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Credit Extensions are Loans

Originally Published: June 2010

Insist on a Completed Credit Application

With the onset of the recession in 2008, businesses have found it difficult to obtain credit lines from banks. As a result, more and more businesses have been using trade credit terms to fill the gap. Most fail to appreciate, however, that, like a line of credit, credit extensions to buyers are essentially loans.

Now, if you were to go to your banker for a loan, you would expect him to require a completed application. So, it makes sense that when a potential buyer asks you for credit terms, which basically is an interest-free, short-term loan, you should also require a credit application. Apples to apples, right?