Question

You work as a wholesale person for a plumbing company. One of your customers, a contractor has an open line of credit with your company for $10,000 worth of products He is currently at his limit; however, he is not overdue. He has just received word that he has been awarded a $40,000 plumbing contract at the local airport. The contract requires he supply $9,000 worth of plumbing products. Your customer does not have the cash to pay for the additional products. he tells you that unless you can provide him some type of financing, he may lose the contract. he says that he can pay you when he finishes his next job in 60 days. Explain what you will do?

Answer 1

I would ask the contractor to apply for an short-term extended credit for the purpose of the project against a post dated check of 60 days. This will also help me build a case for him in my upper management to extend the credit

Through such an application I would also want to investigate the following:

1. What is the time remaining for him to pay the $10,000 credit line that he ha already consumed
2. What is the asset ratio of his current business so that the check he may issue is negotiable as good
3. What is the history of the contractor with us with respect to his payment cycles.

In all means additional credit can be supplied to a business person with ethical practices as he is also a long term customer for us.