Why trade credit checks matter for UK SMEs
Offering trade credit can win sales, but unpaid accounts damage cashflow and profit. A quick, repeatable trade credit checks routine reduces bad debt without killing growth. This guide gives a three-step screening process, a one-page credit-application and scoring template you can use immediately, practical contract and invoice terms, sector-specific red flags, recommended free/low-cost tools and ready-made scripts for reference checks and disputes.
Three-step screening process (fast and low-cost)
Follow these three steps before you open a new account or extend credit significantly.
1) Quick online checks (5–15 minutes)
- Companies House: confirm company status, filing history, officers and recent accounts. Look for late or missing accounts.
- OpenCorporates / Google / LinkedIn: check trading address, company age, director backgrounds and whether the business really operates where it claims.
- Website and social media: active site, recent posts and customer reviews give clues on trading health.
- Basic financials: if accounts are available, scan turnover, profit and creditor days; if none, treat as higher risk.
If any of the above raises concerns (no filings, frequent address changes, minimal online presence) mark the applicant as higher risk and proceed cautiously.
2) Supplier / trade references (phone or email)
Ask for two or three trade references from suppliers in the same sector. Phone is faster for direct answers; email provides a paper trail. Use the ready-to-use scripts later in this article. Key questions to ask:
- How long have you supplied them?
- Typical credit terms and whether they adhere to them
- Any late payment history or disputes
A single glowing reference isn’t enough; look for consistency across referees.
3) Simple scoring (2–3 minutes)
Combine your checks into a single score to make instant decisions. Use the one-page template below to score applicants and set or deny credit. Keep scoring conservative for new accounts or higher-risk sectors.
One-page credit application + scoring template
Copy this into a form or an invoicing system field.
Credit application fields (one page)
- Company name, registered number and trading address
- Main contact name, role, phone and email
- Trading name and trading address (if different)
- Company age and turnover (estimate if not available)
- Requested credit period and credit limit
- Primary bank and two trade references (name, contact, typical terms)
- VAT number (if applicable)
- Signature and date; terms acceptance box
Scoring (total 0–100)
- Companies House check (accounts filed on time, company age): 0–30
- Online presence & sector fit: 0–15
- Trade references (2–3): 0–30
- Requested limit vs declared turnover: 0–15
- Any adverse public records (County Court Judgements, insolvency notices): -50 to 0
Scoring thresholds
- 80–100: Accept; set limit as requested
- 60–79: Accept with reduced limit or short terms (e.g. 30 days)
- 40–59: Ask for first order paid on account or reduce limit significantly