In these turbulent economic times, creditors need to protect their position and lessen the chance of bad debt write-offs. Thankfully, there are simple ways to do this before credit is even extended. Follow these six practical steps to minimize your risk and increase odds of recovery before accounts go delinquent.

#1 - Obtain a personal guaranty.

When dealing with a corporation, obtain a personal guaranty whenever possible. That way, even if the corporation goes out of business, you can still pursue any individuals who have signed. Have an attorney review your guaranty to make sure it will stand up in court. Ideally, it should be in a separate document. If the guaranty is part of a credit application, make sure it's in its own section, clearly marked and titled, so the person signing can't say they didn't know what they were signing. At a minimum, make room for a signature, current address and social security number.

#2 - Insist on a credit application.

Make sure your credit line is set up on your items and in writing with a credit application. If filled out correctly, this should clearly identify your customer and include important information such as:

• Credit and bank references
• Home addresses
• Phone numbers of the principals
• Legal composition
• And more.

This application will establish written terms (like default provisions, rate of interest and returned goods policies) which will help you in the long run. With a signed application in hand, you'll be equipped to combat any issues with an endorsed legal document.

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