Credit Risk Mitigation Tools
When extending credit to a new or existing customer, you take on a creditor's role and the accompanying risk of loss. Here's what to do from the start to mitigate your risk.
Having the company owner(s) stand behind their debt personally is a significant enhancement and may allow you to be paid before unsecured creditors.
A specific Letter of Credit provided by your customer's bank provides you, as the beneficiary, financial security if your customer fails to pay.
Performance and Financial – Performance bonds come from insurance companies and banks. They are used to ensure work provided by a contractor. Financial bonds are debt securities. The issuer owes the bond recipient money and typically must pay interest.