How To Credit Check a New B2B Customer Before Offering Net 30

Offering net 30 to a company you met two weeks ago is an unsecured loan to a stranger, and small businesses make these loans daily with less diligence than a bank applies to a $500 credit card. I am not suggesting you interrogate every prospect; friction kills deals, and most new customers pay fine. I am suggesting a proportionate 30-minute routine for any account whose first order is large enough to hurt, because every catastrophic write-off I have ever cleaned up traced back to terms extended on enthusiasm.

The 30-minute routine

Trade references, done properly (10 minutes). Ask the customer for two suppliers they currently buy from on terms, then actually call, and ask the three questions that produce truth: how long have you traded with them, what is their high credit (the largest balance you have carried for them), and do they pay within terms, and if not, how far beyond? The high-credit question is the one amateurs skip; a glowing reference based on $800 monthly orders tells you nothing about the $15,000 exposure you are contemplating. One caveat to weigh: references are curated, since nobody offers you the supplier they burned, so treat clean references as necessary rather than sufficient.

A business credit report (10 minutes, roughly $40 to $150). Dun and Bradstreet, Experian Business, and Equifax Business all sell single reports; what you are reading for is the payment index (D and B's PAYDEX or equivalent, which scores actual reported payment behavior), the presence of liens, judgments, or collections filings, and the company's stated size against the order they just placed. A payment index showing habitual 20-days-beyond-terms is not a rejection, it is a pricing input: it tells you what your DSO with them will actually be, so set terms and price accordingly.

Public signals (10 minutes, free). Secretary of state registration: does the entity exist, is it in good standing, how old is it? Court records search in their county for active litigation. And the soft signals: a leadership page that matches LinkedIn, a real address, reviews from their own customers. None of these alone decides anything; together they either cohere into a normal company or they do not, and incoherence is the finding.

The decision system: starter limits, not verdicts

The output of diligence is not approve-or-reject. It is a starting credit limit and a review trigger. My working heuristics: for a clean file, initial limit of roughly 1.5 to 2 times the expected monthly order volume, on standard terms; for a thin file (young company, no report history), a lower limit plus a first-order deposit of 30 to 50 percent, framed as standard onboarding rather than suspicion; for a flagged file (poor payment index, active judgments), prepayment or card-on-file until a payment history exists with you, or a personal guarantee from the owner if the deal justifies the awkwardness of asking.

Then let behavior update the file. Three clean on-time payments earns a limit increase; the first significant lateness triggers a review before the next order ships, not after. This graduation system is the whole trick, and it scales into a proper credit-limit framework as your book grows. Diligence answers the question at day zero; behavior answers it forever after, which is why tracking payment patterns per customer, the thing your DSO trend aggregates and the thing we obsess over at RevCollect (bias disclosed), matters more than any report you buy.

The routine costs 30 minutes and at most $150. The write-off it prevents starts at ten times that and goes up. Run it on any new account whose first exposure exceeds a number you would genuinely mind losing, and be honest with yourself about what that number is.

FAQ

Should I credit check every new customer? Proportionately. Small first orders can proceed on card or prepayment with no diligence; run the routine when the first-terms exposure exceeds an amount you would mind writing off.

What questions should I ask a trade reference? Length of relationship, highest balance carried (high credit), and payment behavior against terms. The high-credit answer is what makes the reference relevant to your exposure.

What if a new customer refuses a deposit or credit check? Refusing proportionate, standard onboarding is itself information. Offer card payment or prepayment as the friction-free alternative; a customer who wants terms but resists every mechanism that supports terms is pre-announcing the relationship.

How do I build credit history on a brand-new business with no report? You cannot; you substitute structure for history: lower starter limits, deposits, shorter terms, and fast graduation after the first three clean payments.