WHAT YOU SHOULD KNOW BEFORE YOU EXTEND CREDIT…  AND HOW TO FIND OUT FOR FREE!

Do you really want to extend credit to that new customer or business?  An existing client wants you to bill them for the goods or services at the end of the month.  Should you?  Before extending credit, try finding out who you are dealing with.  If a bank would ask for a credit application before extending credit, why should you not feel comfortable asking for the same type of information?  Find out what you can from the customer or client first.  But that only tells part of the story.

Then you want to see what you can find out about them on your own.  You may not be able to run a credit report on a potential customer or client, but there is a lot of information that is available to you, at no charge. Below is an outline of some of the information that is free to check, and can provide you with the information to make the decision to extend credit or not.

1.   Are They A Corporation, LLC, Or Other Entity Listed Through The Texas State Comptroller’s Office?

https://ourcpa.cpa.state.tx.us/coa/Index.html – To Search Texas State Comptroller’s Records, or call 1-800-252-1386

• Are they in good standing?
• Who are the Officers/Directors/Managers and Registered Agent?
• When were they formed?
• What is the principal business or corporate address?

2. Do They Have A Trade Name Or Sales Tax Permit Issued Through The Texas State Comptroller’s Office?

http://ecpa.cpa.state.tx.us/staxpayersearch/SlsTxpyrSearch.jsp – To Search Texas State Comptroller’s Sales Taxpayer Records, or call 1-800-252-5555

• Search by Taxpayer’s Legal Name
• Search by Business Name
• Do they have a Sales Tax Permit, and if so, is it active?
• How many locations do they have, and under what names?

3. Are They A Sole Proprietor, Partnership, Etc., Doing Business In The County Under A Trade Name? (Not all Counties have records on line.)

http://www.cclerk.hctx.net/applications/websearch/AN.aspx – To search Harris County Assumed Name Records

• Search by Name of Business or Name of Owner
• Have they filed an Assumed Name?
  • Who are listed as the owners?
  • Does it match the name of the contact on the contract?
• What is the business address shown?
  • Is it a residence address?
  • Is it a P.O. Box address?
  • Is it the same address provided on the contract?
• Do they own multiple Assumed Names?
  • Are the names very similar to one another?
  • In the same type of business(es)?
• Have there been many owners of that same Assumed Name?
  • Are all the locations for the business the same?
  • How often does the business change owners?

4.    Has The Entity Been Involved In Litigation In The County Courts? (Not all Counties have records on line.)

http://www.cclerk.hctx.net/applications/websearch/Civil.aspx – To search Harris County Civil Court Records from the County Clerk’s office.

• Have other people or companies filed suit against them?
• Have they filed suit against other people or companies?

5.    Have Abstract Of Judgments Or Other Liens Been Filed Against The Entity And Do They Own Real Property? (Not all Counties have records on line.)

http://www.cclerk.hctx.net/applications/websearch/RP.aspx – To search Harris County Real Property Records.

• Have other people or companies filed a lien against them?
• Have prior release of liens been filed?
• Are there any tax liens filed against them?
• Do they own any non-exempt real property that may be available to satisfy a judgment if one is taken?

6.     What Is The Appraised Value Of The Real Property That They Own, If Any?

http://www.hcad.org/records/default.asp – To search Harris County Appraisal District Records, click on “Real Property Search”

http://www.mcad-tx.org/html/records.html – To search Montgomery County Appraisal District Records

• You may search by owners name
• You may search by property address
• What is the appraised value of the property owned?
• Is the property listed as homestead exempt?

7.     What Is The Appraised Value Of The Businesses Personal Property, And Are They Even Listed?

http://www.hcad.org/records/default.asp – To search Harris County Appraisal District Records, click on “Business Personal & Mineral Property”

http://www.mcad-tx.org/html/records.html – To search Montgomery County Appraisal District Records

• You may search by owners name
• You may search by property address
• What assets are shown as part of the business property?
• What value does the county show for the business assets?

8.     Do They Have A Telephone Listing?

• Check under both the business & government pages, as well as the yellow pages under their business category
  • Are they listed in the phone book?
  • Is the name of the business in the book different from that shown on the contract?
  • Is the address in the book the same as the contract?
  • Do they list multiple numbers and addresses?
  • What does the ad look like?
• Do they have a web site or presence on the Internet?
  • http://www.google.com/ – Is one of many internet search engines
• Are they listed on internet telephone listings?
  • http://www.switchboard.com/ – Is one of many internet yellow page listings
  • Is the name of the business in the book different from that shown on the contract?
  • Is the address in the book the same as the contract?
  • Do they list multiple numbers and addresses?

The more information that you can gather about a client or customer, the better you can judge if they would be a good credit risk.  It doesn’t have to be expensive to check, but it can save you a lot of money on outstanding accounts receivables.