How Do You Check a Business Customer’s Credit Before Giving Terms?

Which credit checks are worth running before the first job

Scale the checks to what the company stands to lose. A small first job may need nothing more than the application and a look at the state record. An account that could owe a month of payroll or a truckload of materials gets every check below, run before work starts by one named person, with each result dated and written on the application.

• The state record. Search the business entity database of the state where the customer is organized: is the company active, is the legal name the one on the application, who are its officers, and when was it formed? Florida’s Division of Corporations, for example, offers searches of corporations and LLCs by name, officer or FEI/EIN, and of judgment liens and federal lien registrations by debtor name.
• UCC filings. A financing statement is the public notice that a lender, factor or other secured party has, or may take, a security interest in the customer’s assets; it names the secured party and indicates the collateral. Under the Uniform Commercial Code a registered organization “is located in” the state it is organized in, which is the state to search, and the filing office must tell anyone who asks whether a financing statement naming that debtor is on file. A filing on all assets, receivables included, gives the secured party a claim on those assets that an unsecured vendor does not have.
• Court records. Lawsuits and judgments in state court are filed county by county, so search the courts of each county where the customer operates. Bankruptcy cases are federal: the PACER Case Locator searches “a nationwide index of federal court cases,” open to anyone who registers for a PACER account.
• Trade references. Call rather than email. Ask how long the customer has bought on terms, the terms, the highest balance, the balance now, and how many days after the due date it really pays. The customer chose these references, so a lukewarm answer is worth writing down.
• The bank reference. With the customer’s written permission, ask the bank to confirm the account and how long it has been open. That shows the company is real and banked; it says nothing about how it pays vendors.
• A business credit report. A commercial credit bureau sells reports with payment history other vendors have reported: for a large account, one more data point, not a substitute for the calls.
• The license or authority the customer’s own work requires, confirmed active; the freight section below shows how for brokers.

How to set a credit limit and terms for a new account

A credit limit is the most the customer may owe at one time, and in a service business that includes work done and not yet invoiced: the exposure starts the day the crew, the temp or the truck starts. So the limit comes from three of the company’s own numbers: expected monthly billing for the account, days from starting work to sending the invoice, and the terms.

Illustrative example: a hypothetical commercial cleaning company takes on a building at $12,000 a month, billed monthly in arrears on net 30. When the first invoice goes out, a month of work, $12,000, is already done. Over the next 30 days a second month is done and not yet billed. If the customer pays on the due date, the company is owed about $24,000 at the peak; if it pays 15 days late, about $30,000. On paper the account is $12,000 a month on net 30. The credit actually extended is two to two and a half months of work.

Set the first limit at what the company could lose without missing payroll, not at what the customer asks for. Start a new account on shorter terms or a smaller limit, and review it after a set number of months paid on time. Write these on the account:

• The credit limit in dollars, unbilled work included.
• The terms, and the day they start counting: invoice date, receipt or approval.
• Any deposit or progress billing required before or during the work.
• The one person, the owner or someone the owner names, who approves work over the limit.
• Whether a personal guaranty is on file, and the date of the next review.

Print the due date, not only the term, on every invoice, and make sure it matches the signed application. When work runs ahead of billing, the cheapest way to keep a limit honest is to bill sooner: progress billing on long jobs, weekly invoices for staffing assignments, an invoice the day the proof of delivery arrives in freight.

Payment patterns that mean a customer’s risk has changed

A slow payer is not always a customer in trouble. A monthly payment run, an approval chain or a missing purchase order number can hold an invoice at a healthy company without anyone deciding not to pay. The signal is a change against the account’s own history: for example, an account that paid in 35 days for a year and now pays in 55, or one that starts paying in a different way.

• Days to pay growing invoice after invoice, measured from the company’s own receipts.
• Partial payments, or the oldest invoice paid while newer ones age.
• A payment returned unpaid by the bank.
• New disputes about work the customer used to accept without comment.
• Requests for longer terms, installments or post-dated checks.
• An accounts payable contact who changes, or stops returning calls.
• Orders growing while payments slow, so the balance climbs toward the limit.
• A new public record: a judgment lien, a lawsuit, a federal lien registration or a new UCC filing against the customer.

The weekly check is one list: every account past its terms or close to its limit, with the days to pay on its last three invoices beside its usual number. One person reads it out on the same day each week, and each line gets a decision: call, hold new work, or leave it. Days sales outstanding gives the picture for all receivables at once; the list shows which account is moving it.

How a carrier checks a freight broker, and a broker checks a new shipper

Freight runs on credit both ways: the carrier hauls the load before the broker pays it, and the shipper gets its freight moved before it pays the broker.

A carrier starts with FMCSA’s public record, by the broker’s USDOT or MC number: the Licensing & Insurance carrier search, which covers those “who have been granted authority or who have applications pending,” or its successor in Motus, FMCSA’s new registration system, where an April 2026 notice says the public will be able to search an entity’s registration record. Check that the broker authority is active, that the name and contact details match the rate confirmation, and that a bond or trust is on file.

Under 49 CFR 387.307, a broker “must have a surety bond or trust fund of $75,000 in effect,” filed on Form BMC-84 for a bond or BMC-85 for a trust fund, to pay shippers or motor carriers “if the broker fails to carry out its contracts, agreements, or arrangements.” It is one $75,000 amount, and each paid claim draws it down. Under the text in effect since January 16, 2026, when a broker’s financial failure is published in the FMCSA Register, the surety must accept claims for 60 calendar days after that notice, so check the FMCSA Register for a notice naming the broker too. The bond limits the damage; it does not replace the check. Then read the payment terms on the rate confirmation, and record the days to pay on the first loads before booking more.

A broker checking a new shipper runs the general checks above. A company shipping its own freight needs no FMCSA operating authority, so there is usually none to look up; if the “shipper” turns out to hold broker authority, the freight comes from another broker, and the credit check is on that broker. Confirm the person booking the load works for the company by calling the main number on the company’s own website, not the number in the email. Until the shipper has paid a few invoices on terms, keep its limit small or ask for payment before the load.

When to cut terms back or switch to prepay

Decide the triggers before they are needed, write them into the credit policy, and apply them the same way to every account. A trigger written in advance, and stated in the terms the customer signs, turns a hard conversation into a rule.

• An invoice past due by more than a set number of days: new work waits until it is paid. The owner picks the number and writes it down.
• The balance over the limit: new work needs the owner’s approval, a payment first, or a deposit.
• A payment returned by the bank: the next job is paid in cleared funds before it starts.
• A second promised payment date missed.
• A new judgment, lien or bankruptcy filing in the public record.
• A large new order from an account whose payment pattern has already changed.

The steps down run in order: shorter terms, a lower limit, a deposit or progress billing, payment before each job or load, then no new work. Tell the customer in writing before the next job, not on the next invoice, and check what the application and any contract say about changing terms. Regulation B counts “an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor’s accounts” as adverse action, but not an action “taken in connection with inactivity, default, or delinquency as to that account,” and a contractor’s lien rights run on their own deadlines. Ask the company’s attorney before relying on either or stopping work under a contract; none of this is legal advice.

When this is not worth the work, and where the Review fits

If customers pay on the spot by card or check, there is no credit to check. If the company has a handful of long-standing accounts that pay on terms, a one-page application for new accounts and the weekly list above may be all it needs. And if an account is already months past due, the question is collection, not credit.

For an owner-led company, the Revenue Review counts this under the Invoice → Payment hand-off. From the company’s own invoices, receipts and customer records, it lists every account on terms with its limit, if one exists, its actual days to pay against its terms, and the accounts whose pattern has changed, in dollars. It does not run credit checks on customers, buy receivables or give legal advice. It takes two weeks, and the report is the company’s to keep.

If the money waiting on customers looks large, the next step is a free 20-minute call, where we say whether the steps above, done in-house, are enough.