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Why real-time credit checks are essential in B2B

Real-time credit checks provide companies with instant transparency into the financial health of potential business partners, minimizing the risk of financial missteps. This article explores the importance of real-time credit checks in the B2B context and how they secure business relationships, increase operational efficiency and ultimately contribute to business success.

What is a credit check?

The term credit checks refers to the assessment of the financial reliability and solvency of an individual or company. 

By analyzing payment behavior and other economic factors, future payment behavior can be predicted. The results are often presented as a number, percentage value or score, with higher values signaling better creditworthiness.

Why are credit checks important?

Credit checks minimize the risk of payment default and are essential for various business transactions. It is even required by law when taking out loans, concluding contracts and for larger amounts in order to ensure financial stability and reliability.

Who can perform credit checks?

In principle, all companies can perform them, provided that a legitimate interest is demonstrated or the consumer has given their consent. Legitimate interests include situations such as purchases on account, credit applications or rental agreements. 

In the business environment, it is common to work with professional providers in order to obtain a reliable assessment of creditworthiness. The implementation and complexity of a credit check depends on the size of the company being assessed. Typically, local credit agencies are responsible for small and medium-sized companies. In Germany, examples include SCHUFA and Creditreform while in the UK there is Experian and Equifax, and similar agencies exist in each market. Conversely, for larger companies and banks it is common for international rating agencies, like Moody’s or Standard & Poor’s to conduct credit checks.

How it works

A comprehensive credit check requires access to various documents, which are either publicly available or must be provided by the company. The resulting credit report includes general information such as industry, company name, registered office and history as well as specific data on insolvencies, debt collection activities and balance sheets. This information enables lenders and business partners to make informed decisions.

Advantages of credit checks for companies

Despite its relevance, around a quarter of companies in online commerce rely solely on their internal data for risk assessment. This severely limits the options available to customers and harbors a major financial risk. 

Credit checks with external data offer companies numerous advantages. It not only proves your own solvency to partners and lenders, but also enables a regular assessment of the financial reliability of business customers. In factoring in particular, it helps to minimise the risk of payment defaults.

The crucial step: real-time credit checks

When making an online purchase, especially when paying by invoice or granting credit, merchants need to be able to quickly and reliably assess the creditworthiness of their customers. Real-time credit checks do just that: they provide comprehensive information on the financial stability of buyers within seconds. This offers e-commerce companies many advantages:

  • Faster decision-making processes: Real-time credit checks allow companies to make informed decisions within seconds. This is particularly beneficial when granting loans, approving financing or concluding contracts, where any delay can reduce business opportunities.
  • Risk minimisation: The immediate availability of credit rating information enables companies to better assess and minimize the risk of payment defaults. This leads to more secure lending and more stable financial planning. 
  • Improving the customer experience: Customers appreciate a speedy processing of their requests, whether applying for a loan or shopping online on account. Real-time credit checks help to eliminate long waiting times and cumbersome procedures.
  • Access to new customer segments: The ability to perform credit checks quickly and efficiently enables companies to offer financial products to customers who are traditionally considered risky (due to lack of previous business relationship) by using advanced analytical methods. 
  • Competitive advantage: Companies that offer real-time credit checks position themselves as leaders in terms of technology and customer service. This innovative approach can be a decisive factor in differentiating themselves from competitors and gaining new market share.

Increase efficiency and security with Mondu

In today’s fast-paced business world, real-time credit checks are no longer just an option, but a necessity for businesses to ensure security, efficiency and customer satisfaction and strengthen their market position. 

With Mondu, you can offer your B2B customers the benefits of buy now pay later payment methods while benefiting from integrated real-time credit checks that lead to lightning-fast checkout of existing and new customers. 

Find out here how you can increase the purchase completion rate of your B2B web shop and minimize your risk with Mondu’s B2B payment services.

Content & SEO Manager

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