How to be a Credit Detective: Finding Credit info on Private Companies
A key component of being a credit professional is reviewing current customers and new credit applications for approval. What do you do when you can’t locate any information? Why are privately held companies so much more difficult to find than public ones? Join us November 3rd at 2pm CT, as D’ann Johnson, CCE with A’core Concrete Specialists shows us different ways to find the information you are looking for.
Join this session to find out:
- Steps credit professionals take to track down hard-to-find financial info
- Online resources where you can obtain property, ownership, public records, and more
- Places to do credit research in person when you hit a wall on internet searches
- Obtain Certification to show your development in credit risk
- Lori J. Drake, CBA, Payment Professionals Community Manager, Levelset
- D’ann Johnson, CCE, Corporate Credit and Collections Manager, A’core Concrete SpecialistTranscription
Lori J. Drake, CBA (00:03):
Good afternoon everybody. And thank you for joining us today. As we are going to talk about private companies, equaling private credit, being a detective to see where you can find all this information. Thank you for joining us. And we are here with DeAnn Johnson. Hi Dan. Hi, thank you for joining us. Do you want to tell everybody a little bit about yourself?D’ann Johnson, CCE (00:26):
Um, well, my name’s Dan Johnson. I’m a CCE. I work for a concrete cutting. Uh, we are a concrete service company. I have been in construction credit for 20 plus years. Um, prior to that, I worked for the, for Kenworth sales, the trucking company. Um, and before that I worked in the private sector before that I worked for the government. So I have a kind of a well-rounded view of, uh, businesses and what’s expected on both sides.Lori J. Drake, CBA (00:57):
Absolutely. Well, thank you for taking time out of your day to be with us. Thank you. Hello. There we go. If you don’t know what Levelset is, we are a software construction company. We help with liens waivers and getting a bond claims filed and that sort of thing. But we also have a community, which is what you’re watching this webinar through today. Uh, we just, it’s a group of credit professionals. We do education with each other, uh, different classes. Uh, we have meetings that we do as well as much more. So if you want to know more about that, just let me know and I will go ahead and let you take a DM.D’ann Johnson, CCE (01:33):
Thank you. So first and foremost, thank you everybody. That’s, that’s, uh, logged in and I hope you find something within this that is helpful for you. And I am open to feedback. So I think toward the end, there might be some time for questions, or if you have comments, um, things that you might’ve found that have been helpful for you. So we’re going to start off with first and foremost, the best way to protect yourself and to protect your customer. Your company is to have a defined, written minimum credit criteria for all prospective customers, because you know what, at the end of the day, our job is to not say no, but how right? Um, so if you have a minimum credit criteria and that you have sent out to all of your sales and all of your managers and they understand what’s needed first and foremost is your credit application, right?
D’ann Johnson, CCE (02:32):
And do you have a threshold as to where you are going to require a personal guarantee? And if you get that personal guarantee, do the people that signed the personal guarantee, have the authority to send a personal guarantee or the application. So there’s a lot of things that go into your first steps, right? So ask for those trade references in banking information, and then follow up on those requests. Um, I had opportunity recently to talk to a gentleman who is starting a service, that what they provide solely is, uh, to help companies like ours, get information from banks. Um, so if you guys are interested, I’d be happy to share that information with Lori after the presentation. And she can, uh, send that out to you. Um, it’s, he’s a fairly new company, but they have a relationship with many of the larger banks, not so much credit unions, but the larger banks that if you have a customer that lists a bank, uh, banking information, and you have the account number, they can usually within 24 hours to have that information back to you.
D’ann Johnson, CCE (03:40):
So Borea my driving. Are you driving? Go ahead and turn it for you. Okay. Next page. So we’re going to talk about a little bit about the magic of a Google search, right? So you’re going to be do your basic search. You’re going to see, does the company have a website, is a professional. Does it list the owners and offer it officers and locations? Can you match any of the information that’s on the website, on your application or on your contract? How big is the company? What type of work do they do? Um, how long have they been in business and how long have they been in this area of business? Uh, I had, uh, a chance, uh, where a customer applied for an app, uh, for an account with a previous company. And he was a new startup company. But when I researched him, he was actually starting up a different side of his large construction company.
D’ann Johnson, CCE (04:38):
So sometimes you’re going to search not just by the company name, but the owner officer’s name. Right. Because you can link them to that company that they’re applying for, but maybe they’ve been with other businesses in the state of Utah, contractors, licenses and business licenses are issued to businesses, not people. So one person can have multiple businesses. So do a Google search on the owners and officer’s names. What does that come up with? Right. Do they have information on LinkedIn or Facebook and, and talking about that, you know, most companies have not all companies now have some sort of social media presence, so they have, uh, Facebook, Instagram, LinkedIn. So not only can you look up information about the owners and officers, you could also look up information about the company themselves and what information could you find, maybe they’re posting pictures of their latest project, maybe there’s pictures on there.
D’ann Johnson, CCE (05:38):
You know, if you’re in a leasing type situation, they’re showing pictures of the type of equipment they, that they’re using or leasing again, that just gives you an idea of the type of company you’re going into business with. Right. And search the physical address of the business. Um, you know, do a, again, a Google search. Is it an office building? Is it a private residence or is it a ups store where they just receive mail for that, that particular company? Not saying it’s bad. Not saying it’s good. Just you want to know. Right. Um, we had a situation where we had a customer that had a private residence address and we shipped product to his private residence. Um, was that a bad thing? Probably not the type of business he was doing it wasn’t out of the norm. But would that be something that you would feel comfortable with, right.
D’ann Johnson, CCE (06:35):
If you’re shipping project products, do you want it to go to a, a private residence or would you feel more secure if it went to a business location? Um, does there the phone number they provide tied back to the company or is it a personal cell phone? A lot of times we have experienced where the number that is listed on the agreement or on the credit application is not the main number for the company. It’s the estimator or the sales guy or the project manager. You want to talk to the person at the location that can tell you, yes, they are going to be doing business with you. Yes. They have signed the application and he has to move forward. Um, especially right now where there is, um, uh, business identity theft. You want to make sure that who you’re doing business with on paper is who you’re doing business with in reality. So make those phone calls, uh, don’t depend on email emails can be rerouted. Um, so, you know, do your Google search, uh, do a business search through your, you know, your local, uh, secretary of state and see if they publish numbers and call those numbers and verify that they a, they pick up the phone and they say, hello, um, which I’ve had happened. Um, part they pick up the phone and say, XYZ company, how may I help you? Right. There’s a, there’s a clue right there. Go ahead.
D’ann Johnson, CCE (08:14):
Yeah, I see.
Lori J. Drake, CBA (08:15):
And they’re really quick, um, when you’re doing the searches on social media, it actually works out really well because I had a customer one time that said they didn’t receive our material, but they had a picture of our truck unloading the material at the same job site on their Facebook account.
D’ann Johnson, CCE (08:31):
Yep. Yep. And just be careful with social media, because there is, are still some laws, different states have different laws that govern how you can use social media. But as long as it’s public media, you cannot friend them to get the information. But if it’s public information, it’s public information, right. Same thing as if you do a Google search and, you know, comes up that there’s a negative rating through, you know, better business bureau or, you know, a lot of these Yelp sites and stuff have rating systems. Now I’m not saying you take that a hundred percent into account, but it’s it’s information, right? So if you are doing business with somebody and they claim that they’ve been in business for 20 years, and you can only show that they’ve been in business for the last two years, and then you look on, uh, your Google search turns out that well, yeah, there was another business that had that same name from years ago, but this is an entirely new business.
D’ann Johnson, CCE (09:35):
That’s when you start asking questions, right. That’s when you put on your detective hat and you start asking questions, you pick up that phone and you say, you know, did you guys use to be at this address because I’m seeing something at this address and they’ll either say yes or no. Um, again, names are intrinsic to businesses, but we all know that there are businesses out there that have the same or very similar names. We want to make sure we have the right information, billing wise name, so that when we do our research, we’re building our file for that company, not a look alike. So, um, and I was going to say, I see your guys’s questions, if you’re okay with it, we’ll wait till the end. And then we’ll do all the questions. Um, and I promise we will get to everybody. Um, so here’s some other additional questions that you can ask.
D’ann Johnson, CCE (10:30):
So what’s the current financial market for the type of business they’re in. It’s a good question right now, right? Um, what is our hardest hits, um, market right now? Restaurants, right? Restaurants and fast food places, service industry, because labor search shortage and supply chains shortage. So not again, not saying you’re going to say no, but what is the type of business they’re in and what’s the market in your area for that business for the year they’re going to be doing business in another thing is what the economical environment for the city or state they’re planning on doing business in, if they’re going into a depressed market and they’re going to open up a new company, what’s the viability long-term for that particular business. Now, again, we’re mostly short term creditors, right? We’re not, and I’m not speaking there. There could be some mortgage people on here or financial institution people on here.
D’ann Johnson, CCE (11:31):
So you’re looking long term, but short term, you know, if you’ve got a company that you’re setting up and you’re shipping product to, and within the first 30 days they decide, nah, not going to work and they closed their doors. You need to be prepared for that. That happens. Right. That’s, that’s the reality of our world. Um, so where are they located? Are they a one, man? Does the guy operate out of the cab of his pickup truck or does the lady operate out of her basement or do they have several locations? Um, are they local to your state? Are they, you know, uh, are they statewide or are they, um, you know, throughout the United States or are they international that kind of plays into all of this is the address listed on the application, the main office or branch location. You always want to make sure that you have the main office location information, because that’s where the signers of the checks are most likely, right.
D’ann Johnson, CCE (12:31):
Um, if it’s, uh, a mailing address, is it a PO box? You know why we don’t want PO boxes? You can’t serve notice to appeal box. If something happens that you, you know, you have to go legal on this, you need a physical address to be able to serve documents to a process. Server cannot serve papers to appeal box. Um, are they existing company, but new to you? And if they are where they been getting a good surface prior to coming to you, why are they looking at moving your purchases? There’s a lot that can be said for that, right? Maybe you offer a specialty product that there are other, uh, supplier does not, or, you know, maybe, um, you are, have better availability than who they’ve used in the past. It also could be that maybe they’ve had some issues with their previous supplier or service provider, and now their accounts put on full.
D’ann Johnson, CCE (13:33):
These are things you want to know. Um, and if they’re a new company, what type of experience do they have in that industry? Um, you know, we, we, we, as a, as a country, we promote entrepreneurship and people getting into business. But, you know, if, if you don’t have experience in what you’re going to go into business in, and you don’t know the ebbs and flows, are you going to, are you going to be successful? And how does that affect you as the creditor, if they don’t have good ideas, what is required? So I’m going to just going to give you a for instance. So in the state of Utah, you have to have a contractor’s license in order to do construction work in the state of Utah. So if it’s a new company and they don’t know that they have to have a contractor’s license in the state of Utah, and I opened them and account and allow them to purchase, we’ve given up our lien rights. So, you know, just, just some stuff to think, always keep in mind where you’re doing business, what the laws of that state or county or parish or whatever is. And pull that in. Go ahead.
D’ann Johnson, CCE (14:51):
So then again, more places to look, uh, the department of commerce or the department of our DAPL third-party dun and Bradstreet, uh, credit risk monitor there’s, um, Moody’s S and P Fitch, Experian credit.net. Um, you can go to your, uh, what does that pacer, I’m sorry, my brain just went pacer will tell you if you don’t know what pacer is. Pacer is a free service where you can see if somebody’s declared bankruptcy. Um, you can look for S C S E C filings. You can look for public records, uh, that show lien searches, uh, or shows liens for closures. Um, anything like that, again, Google, LinkedIn, Facebook and she’s list. Um, while that kind of sounds weird. And, and if you guys know that there’s like some tack Angie’s list, depending on what you’re doing, um, you know, if this is a small entrepreneur guy, are they listed with something like that in, are there reviews?
D’ann Johnson, CCE (15:56):
Um, you can also look at the better business bureau. A lot of people don’t report to B and B or the BBB anymore, but sometimes there are some things out there that you can find better business bureau will actually give you at least an overview of information on the company, the date it was started, they might not have a, a rating, but it will give you basic information on the company, but where else can you look? You can look on, uh, business and industry magazines. Most of the industries, uh, out there have some sort of centric publication that they have just for them, right. Um, find out what that is. Look at that, you know, um, maybe they don’t hit business week, but maybe they’re in your local paper that comes out just to your area where it says, you know, new business coming in and you might be able to find some information that way, uh, financial pages. Um, we have a, a paper that we get that is basically just for the greater salt lake valley that goes through new businesses and, um, when they’ve opened and who their, uh, uh, owners and officers are, and, and basic information, if you have one of those, that’s a great resource to find information on who you’re trying to, um, vet for a credit up. But
Lori J. Drake, CBA (17:31):
I was going to say, Melissa is raising her hand.
D’ann Johnson, CCE (17:36):
Yeah. Okay. Can we take her up new? Um,
Lori J. Drake, CBA (17:50):
Know I asked her to unmute, maybe she stepped away. Well, we’ll come back to that. Go ahead.
D’ann Johnson, CCE (17:55):
Okay. Okay. So, um, so then we’re back to the banking information, right? Um, so what we want is we want the name of the bank. Um, so we, and the account number, so we can send that request bank information, and we all know banks sometimes will share information and sometimes not so much. Um, oh, well, let’s just say she inadvertently hit, raise her head. You’re fine, Melissa. They see you. Um, but some of the information you want to find out is, you know, the account balance, not necessarily the total amount, but is it high six figures? Is it, you know, less than 50 bucks, um, length of time as a customer, do they have a credit line? Has there ever been any innocence checks, um, has the account been closed for any reason, trade references? Um, and again, there’s, there’s specific things that we can ask now that are, that we can’t ask now that we could before, because they violate antitrust laws.
D’ann Johnson, CCE (19:00):
So basically what you’re going to ask is the amount of time they, the account has been open high credit within the last six to 12 months and average days to pay. And if there’s any NSF payments asking what somebody terms is, is actually a violation of antitrust laws, just like your pricing is between you and your customer terms are between you and your customer. So you can ask. But if they say they’re not gonna answer probably best that they don’t. And then you can require a personal guarantor from the owners or partners. And when I say partners, this is something that, that I’ve always done. If it’s an LLC or a partnership, I want personal guarantees from everybody. The reason why isn’t a limited LLC, LLC limited liability corporation, limited partnership, they’re only responsible for the amount of money that they put in to start the company.
D’ann Johnson, CCE (20:01):
So if they owe you $50,000 and the person that signed on the dotted line fully put in 1500, they’re only responsible for 1500, unless you have that personal guarantee. And if you have personal guarantees from all of them, this is my gut roses. I want to go after as many people as I can, because if I have a personal guarantee from one person and they don’t have any assets, what good is the personal guarantee, right? That leads me to the next thing. If you have somebody sign a personal guarantee, check their credit because the personal guarantee is only as good as the person that signs on the dotted line. Go ahead, next page.
D’ann Johnson, CCE (20:44):
Okay. Things that make you go home. And I think somebody posted this, um, I saw a question pop up, so we’ll get to this later, but this came up some years ago. Do you have your, when you require a personal guarantee, do you require that the original application with what they call wet ink signatures be mailed or otherwise delivered to your office and do your require that pers that the personal guarantee signatures be witnessed or notarized? The reason why I’m asking this is there have been several successful cases come up across the United States where the person who signed quote unquote, the personal guarantee claims they did the sign, it and the courts have sided with the personal guarantors saying, well, you was the credit lender because that’s basically what we are, should have done due diligence and ask for that to be notarized. It might be their signature.
D’ann Johnson, CCE (21:47):
It might not be their signature. We have no way of knowing yet. What would you say to the companies? Then they have the online credit application where everything’s electronic. Those are actually probably your best bet, because if you were doing, uh, through electronic signature, there should be a, they call it a secure capture where it pings to the email and the IP address of the computer, where that was signed, which can then go back to the company. Right. Um, and you know what it doesn’t, it does, I’ve done this myself. I’ve actually reached out to people and say, you know what? I can’t, uh, what you’ve signed, doesn’t come through on my side. Can I just have you sign and send me back the signature page? You know, again, pick up the phone and make the phone call it doesn’t, it doesn’t do anything you can’t be told. No. If you don’t ask, I guess so. Okay. Next page.
D’ann Johnson, CCE (22:54):
So personal guarantee equals personal credit. So if you’re pulling personal credit to guarantee, you want to make sure that the, a, the person that, that is signed a personal guarantee is credit worthy, right? Because you’re basing what you’re going to allow them to have your credit limit, credit guide, whatever you choose to call it based on their personal credit. Right. And I’m going to put a coat of steel in his, because this is something that comes up. So what should you look for? Do they own a home, right? Because we want assets. If you have a personal guarantor and they have great credit, but they don’t only assets. What are you going to go after and hold hostage, get the account posts out. Right. And I’m not saying this sounds really terrible because we don’t go into this thinking the account’s going to be go south.
D’ann Johnson, CCE (23:43):
But that’s what we to think about. Right. Um, do they have second mortgage? What’s the total monthly payment? How long have they had this? Um, have they ever been reported as past due? Do they have vehicles? Are they over at their limits on their credit cards? Do they have lanes or judgments? Have they ever filed a bankruptcy? And why? Because the reason why I’m going to put the why in there is because we all know bad things happen to good people, right? Life happens. And sometimes what happens is that completely out of control. And it’s not that we intended for it to happen, but something catastrophic happens. And before you know it, you’re in over your head and you have to file a bankruptcy just to maintain living space for your family. Right. So ask the question, you filed bankruptcy, why they’re, they’re going to tell you it’s public record that they filed a bankruptcy.
D’ann Johnson, CCE (24:43):
Um, but the same thing is if you pull a person credit and you see that they have judgments or liens filed, ask them why, um, you know, if it’s a medical thing, maybe, you know, maybe there was a catastrophic medical event and they’re trying to dig out of it. You know, they’re doing their best. Does that say, you’re not going to grant them credit, not necessarily, but it may give you an, an idea on how to put their terms in better perspective. Um, again, how many inquiries did they had the last 30 days? And I’m going to say this because the number of inquiries will affect FICO scores. So don’t just look at the FICO scores, look at the over all, uh, information, because if you’ve got a person who is trying to start up a business and they’ve gone to find divert, people want to set up credit accounts.
D’ann Johnson, CCE (25:45):
And all five of those people have asked for personal guarantees and all five of those people have full, you know, their personal credits, their FICO scores are going to be pretty low. I’m just saying, um, so take that in consideration, right? You can kind of see at the bottom, depending on who you pull your credit reports through, you can kind of say who’s pulled credit and why at the bottom of the report. So tight kind of take that into consideration. Um, you know, if they’re trying to set up a business there, their, their FICO scores could be taking a hit because they’re looking at financing a company on their own. Right. Um, that’s why it’s always good to go to the bank because if the bank says, yes, they have a credit line with us, then that credit line is a backup for their personal guarantee, right. Or if they have credit cards and I hate to say this, but if they’ve got personal credit cards and there’s enough room on that card, that they might be able to slide in one of your invoices, there you go. Right. Go ahead into the next slide.
D’ann Johnson, CCE (26:54):
Um, so then, you know, again, your FICO score, this is just kind of a, uh, a generic range. You have to look at it for your industry, right? So if you’re depending on what type of company you’re, you’re dealing with, so let’s just say 60, 85 or above FICO scores, a credit meaning it’s a minimum risk. So they have an open-ended credit guide. Now we use the word credit guide. Um, and the reason why is from my previous days of working in consumer credit, the word credit limit, as gut, as governed by the federal, whatever that agency is, if you use the word credit limits, so you give somebody a $5,000 credit limit and you allow them to go to $10,000 legally, they are not responsible for one penny above that $5,000.
D’ann Johnson, CCE (27:53):
So we use the word credit guide because that allows us to be flexible with our customers. Right. I might set a credit guide for one of our customers for $50,000, but one month they might need 75. The word guide allows me to be flexible within that term. And we make sure that that’s through all of our documentation. We don’t use the word credit limit anywhere. We use the word guide. And normally, just so you guys know, I don’t share that information with my customers. If they say, well, how much is my credit limit? I say, well, because of the type of construction industry work in, we don’t assign a limit per se. We use a guide, and right now I’ve got your around 10 K. But if you need a little bit more than that, we can be flexible. And that usually makes them feel happy.
D’ann Johnson, CCE (28:45):
Right? Oops. Do we have the old one? Because that’s the tax return. We weren’t going to do the tax return. Oh, okay. Just keep going. Pay no attention to the woman. Okay. Here we go. Putting it all together. You can use tax returns. I think we left that in there. If you guys have saw my previous or had seen my previous, um, webinar, you can use tax returns as financial statements. If you’re a customer, we’ll give those to you. If you want more information of that, about that. Laurie has that deck, or I’m happy to provide that too. So,
Lori J. Drake, CBA (29:21):
So go to Levelset webinars and just look at for DNS last one. And it’s got the whole presentation as well as the slide.
D’ann Johnson, CCE (29:28):
Perfect. Perfect. Thank you. So now we can move on to the next one. So putting it all together now, this is something that is near and dear to my heart because, um, as we all with the, with the exception of a very few, we are not an island onto them to ourselves, right? We have people in other branches or other divisions, or maybe we’re training somebody to be our backup, where we want to make sure that we’re treating everyone the same across the board. Right? So I, I have a little spreadsheet that assigns numerical value to each credit, uh, to each area of the credit inquiry kind of gives you an overall picture of your prospect. It’s more black and white, so you can more easily convey your findings to your salespeople or your C-suite or whomever you’re. You’re needing to provide this information to, without giving them the confidential information that we can’t share with them, which is credit reports, right.
D’ann Johnson, CCE (30:36):
We can’t share with them the credit reports or the personal credit reports. Those are confidential information. So this gives it kind of a quicker breakdown. And this is great. If you’re new, as like I said, if you’re new to credit or you’re managing a large credit team, or you’re training somebody, this helps them treat everybody the same across the board. But it’s also helpful when they’re processing an application. Like, okay, now what else do I need to do? So it’s not only is it a numerical spreadsheet, but it’s a checklist, right? So if you go to the next slide, I believe that is the yeah. Right here. So this is, you can make whatever you want. Um, this one shows. So at the top it says original credit application. It’s a point. Do you have the original, I consider an email, the application, the original right anymore.
D’ann Johnson, CCE (31:32):
It’s all online, um, personal guarantee. And what is their credit score that gives you a point a, is there a second personal guarantor, was their credit score that gives them points? Is there no personal guarantee at all? Um, do you have an audited financial statement? If it’s a private company, they’re probably not going to give those to you, but again, you can ask, um, they might give you tax, um, information that could be considered in theory, um, audited financial statements. They’re not technically audited, but we hope what they submit to the government is true and factual information. How many years that they’ve been in business assign a point, you know, legal entity on the app confirm. So have you actually gone in to your secretary of state and said that, yes, this is the business that assigned the credit application. This is the business we’re going to be doing business with, you know, trade references all the way down.
D’ann Johnson, CCE (32:34):
Um, and yes, Amy, um, I’m willing to share this. I will give this to Lori. And, you know, again, this is just kind of a generic, you can also use this and I don’t know how many of you guys do this. If you do an annual review, or if you have a customer that stress doing more business with you than they have in the past, if you see the section second section, it shows more points that you can do. So, you know, continue up this as a credit review. So how many, how many years have they been doing business with you? Maybe you use this. If it’s somebody who did business with you years ago, and now they’re coming back. Right. But if you look at the bottom and I know it’s tiny writing, and I’m sorry, but you can kind of see where the credit score adds up.
D’ann Johnson, CCE (33:20):
So, you know, if you have a five it’s best, it indicates minimal risk for as good moderate risk. And then off to the side, you can see how those, uh, criteria go. And again, don’t use this as like the end all, do you all think of it from your business standpoint? If you are trying to build an area, you might want to be a little bit more lenient on some of these things. So you build the, the revenue in that area, in that state, in that city, whatever. Um, but take a hard look at this and say, okay, where do I, where do I draw that line? Right? Because at the end of the day, again, our job is not to say no, it’s to say how. And I use a term that everybody laughs at me. I say, when we have a customer who doesn’t qualify for an open account, I call them our preferred cash customers.
D’ann Johnson, CCE (34:21):
Why? Because we prefer they kick, they pay cash, but it makes them feel good, right? You’re a preferred, we set you up an account and maybe in six months we review, we see how you’ve been doing. And maybe then we open you for a small line of credit. It allows a new company to grow. We’re partnering with them. We’re giving them the avail ability to, to, um, grow with us as well as protecting us. Right. And it allows us to get to know them better as we move forward, you know, going back to vetting these customers, you know, if they have six months of paying their bills in full on time on Cod, and those balances are large. Pretty good bet that they’re going to continue to do that. Right. Not always, but pretty good bet. Okay. You can move to the next slide.
D’ann Johnson, CCE (35:17):
So here’s your not so hidden resource, your sales staff, your sales staff, or your boots on the ground, right? They’re the ones that are out there every day. And they’re not just talking to this potential customer, they’re talking to other customers who may know this customer, something come up. Right. And, and I know some of these you’re looking at and you’re like, well, why would I want to know that? Well, okay. So let’s just think about it right now. We have a supply chain issues. We have issues with labor and staffing. So your salesperson goes out on a job site and come to find out that this person is applying for credit free with you got kicked off a job because they couldn’t perform for whatever reason. Maybe they didn’t have the supplies they need. Maybe they didn’t have the labor force, whatever that that’s part of that information you want to know.
D’ann Johnson, CCE (36:20):
Right. Um, maybe they find out the health of the owner, my previous company, um, it was a long established company had been around for 50 years in the salt lake area. And when I say that there wasn’t anybody that we did business with that the owners didn’t know I am not lying. Um, so you know, they, they would hear about the health of the owner. Um, is that a concern? Well, it could be if they’re your personal guarantor, right. Um, management teams dresses right now, we we’re all seeing it. You know, staff turnover, vacancy, and key positions in a company. Those may be some red flags that you might want to address again, not saying no, just information for you to have personal information. Um, you know, is there a lawsuit? Is there, you know, um, the check signer is, is, you know, out of been out of the office for two months, um, you know, is there, uh, an impending divorce, some of the, again, these might seem more personal information, but at the end of the day, it’s information, you need to build your file again. Not saying, you’re going to say no, but just saying, this is information for warned. We want to be forewarned. Right. Okay. Next page.
D’ann Johnson, CCE (37:47):
So an Assa prediction is worth a pound of cure. So you’ve gathered as much information you can and you’ve decided to move forward with this new account. Maybe you’re still on the fence, right? So what are some other ways to protect your company and your company’s investment purchase money, security agreement, depending on what you’re doing, right? UCC filing, especially if you’re leasing equipment leaner, preclean get a letter of credit pre-payment or percentage came in. This is a big one. Um, again, as I talked earlier, you know, our preferred cash customers, can you ask a customer, you know, Mr. Customer, we would love to do this job for you, but we can’t give you the full amount. Can you put up half? Yeah. You can ask. If they say no, say, well, then we can only give you up to this amount. And then once you pay that, we’ll give you some more, right?
D’ann Johnson, CCE (38:47):
So that way you are maintaining your risk level within your company, joint check agreements. If appropriate. Now I have my own feelings about joint check agreements. And I know a lot of you guys are going to disagree with me, but joint checks are iffy at best because most companies and why most companies operate out of lockboxes. Right? So if you have a joint check and it goes to a lockbox, are they going to ask, does it need a second signature? They’re just going to deposit it. And then now you’re trying to get your money back from this other company that was, that received the joint check. Um, I’ve done that twice in the last three months and I really don’t want to do it ever again. Um, so again, joint check agreements. If, if it makes sense, just make sure that the joint check goes to you and not to the other person.
D’ann Johnson, CCE (39:41):
And then it goes to your location, not to your lock box. That way you can make sure everything’s signed on to the battle line and everything’s done the way it needs to be that. So next slide. So again, at the end of the day, the easiest decision is to say, no, right? You can say, Nope, not gonna do it. Nope. Not gonna do it. I envy, I hate to say this, but I can be sometimes the credit card companies, because how easy is their job to say, you don’t pay, we’re going to Sue you. You don’t qualify for an account. Sorry, you don’t get one. We don’t have that luxury. We have our salespeople and our C-suite and our owners and stuff saying, no, we got to make this work. Right. So whatever you can do at the beginning to secure whatever amount you’re going to grant to this customer, even if you don’t grant and you do, you know, Cod or prepayment or whatever you want to call that works for your company, that’s the hard part, right? That’s the hard part to say. Yes. So with that, uh, is there any, I mean, I know there’s lots of stuff and Lori, I hope you’ve been monitoring the questions because I kind of,
Lori J. Drake, CBA (41:04):
It’s still our out, um, Jill asks where she can pull a personal credit report.
D’ann Johnson, CCE (41:10):
Um, you can go now before for my company. Um, I have access to it’s called CIC. It’s a personal credit reporting, uh, service that we pay for each time we go through and order a personal credit report. Um, there are several companies out there that offer personal credit reporting services. The one thing I am going to caution you guys all on, because we’ve had this happen where the customer pulls their credit report and sends it to you, whether they pull it from, I don’t know, credit reports.com or whatever that is, don’t base your information off that you want third party verifiable credit information, and for them to have pulled it and send it to you as great. That’s nice. But you know, you want to be able to access all of the information because I, you know, most, a lot of people I know can manipulate anything that they get and make it look wonderful. I, I’m not that coordinated, but okay. You know, some people are,
Lori J. Drake, CBA (42:23):
Um, I can tell you the ones that we’ve found to be the most popular were Cartera and Equifax. So those are some good ones too. Um, and if you’re interested not to do a sales thing here, but, um, we are doing a webinar tomorrow more than a credit report. So it’s actually on credit reports in different ways you can get them. So just for thought there, um, Eric asks, what do you do if a customer refuses to endorse the personal guarantee?
D’ann Johnson, CCE (42:49):
Well then there again, you have that option to say, unfortunately, we can’t move forward with offering you terms without the personal guarantee, we’d be happy to offer you a Cod or as I call it a preferred cash account. And then in six months we can reevaluate. But right now we don’t have enough information to, to validate your request for credit. The, the one thing I’m going to say is, and I was talking about this in one of my groups the other day. Um, and if you have access to a network or a trade group, if you will, that’s another great place to get information because nine times out of 10, if the first thing is coming to you and applying for credit, somebody else in your group or your network is front of them. So you can always ask the question, as long as you stick to factual information.
D’ann Johnson, CCE (43:45):
I think, I think the, the pers the, where it gets kind of dicey is when somebody starts going off on a tangent about, well, you know, 20 years ago, he defaulted, blah, blah. No, you want current factual information? Are they a customer? Yes. Do they pay their bills on time? No. What is their highest credit? $25,000. What’s the longest they’ve been passed to 90 days. Do they respond to you? Yes. Slow but collective, right? That’s the information you want to hear. So always reach out for that. Um, but you can, there’s so many resources where you can reach out and ask questions, but getting back to the personal guarantee, we’ve had some issues, uh, recently, because we, we have a duality in our company because a lot of what we do is contractual work. Um, and so we have been asking, in addition to the contracts, we’ve been asking for a credit application because we contractor know you are still lending your company’s money.
D’ann Johnson, CCE (44:57):
I E everyone that works for you company, it’s their paycheck and yours hedging the bet on this company, paying their bills, right? And you have legal information inside the contract that should protect you. But at the end of the day, how many contracts actually tells you who’s responsible to pay the bill? Who do you send your invoices to? And thirdly, when will they pay you? So when a customer pushes back and says, we’re not going to sign the credit application, okay, well then here’s, here’s the situation we either, can’t give you can’t move forward with what we have or in our case, if it’s just the contract we say, okay, so we can allow you for just the contract, but anything that falls out of that outside the contract, you have to pay for it at the time of service that usually pushes them into signing the credit application, because they don’t want to go through that hassle.
D’ann Johnson, CCE (46:03):
Right. Um, I don’t know if you guys are familiar with what, what as copied service company does. So you see us out on the freeway, right on the highway, where are the guys out there that are grinding or sawn or cutting slabs out of pavement or whatever that is. So we’re, our guys are out there on the job and the project manager or the foreman, whatever says, Hey, since you’re here, right? So that work does it fall within the contract? And it’s difficult to get the people who are paying the bills to understand that, Hey, your project manager asked us to do this. So that’s why we are asking for both. And sometimes we do get that pushback where they won’t sign, they won’t sign the personal guarantee. They won’t sign the terms and conditions, and we just have to move forward. And, and without being mean, I guess about it, um, just say, well, these are, these are our policies.
D’ann Johnson, CCE (47:04):
This is what we have to work with. You know, we would love to do the job with you, but we need this information. We need that personal guarantee, or we can do it this way. You can prepay, you can. I’ve had, my previous company has several customers that would pre-pay months in advance. So they would come in and hand me a check for $30,000. And then they would eat away at that. And then when they would get down to a certain amount, I would send them a note and say, Hey, you’re down to 3,500 bucks and they’d bring me in another chat. There’s ways around it. But don’t be afraid to say, I need this from you in order for us to move forward. Right. It is a relationship at the end of the day, what we do is more about sales than sales, because we have to create the relationship. We have to maintain the relationship, but we also have to be a paid for that relationship. Right? So don’t be afraid to ask the questions. Don’t be afraid to say, you know, I can only do so much. Um, and also understand guys, and I know this causes heart burn, that sometimes you have that customer that goes to your, your boss or to your president, or we call them. And I don’t know if you guys have heard this term, fob is friends of boss.
D’ann Johnson, CCE (48:37):
Um, it’s out of your hand. And if they say do it, you do it right. Cause at the end of the day, they sign your paycheck. Um, I just make copious notes so that if the time comes, I can go back and say, well, you told me to open this. And I gave you all the reasons why we shouldn’t. So now you can call them and ask them for their money.
Lori J. Drake, CBA (49:09):
We do have another question from Melissa. She said, when you stated that customer may not be held responsible for any amount over their approved limit, is that specific to a state or is this everywhere?
D’ann Johnson, CCE (49:19):
My understanding. And again, this was back when I was doing consumer credit, which is different than commercial credit. Um, it is a federal law. It is not state to state. Isn’t the federal law that if you assign a credit limit and you allow somebody to go, that’s why credit card companies are so hard and fast. You know, you have a $5,000 limit and you’re at $4,999 and you charge something. That’s two bucks. They declined that because they’re, you’re not responsible for anything that goes over that. Now that doesn’t include, um, like fees and stuff, because Lord knows they can charge those all they want to. But in construction, I always err, on the side of caution, I would rather be able to walk into court and say, we assign them a credit guide of $75,000. They now owed us $80,000. And I’ll be honest with you. I’ve never had that come up in all of my court cases. I never had that come up in small claims or in regular court. I’ve never had that come up where they asked what credit limit or credit guide we have assigned. But if it’s undocumentation, that can be subpoenaed in court. The judge may take a look at that and say, you gave him $75,000 and now they owe you 150,000. When were you going to put the brakes off? Right?
Lori J. Drake, CBA (50:50):
Yeah. I’ve heard that a few times. Yeah. That appears to be our last question there. Um, if anybody wants more information just on credit in general, we do offer, uh, construction certification course foundations of credit, as well as a book that Thea Dudley has written and she teaches as well. If you want more information, you just get to love set.com/thea-dudley. And that’s it. Thank you DeAnn so much for again, taking your time. You had some great information. People said that you just did awesome. And it was a great presentation. Um, if you wouldn’t mind sending me that page that has the credit scoring, I can go through that and attach that. Yeah. I’ll just attach that to the recording email that goes out okay for everybody else. Thank you for joining us today. Uh, keep an eye on your email. You are going to get an email with a quiz. If you answer the quiz, you’ll get a certificate of completion for Dan’s course here. And thank you again and thank you everybody else for attending. We hope to see you at the next one. Thanks everyone. Have a great day. Thank you.