Covering Business Credit

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Business Credit and Collections
Commercial Credit Management

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Doctor Credit

I attended a recent seminar in which you stated that companies should not sell to customers with a deficit net worth. Can you expand on that statement?

Answer: I hope I have been misquoted. The advice I usually give is as follows: A deficit net worth indicates serious financial stress. The credit manager cannot recommend a credit limit to a customer with a deficit net worth because that company is technically insolvent. I believe that credit professionals need to establish credit limits and credit terms for customers with deficit net worth cooperatively with senior management. I think that there are many instances in which it makes sense for a company to sell to a customer when liabilities exceed assets, but I feel that this should be a "business decision" rather than a credit decision.

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