Credit applications and sales terms

A credit application signed at the start of a customer relationship is the cheapest collection tool available.

Correct legal name and form of the customer, verified against the state’s records, with any assumed names identified. Suing the wrong entity is the most common collection error.

Principals and ownership, with a personal guaranty where the credit warrants it, executed by an individual in their individual capacity — not signed with a corporate title, which is a recurring defect.

Financial information and trade references, with authorisation to obtain credit reports.

Terms incorporated. Payment terms, interest on overdue amounts at a lawful rate, attorney fees and costs of collection, a security interest in goods sold with authorisation to file a financing statement, reclamation and stop delivery rights, warranty terms and limitations, choice of law, forum selection, and a jury waiver where enforceable.

Notice provisions requiring the customer to notify of changes in ownership, name and address.

Updating. Applications should be refreshed periodically, and the guaranty should be a continuing one so that it covers later credit.

Consistency. The terms on the application, on the invoice and on the acknowledgement should match, or the battle of the forms decides which govern.