There appears to be a prevailing preference among wholesale supply houses to favor the generating of additional sales, yet unnecessarily sacrifice a conservative approach to credit and the education of the credit and sales staff.

An effort to implement conservative credit measures and educate the staff will be worthwhile in reducing uncollectible receivables.

Often, the sales rep will be at a construction site or busy branch counter, scribble out a partial completion of a credit application and personal guaranty and, whether signed or not, put it on a fast track for approval.

Diligence is necessary in the process of granting and extending credit and it begins with a serious process of education. This phase can best be accomplished with in-house seminars presented by an expert legal practitioner.

The topics are many, starting with full and accurate completion of a well-drafted credit application and personal guaranty form to more complicated requirements in order to be able to take advantage of materialmens lien laws.

The first line of preemptive defense for the wholesale supply house is a well-worded CAPG. A CAPG taken from a form book or drafted by one other than an attorney could leave the seller vulnerable. Each state’s laws may vary and inconsistent or unclear language could be construed against the drafter. It is imperative to choose questions that would be of importance in a collection or litigation situation and phrase them with consistency.

The supply house should be sure to get the Social Security numbers of the personal guarantors, sole proprietors, partnership partners, etc., whether as an inquiry on the CAPG itself or on a separate page. Many states now require an affidavit by the creditor or its attorney before awarding a default judgment in a lawsuit situation to support the fact the debtor or its principle was not absent due to military service. The Federal Department of Defense provides a record of this upon completing a request, which requires a debtor’s SSN. Of course, it must be remembered to redact the SSN from any document or form viewable by the public, including lawsuits at the courthouse.

Also, many banking institutions find it necessary to verify proper identity with a SSN in order to locate and freeze judgment debtor's accounts in post-judgment garnishment proceedings. Many title companies find it necessary to confirm judgment liens with the SSN of the judgment debtor. Wording also should be included wherein an applicant authorizes your use of the SSN.

The supply house should require a legible photocopy of the driver’s license so the principal or guarantor can be identified. Often times, with debtor avoidance or deception, a process server cannot serve the correct person because of inability to identify the proper individual.

If your account terms and conditions is a multi-paragraph or multi-page list, it must be clearly made a part of the CAPG process. It must be properly signed and dated. Done correctly, it will eliminate or reduce issues as to revocation of personal guarantees, return and/or restocking of materials or transfer of ownership of the accountholder’s business. Conversely, if done incorrectly or not at all, it will leave the supply house quite vulnerable to many defenses that will allow the debtor to walk away.

The preemptive measures are many and the tips and hints are many, but the two primary messages here are that many measures are worthwhile and an expert legal practitioner is necessary.

This article and the information contained herein is for informational purposes only and is not to be construed as rendering a legal opinion or advice. The facts of each situation as well as state laws are varying and different. Prior to any action being taken, consultation with an attorney is recommended. This article is not a substitute for consultation with an attorney prior to proceeding with any matter.


Author bio:

Arthur S. Vener, Esq., is a practicing attorney with expertise in creditor rights collection practice. He has represented wholesale supply houses for more than 30 years and works with clients throughout New York and Georgia. Contact him at 845/359-3560, 404/881-1800 or at


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