What is Trade Reference?
Trade references are the names of the business firms that can submit a report on a customer's creditworthiness. Whenever a customer requests for the supply of goods on credit, the trader has to obtain necessary information about the four C's of the applicant. For this purpose, the trader asks the applicant to name a few businessmen of his acquaintance to whom he may 'refer' the matter. These businessmen are called referees or trade references.
What is Bank Reference?
Bank reference is the name of the banker of the credit applicant with whom he maintains his account and through whom he meets or negotiates bills, etc.
When a bank reference is supplied, the trader cannot take up the reference directly because, in order to preserve the secrecy of customer's accounts, a banker does not give any information to outsiders other than another fellow banker. Therefore, the trader should request his own banker to get the necessary credit information from the credit applicant's banker.
Hints for Drafting letters for Trade and Bank References
- Express your pleasure and gratitude for their Order
- Provide information about Company's Credit Policy
- Explain Why you need Information?
- Make a request for Specific Information like…Trade References, Bank References, Financial Statement or Personal Interview etc..
- Assurance for Confidentiality of provided Information
- Build Goodwill
- Final Assurance for Immediate execution of Order once the reply is received
Letter Asking for Trade References
The Apex Company Limited, Mumbai received orders for Machine Tools from Burhani Store, Bora Bazar, Mumbai. Write a letter requesting two Trade References for Credit Information.
The Apex Company Limited,
206 Apex Group, Behind Courtyard Marriott Mumbai
Andheri Kurla Road, Andheri East, Mumbai - 400059
Phone No. (079) 010101010
Fax no.(079) 00110011001
Website: www.apexlimited.com
Date: 7th July 2023
The Proprietor,
Burhani Store,
Bora Bazar, Mumbai-2.
Ref: Your Order dated on 1st July 2023
Dear Sir,
It is a pleasure to welcome you to our large circle of customers.We were happy to receive your order dated 1st July 2023 for machine tools worth of Rs. 25,000. We look forward to adding your name to the list of our valued customers. We are agreeable to give you credit for the full amount but as this is the first time we are doing business we have to ask you to let us have the names of two of your suppliers with whom you have already established credit.
We expect to be able to complete the enquiries within a week's time. If your need is urgent, please let us know, So, we can send a part of your order on C.O.D. terms immediately.
Our request doesn't imply any misgivings on your credit standing. Getting trade references is a part of general policy matters and we request all our new customers send us this information before we open an account in their name.
We will be happy to open an account for you as soon as you furnish us with two or more trade references so that we could complete the necessary formalities attached with your credit application. We are pleased to have the opportunity of adding your name to our list of credit accounts. We trust that this exchange of letters marks the beginning of a long and mutually profitable business connection.
We look forward to adding your name to the list of our valued customers.
Thanking You
Manager of the Credit Department.
Letter Asking for Bank References
A Customer wishes to have his order executed by a trader on Credit. Since the customer is new to the trader he can't credit him directly without any enquiry. So, For Inquiry purposes draft a Letter From Sudha Wholesale Corporation to Messers and Sons asking for Trade References and Bank References?
Sudha Wholesale Corporation,
45, Station Road, Mumbai - 400 005,
Website: www.sudhawholesale.com
Email: sudhawholesaler@gmail.com
Phone No: 00000 00000
Date: 7th July 2023
Messers and Sons,
78, Andheri East,
Airport Road,
Mumbai - 400 006
Subject: Letter asking for Bank References
Respected Sir,
It is a pleasure to receive your order of 5th July 2023 for th DVD, CD and MP3 players stocked by us. We would like to grab this opportunity to add you as our valued customer.
As per our Credit Policy, We shall gladly open an account for you as soon as you furnish us with three trade references along with your bank reference so that we could complete the necessary formalities to establish your credit account. Our request does not imply any negative connotation for your credit standing. Getting trade and bank references is a general policy matter and we request all our new customers to send us this information before we open an account in their name.
We assure that as soon as you write us return mail, we will record your order earliest so that there is no delay in your shipment. We are pleased to have the opportunity of adding your name to our list of credit accounts and hope the opening of this account will be the beginning of a long and happy association with you.
Yours faithfully
(Sudha Wholesale Corporation)
A Reply Letter Mentioning Trade References and
Bank References
Example: The Sudha Wholesale Corporation has requested Messers and Sons to provide two trade references along with bank references to check their credibility through status enquiry from external sources. Draft a letter incorporating the same purpose.
Messers and Sons,
78, Andheri East,
Airport Road, Mumbai - 400 006
Email ID: messersandsons@gmail.com
Date: 8th July 2023
To,
The Manager,
Sudha Wholesale Corporation,
45, Station Road,
Mumbai - 400 005
Ref: Reply to your letter dated on 7th July 2023.
Respected Sir/Madam
Thank you for your courtesy in agreeing to open our Credit account in your books. As required by you, we are giving below three references with whom we have had an open account for the past five years.
C.G. Road, Mumbai,
Contact: 022-22617154-59
(2) Max Electricals.
Nehru Marg, New Mumbai
Contact: 022-22617154-59
(3) M/S Shiv Shakti Brothers.
Mahatma Gandhi Road,
Necessary Information regarding our bankers are also given below…
Lal Bahadur Shastri Marg, Kamani,
Kurla West, Mumbai, Maharashtra 400070
Contact:022-01010101-59
B, D. N. Nagar Ground, College, Society Rd,
Jogeshwari East, Mumbai, Maharashtra 400060
Contact: 022-10101010-59
Should you require any additional information, please write to us. Thank you for the consideration of our Credit Application. However, since we wish to add new sets to our stocks for the Deepavali season, please complete your credit check as quickly as possible.
Waiting for a positive response…
Thanking you,
(Messers and Sons)
What is Status Inquiry Letters?
After receiving references from the prospective customer, the trader should now take them up and request references to provide necessary information about the credit status of the customer.
While writing a status enquiry letter, it must be remembered that the whole matter should be kept confidential and that those who provide the trader with this information are doing favour to him. Therefore the letters should be polite and appreciative and he should assure the references that all information being furnished by them will be treated strictly confidential. There are two types of Inquiry…
- General Inquiry
- Particular Inquiry
Guidelines to draft Credit Inquiry Letters
- Give the name of the person or firm about whom you are enquiring.
- Indicate that you have been asked to refer to the addressee.
- Mention the amount of credit asked for
- Time period for which credit is to be extended.
- Make a request for credit information about the maximum amount and period for which Credit can be granted,
- Polite request to have a financial position of the customer
- Assurance of Confidentiality
- Express your willingness to render similar service to the referee if he ever needs it.
- Enclose a self-addressed envelope.
Example: After receiving Trade References from Messers and Sons, Madurai, The Fine Crockery Mart, takes up one of the references for Credit Information. Draft a letter for the same.
The Fine Crockery Mart,
Vani Nagar, Bengaluru-000 000
Contact: 022-2737378-38
Email:shahelectronic@gmail.com
Website: www.shahelectronic.com
Date: 10th July 2023
To,
The Manager,
The Antique Makers,
56, Mount Road,
Chennai - 000 000
Confidential
Sub: Inquiring the financial status of Messers and Sons, Madurai
Dear Mr.XYZ,
Messers and Sons have placed a large order for Glassware amounting to Rs.50,000/-. They have asked for Credit for a period of Three Months, mentioning your name as Credit References.
Since, we have had no dealings with Messers and Sons in the past and therefore do not know their creditworthiness. As we understand that you have been dealing with them for the last 3 years, we wish to know your opinion regarding their creditworthiness.
We request you to respond to the following questions about Messers and Sons…
1. How long has Messers and Sons had a credit account with your company?
2. What is the credit limit you currently extend to them?
3. What is the maximum amount of credit you have ever extended to them?
4. Has it ever been delinquent in paying his dues?
I assure you that information provided by you will be strictly kept confidential. If you send answers to the above questions by 13th July 2023, it will be highly appreciated. We will be highly glad to provide you with any such help in future.
Yours Faithfully,
(The Fine Crockery Mart)
Replying to Status Enquiries
It is a recognised custom among traders to regard it as a duty to answer status. enquiries. Every trader requires, one day or the other, the same information from others is perhaps the main reason why every businessman replies promptly to such status enquiries.
The reply should be frank and specific and as helpful to the enquirer as possible. It is not necessary to give any instructions or suggestions to the enquirer about what to do with the credit-customer's application. The writer should just furnish the information asked for and leave it to the enquirer to decide for himself. Replies are often so worded that no express or implied responsibility is assumed by the writer. Further, the writer should make it clear that the information supplied will be treated as most confidential.
Replies to status enquiries may be:
- Favourable Opinion
- Unfavourable Opinion
- Mixed Opinion
Hints for drafting favourable replies to status enquiries
- State how long you have been in trading relation with the credit applicant.
- Give the nature of the account and the amount of credit.
- Mention the financial position and business prospects of the applicant.
- Mention your recommendation for asked credit amount
- Tell the party that the information given is without any personal responsibility and should be treated as confidential.
Example:Reply to above letter (favourable reply).
Example: Write a reply letter to The Fine Crockery Mart from The Antique Makers, which is a Trade Reference provided by Messers and Sons.
The Antique Makers,
56, Mount Road,
Chennai - 000 000
Phone No: 022-72728286-67
Email: antiquehelpline@gmail.com
Website: www.antiquemakers.com
Date: 12th July 2023
To,
The Manager,
The Fine Crockery Mart,
Vani Nagar,
Bengaluru-000 000
Confidential
Sub: Reply to Status Enquiry Letter about Messers and Sons dates back to 10th July 2023
Dear Sir,
This Letter is written with reference to your Status Enquiry letter about Messers and Sons of Madurai dated on 10th July 2023, We are glad to be of help in ascertaining the credit standing of our customer.
Messers and Sons of Madurai, about whom you have sought credit information in your letter, have been on our books for three years. Their record of payment during this period has been entirely satisfactory. Their business ability and financial integrity are held in high esteem in this line of business. Their purchases average over Rs. 50,000 a month in the festive season and about Rs. 40,000 per month during other periods.
Mr. Murli Menon, Managing Director of the Messers and Sons, enjoys a reputation in our area, and we are happy to provide a reference for him. We would like to add that our confidence in this firm has never been misplaced.
This is our personal opinion of the firm and we request you to treat it as such. We are not responsible for any decision which you may take in this matter in future.
Yours faithfully
M. Krishnamurthy
(The Manager of The Antique Makers)
Unfavourable Reply
Any unfavourable reply requires care in drafting. Mere expression of regret at being unable to furnish the necessary information is not recognised as a good policy. A better method is to state in simple but definite terms the writer's personal experience with the credit applicant. Hints for drafting rather unfavourable replies to status enquiries are given below…
1. Referring to the enquiry, tell how long you have been acquainted with the applicant
2. Mention the amount and period of credit granted.
3. On the basis of your experience in collecting the dues, state whether the customer is a
- Sure but slow payer
- Makes large purchases but is a troublesome payer
- Has a sound business but likes to delay payments; or
- Is very honest but not very capable.
4. Whenever necessary, mention the applicant's business failures, impoliteness, indifference to his creditors, weak financial position or his present creditworthiness.
5. Don't fail to mention the good qualities of the applicant, such as his strong business morality, his ability to face difficulties, etc.
6. Give your opinion about the extent of credit only if the applicant deserves it. 7. Mention that the advice is free from any responsibility and that it should be treated in confidence.
Example: Reply to above Letter (Unfavourable Reply)
The Antique Makers,
56, Mount Road,
Chennai - 000 000
Phone No: 022-72728286-67
Email: antiquehelpline@gmail.com
Website: www.antiquemakers.com
Date: 12th July 2023
To,
The Manager,
The Fine Crockery Mart,
Vani Nagar,
Bengaluru-000 000
Confidential
Sub: Reply to Status Enquiry Letter about Messers and Sons dates back to 10th July 2023
Dear Sir/Madam
Writing about the credit standing of the firm you mention in your letter of 10th July 2023, we must advise you to consider the application carefully. We have had our business relations with this firm for the last 3 years. However, our experience in the last three years is that the firm has been slow in making payments.
According to market reports, the above mentioned firms do not seem trustworthy to grant a Credit to the extent mentioned by you. Our firm has preferred to deal with them on a COD basis.
In the past 2 years this firm has been deferring payments for long periods. Overbuying appears to be a usual practice with this firm. As a result, we, like many other suppliers, are giving them either very short credit or supplying goods only on a cash basis. So, Here we suggest a line of caution.
We hope this information will be considered confidential and without any responsibility on our part.
Yours faithfully
M. Krishnamurthy
(The Manager of The Antique Makers)
Mixed Opinion
The Antique Makers,
56, Mount Road,
Chennai - 000 000
Phone No: 022-72728286-67
Email: antiquehelpline@gmail.com
Website: www.antiquemakers.com
Date: 12th July 2023
To,
The Manager,
The Fine Crockery Mart,
Vani Nagar,
Bengaluru-000 000
Confidential
Sub: Reply to Status Enquiry Letter about Messers and Sons dates back to 10th July 2023
Dear Sir,
We received your inquiry letter dated July 10th regarding Messers and Sons. We would like to express our gratitude for your interest in our customer.
We have been serving Messers and Sons as our customers for the past three years. Currently, we extend a credit limit of up to Rs. 50,000/- to them, and we have not explored higher limits thus far. It is worth noting that we have encountered no difficulties in collecting dues from them. Additionally, we are pleased to inform you that one of the partners who recently joined the partnership with them possesses a strong background in business administration. As a result, we anticipate significant growth and development for the firm in the near future.
However, we must emphasize that our experience with Messers and Sons is limited. Therefore, any decision you make regarding their creditworthiness is entirely at your discretion, and we cannot assume any responsibility in this regard.
Once again, we appreciate your inquiry and thank you for considering [Party's Name] as a potential business partner.
Yours sincerely,
(Manager)
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