Magazine article Business Credit

These Best Credit Practices in Brazil Will Keep You from Falling Downhill

Magazine article Business Credit

These Best Credit Practices in Brazil Will Keep You from Falling Downhill

Article excerpt

I'm often asked by many overseas creditors about where to start when establishing a business relationship with a customer in Brazil. My answer is that it often depends on whether you are going to grant credit, and if so, how much.

If you're going to provide credit for only a few hundred dollars on each order, then it's probably safe to say that investing any significant amount money in your credit research is probably not worth the cost per sale. However, as the amount of credit being granted increases, the amount of research, due diligence, time and money required will increase as well.

Here is my list of best credit practices.

Obtaining a credit report from one of the local credit information bureaus is a quick first step. As all the major international credit reporting companies are providing their services in Brazil by partnering with one or more local credit information companies, usually what they can provide in English is what has been provided to them in Portuguese. However, bear in mind that the financial and legal information that is provided doesn't necessarily mean that it has been confirmed.

When looking at the credit report, in addition to the financial and payment data that is provided, we need to take a careful look to see if there are any pending or settled law suits and judgments, respectively. Certainly any lawsuits related to unpaid accounts would be a red flag. In order to verify the nature or underlying basis for the lawsuit or judgment, a look through the legal public registry can give you additional details regarding the underlying claim so that you can more accurately understand the reasons why the lawsuit was brought about in the first place. Please note that each Brazilian state has its own registry (only in Portuguese). As an example, the one related to Sao Paulo is: www.tjsp.gov.br.

Onsite visits can divulge a great deal of information that is not in a credit report. I recently received an inquiry for an onsite visit from a creditor in Europe who is in negotiations with a Brazilian who would like to purchase approximately $1 million in equipment. Due to the large amount of credit that will be extended, I have been asked to make the initial onsite visit. During my visit, I will be able to:

* speak directly with the owners and executive management and get a feel for their honesty and forthrightness

* evaluate the internal and external physical condition of the company

* observe the general atmosphere and activity level of the employees

* visit the local court and inquire about claims, suits or judgments against the potential customer

* visit local trade suppliers that have been previously provided to verify credit limits and payment history

Moreover, when making an onsite visit, the psychological benefit can't be overstated. When the creditor's representative, especially one who is an attorney, makes the onsite visit, the potential customer may feel much more inclined to be aboveboard with information and to resolve any disputes that may arise in good faith.

Doing background checks on the owners is highly recommended. Just like you would research as much as possible about the customer's company itself, you never know what kind of red flags could be lurking in the background of the owners or executive management. During my career I have come across owners who have not only had several bankruptcies and other civil suits in their past, but criminal felonies as well. …

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