Why Reliable Credit Screening Is Necessary More than Ever

As the world continues to battle with the current pandemic, different economies have had to adapt their business methods to help them stay afloat throughout this time. The lending business has also become more fragile and riskier as economies continue to crumble due to the closure of the economic activities that reduce income generation. Today more than ever, it is crucial that lending firms pay keen attention to credit screening their debtors. Here are the reasons why:

More challenging economic times make it harder for debtors to pay 

If there is any reason why you should increase your credit screening capabilities at this time is because of the crumbling economies. The current pandemic has made economies deteriorate by the day, and in some places, this has led to employees losing jobs and property. When this massive wave of financial challenges set in, debtors would find it even more challenging to pay their loans. 

If you are a loan agent, it’s in your best interest to clearly understand an individual’s debt history before advancing to give them a financial loan at this time. Financial experts at MicroBlit often advise lenders to identify smart ways to lend, collect quicker, and grow their business. An individual who had a bad credit score when the economy was better is most likely to default their loans at such times when the economy is worse off. A reliable credit screening service can then be used to determine how to award loans to debtors in this period without suffering losses from unpaid debts. 

Identifying the correct tenants for rental spaces

One of the businesses that have been affected by the recent changes in the economy is the real estate business. The demand for office space has relatively reduced as the restriction in movement is imposed by different government regulations. This might make it challenging to keep your rentals occupied and keep you in a desperate need to find a tenant. However, finding the right tenant is more important than finding a tenant. Keeping in mind that multiple businesses have suffered financial losses with the pandemic, it is easy to find tenants moving around because they could not afford to rent space in their previous locations. 

A proper credit screening method would help you to gauge the financial stability and reliability of the tenants you are looking to accommodate, and this would allow you to identify possible red flags on their business portfolios. Besides, this service would enable you to obtain information about the individuals or the business, such as social security numbers, previous addresses, and date of births. It also provides you with the public records for the individuals to ensure that you make the right decision when leasing your property for your security. 

Protecting your supply chain

Credit screening comes in handy at this time, especially for the business partners associated with suppliers and customers. You must guarantee customers in your business a continuous supply of the product. A supply chain is especially vital at this time when some companies are closing due to a lack of resources. This can be challenging when your business depends on suppliers who need to supply critical materials used in the production of your goods or services. 

Suppliers could very easily damage your supply chain and hence hurt your business. To prevent this from happening, you need to ensure that you engage creditworthy suppliers for your business. The use of a well-sophisticated credit screening service will provide you with the essential financial health and overall business sustainability of your suppliers. This can help you plan on whom you can bring onboard to ensure the smooth running of your business. 

Comparison of industry-standard payment models with payment pools

Whichever industry your business is involved in, you might be associated with the supply of products to huge clients who consume products on a credit basis. This arrangement might work well under normal circumstances. Still, it is essential that you determine the amount of time that these clients, which are essentially companies, take to pay up their suppliers with the current economic situation. 

This information can help to protect your company from a potential financial hazard. Clients who take too much time to pay their suppliers could hurt your business, especially if you start small. In whichever case, this information should be used to determine the types of tenders applied for and the companies you can comfortably do business with.

In conclusion, the issue of credit screening is considered as a necessity for virtually any business. This issue is vital for both the lending business, real estate business, and regular supply chain and retail stores. All these different businesses involve the exchange of property with an agreement to be settled later, which is enabled by the lender gaining trust in the willingness and capability of the borrower to repay the agreed amount. Credit screening is the key to making these lending decisions.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.