A business regularly extends credit to customers for large purchases with a standard interest rate of 5 percent. There is also a $200 installment fee that is added to the total cost of the purchase. What should the business do before extending credit to a regular customer?
Before extending credit to a regular customer, the business should conduct a thorough credit check on the customer to assess their creditworthiness and ability to repay the loan. This can include reviewing the customer's credit history, income, and overall financial situation. Additionally, the business should clearly communicate the terms of the credit agreement, including the interest rate and installment fee, to the customer to ensure transparency and avoid any misunderstandings. It's also advisable for the business to have a formal credit approval process in place to ensure that only creditworthy customers are granted credit.
