Extending credit

God promised His people that they would be blessed if they obeyed His commandments. One of those blessings had to do with lending. Moses indicated that the Lord would bless all the work of your hand, and you will be able to lend to others.

Just because lending is part of ‘the blessing’ doesn’t mean we can simply forge ahead without considering how to extend credit in a way that is both honouring to God and consistent with Biblical principles.

Many businesses fail because of poor credit policies. Business leaders must be wise in their approach to lending. Business-to-business credit is usually used as a means of managing cash flow. Customers who place orders, expecting credit beyond the permitted payment period, are asking you to be their banker. Be careful not to extend further credit in order to make a sale. Make sure you do a credit check on your existing customers on an annual basis as well as on all new customers.

Since you are committed to pay your creditors, whether or not your debtors pay you, think carefully about how much credit you extend and to whom. Let these two principles be your guide:

• Limit your lending to those who are faithful in repaying.
• Do not extend credit to those who will be damaged by it.

Our purpose in business is to glorify God and sincerely care about customers even if we don’t know them personally. Jesus’ words from Matthew 5:42 indicates that we should ‘not turn away’ from those we do business with. This extends also to those who have difficulty in paying what is owed.

In our chemical business, we made regular credit checks on customers. This saved us from losing money due to a customer going bankrupt. We also realized that we had a responsibility to those who could not pay. Having made a policy to be debt free and maintain a good cash flow, we were in a position to extend more credit to customers who had genuine payment problems. In one case, we even wrote off a large debt, so that a customer could continue dealing with us. Future profits more than made up for this sacrifice.

Question for the day
How do you deal with lending and credit control in a way that glorifies God? Do you have any ideas about improving that area of your business?