etc) and many times have the superiority when it comes to Lien status. And when it comes to Bankruptcy, your rarely take the "hair cut" that the Unsecured Creditors are forced to take.
The decisioning processes are 2 different situations....you are not taking anywhere near the risk that a B2B is taking when allowing open terms.