Originally Posted by
MetalsCreditGuy
Thank you for the welcome and question t00nces2. I'm not actually involved in lending. I help scrap companies that extend trade credit to customers (shipping a load of scrap and giving net 30 day terms for payment for example) to know the credit risk of their customer before making the shipment. It's basically an unsecured loan to extend trade credit to a customer - if they file for bankruptcy before paying you for a shipment, you would be out the material shipped without payment.
As far as why the scrap industry - a lot of credit services try to be everything to everyone. Being in Michigan, we chose to specify our services in the scrap industry. There are large dollars/volumes of material shipped with sometimes limited margin (therefore each shipment is taking on quite a bit of risk) - i.e. if you don't get paid on even one shipment it can have a significant impact on business operations. Being industry specific helps us to stay more informed and really know the credit profiles of even smaller mom and pop shops.
My company can provide the information and analysis to help you know a customer is financially stable (setting a credit limit) and someone you would want to do business with. If you weren't looking to use a service there are also ways to check credit in house like doing your own due-diligence and sourcing bank/trade references, financials and other information to analyze. It's a very involved process and many of our clients compare us to an outsourced credit department. I'd be happy to share more about what is important to look for when extending credit or answer any further questions, just let me know. Thanks again for the message.
I can see how if you are a large scrap operation, perhaps shipping a million dollar load in a shipping container or something of that sort, this type of service could be useful. However, I have also heard of various online escrow services that can solve this type of issue for these types of transactions. However I dont see how extending credit to scrap specifically is different than extending credit for anything else.
For example, a shipment of crops, metal, computers, chemicals, etc, all have the same issues I would think. I guess maybe I would need some more info on who is extending credit to who, and why?
Like... If I am a seller, I send my materials. If I am a buyer, I get the materials, and then payout the agreed upon amount.... I am not sure where credit comes into play here.... I am not trying to rain on your parade, I just legitimately want to know and do not....
Unless you are talking about extending credit to buy, and then resell? But then that isnt any different that a business loan or using a personal loan, HELOC, credit card, or any other type of credit.... I am not sure if you are saying you extend credit to ensure a transaction (like a sort of escrow?) or if you just provide business lines-of-credit but ONLY to scrappers? Or something else?
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