How to Make a Trade Credit Application

Trade credit applications help companies assess whether a customer qualifies for a short-term, interest-free line of credit. But while detailed information is essential for underwriting risk, adding too much friction can discourage customers from completing the process.

This article shares our insights as a leading provider of credit management software on how to build a practical, efficient, and thorough trade credit application that protects your business without overwhelming your customers.

What Is a Trade Credit Application?

A trade credit application is a formal request made by a buyer to a seller to purchase goods or services on credit terms, rather than paying cash upfront. It allows the seller (the creditor) to evaluate the applicant’s financial health, legitimacy, and payment reliability.

While similar in concept to consumer credit or bank credit, trade credit in B2B contexts is typically short-term and based more on business reputation, references, and transaction history than on FICO scores.

Core Requirements of a Credit Application

Our clients rely on trade credit applications forms for three core functions:

1. Assessing trustworthiness: Is the applicant legitimate, solvent, and reliable?

2. Collecting contact info: Who should be contacted for approvals, billing, or collections?

3. Cash flow forecasting: What terms are being offered, and how do they affect receivables?

Use the explanations and recommendations below to devise a credit application which performs each function strongly.

Trustworthiness

When deciding whether or not to approve clients for credit, consider the following.

Legitimacy

To avoid fraud and bad actors:

• Avoid publicly disclosing fraud prevention tactics when possible. This can reduce their effectiveness.

• Tailor your fraud checks based on what information is available for each applicant type. For example:

  • Request EINs from corporations.

  • Ask for a license number from contractors.

• If your customer must submit additional forms, provide pre-filled or situation-specific templates (e.g., a tax exemption certificate for the correct state) to reduce confusion.

Financial Capacity

When evaluating if the applicant has the means to pay:

• Avoid relying heavily on bank references. Most banks are slow to respond, and applicants often hesitate to share detailed account info.

• Use business credit reports to assess financial health. Make sure your credit team can easily access the data associated with each applicant.

Payment History

When checking an applicant’s reputation:

• Simplify the process of collecting trade references. Pre-fill names and email fields, and use digitally fillable forms.

• Thank trade reference providers. It’s particularly important to show gratitude in this scenario because they don’t directly benefit.

• Search online for company news, reviews, or legal filings to get a sense of their general reputation and risk.

Contact Information

To avoid approval delays or missed collections:

• Ask for primary and secondary contacts.

• If you feel it’s appropriate, asking for these contacts may speed up processing times:

  • Authorized signers.

  • Accounts payable contacts.

  • Operational contacts.

Cash Flow Forecasting

A credit application should clearly record:

• The net terms offered.

• The approved credit limit.

• Any special terms or payment arrangements (e.g., milestone billing or partial payments).

Standardizing this information allows your accounts receivable team to predict cash inflow more accurately, prioritize collections between various accounts, and improve overall balance sheet reporting.

PDF vs. Online Applications

Credit applications are increasingly being done online instead of through PDFs. Consult this section to determine what option is more suitable for your company.

PDFs are static and familiar, but they lack automation and are prone to human error and delays. If your team is spending excessive time on manual tasks, upgrading to an online credit application is likely the smarter move.

What’s Next?

If you're ready to modernize your trade credit processes, NetNow can help. Book a demo to learn about what an online credit application would look like for your company. Feel free to also try our ROI Calculator or explore our other resources.