The right to credit is not automatic and, when asked to trade with small companies or those without an established trading history, resulting in a low credit rating, obtaining additional security can be a way of trading while minimising the risks involved.
A simple directors’ guarantee or guarantee and indemnity can be added to the credit account application form for signing by the director. A further course of action would then be available against the guarantor or indemnifier should the business fail to comply with its contractual obligations. This can reap substantial rewards where the directors have assets that may be enforced against, even where the company does not.
Recently published cases: