Perspectives

Your Best Customer Just Took on a Bigger Project. What Changes for Credit?

A longtime customer call with good news. They landed a major project and need a higher credit limit to support it.

They have paid reliably for years. Your sales team knows them well. There is a reasonable business case for saying yes.

Before you approve the increase though, it is worth asking what makes this transaction different from the ones that earned your confidence in the first place. A strong payment history matters, but so does the project that will generate the money to pay your next invoice.

A familiar customer can bring unfamiliar risk

Consider an equipment customer that has successfully handled smaller commercial projects for years. Now it is taking on a much larger job, farther from the usual market, with a general contractor it has never worked with.

Your customer may still be well managed and financially sound. But this project could require it to carry expenses longer, coordinate more work, and depend on payment arrangements it has not dealt with before.

Those changes affect your exposure, too.

Credit review often focuses on whether a customer can pay. A project review adds another question: What needs to happen on this particular job for your customer to get paid?

Understanding that answer can help you decide how much credit to extend, what information to collect, and whether additional protection deserves a closer look.

Start with what changed

Experienced credit professionals know that every transaction carries some uncertainty. The challenge is identifying when a new transaction falls outside the assumptions supporting an existing approval.

A substantial credit increase is an obvious reason to take another look. Other changes are easier to miss.

The customer may be working through a different legal entity. It may have moved from contracting directly with a general contractor to supplying a subcontractor further down the chain. Equipment may be headed to a public project or into a state where your team has less experience.

Even growth can create pressure. A customer that comfortably managed on large project may struggle when several projects require significant cash at the same time. A useful review begins with a straightforward question: What are we being asked to finance now that we were not financing before?

Confirm who is responsible for payment

“We know the customer” does not always mean the documents identify the right party.

An established customer may create a separate company for a new venture. A purchase order may come from an affiliated business. Someone placing an order may be acting for a property owner or another contractor.

Before exposure grows, confirm which entity is buying or renting from you and whether your agreement accurately reflects that relationship.

If you are relying on an existing guarantee or other protection, have it reviewed to determine whether it supports the new arrangement. Similar company names and shared ownership can make a transaction feel familiar while leaving important questions about who owes the debt.

These questions are generally easier to resolve while everyone is working toward the sale.

Know the job behind the order

For project-related sales and rentals, basic job information belongs in the credit conversation.

Your team should understand:

• The project’s name and exact location
• Whether it is public or private
• Who owns the project and who serves as GC
• Your customer’s role and who hired them
• The expected duration and your anticipated total exposure
• Whether payment bond information or other project documents need review

This information helps your team evaluate how payment is expected to move through the project. It also gives legal counsel a starting point for assessing what protections may be available and what steps require early attention.

Trying to reconstruct the contracting chain after payment stops can consume valuable time. By then, the people who knew the details may have moved on, and the documents may be scattered across departments.

Review the full commitment

The outstanding balance is only part of what your company has at risk.

Open orders, equipment already committed to the job, and anticipated deliveries may push the exposure well beyond the number on the aging report. A proposed increase should account for those commitments and how long your company expects to carry them.

Then consider the protection supporting that exposure.

Do the current agreements fit the work?Have changes in the customer’s business affected documents already on file? Are there questions about guarantees, collateral, or project-related recovery options that should be addressed before the next delivery?

There is no single answer for every account. The goal is to make an informed decision based on the transaction your company is actually entering.

Decide what will trigger another review

Approval should also establish when the team needs to revisit the account.

A project may run longer than expected. Equipment needs may increase. Your customer may request another limit increase before the first phase is complete.

Set clear expectations for which developments require another conversation. That might include a material increase in exposure, a change in the contracting entity, or a payment slowdown accompanied by continued requests for additional credit.

Assign responsibility for bringing those changes to credit. Sales and operations often learn about project development first. A review process works better when they understand which information matters and who needs it.

Bring legal into the decision while there is time to act

An early legal conversation can be focused and specific. You may need an attorney to review an unfamiliar agreement, confirm which party is obligated to pay, or evaluate whether existing protections fit a larger commitment.

That input helps credit leaders weigh the opportunity with a clearer understanding of the risk.

WFJ and Wagner Business Solutions work with companies throughout the credit relationship, including before an account becomes overdue. When a customer’s needs change, we can help your team review the transaction and address questions that could affect payment later.

A long time customer’s growth can be a valuable opportunity for your business. Taking a fresh look at the credit arrangement helps you support that growth with a clear understanding of what your company is committing, and how to protect it.