When Do You Need Credit Application Terms?

If your business provides credit to customers, you may wish to obtain a Credit Application Terms document.

This is a contract that sets out exactly what the roles and responsibilities of each party are, including expected timeframes and what happens if the customer fails to make repayments.

What Are Credit Application Terms?

Credit Applications Terms record the terms under which you’ll provide credit to customers of your business. 

For example, this could include a customer paying after the purchase, on a payment plan or otherwise.

The terms will record the details of your credit arrangement, including clauses setting out when payments fall due, interest payable on overdue amounts, and your rights if you need to take further action to seek payment for the goods. 

This is a legally binding contract between you and your customer. 

Why Do I Need Credit Application Terms?

If a customer does not pay you, or if disputes arise over the amount they owe, it’s a good idea to have Credit Application Terms to refer back to. 

If both parties have signed this agreement, it can help resolve disputes and misunderstandings relating to payment. 

Credit Application Terms will:

• Lay out the rules. Credit Application Terms will lay out the rules for how your customer must pay you back. This will include the payment schedule and interest rates, and when you are allowed to take action for non-payment. 

• Explain the consequences of defaulting. If the customer defaults on the credit repayment or refuses to pay, you will be able to rely on your Credit Application Terms to take actions against them to recover what they agreed to pay you. 

• Limit your liability. Having a contract in place with disclaimers and clauses that clearly outline you and your client’s responsibilities ensures that you are protected in the event of a dispute.

What is Included in Credit Application Terms?

Generally, Credit Application Terms address the following matters:

• Payment schedule

• Interest rate

• Consequences of default

• Rights on liquidation of the business

• Liability protection

Need Help?

Having an experienced lawyer draft your Credit Application Terms will ensure that you have a clear and strong document setting out your terms of credit with your customers, and outlining what will happen in the event of a dispute.

Feel free to get in touch with us to get things started on your Credit Application Terms! Our friendly team can be reached at 1800 730 617 or at team@sprintlaw.com.au.

Aidan Watt

Aidan is a lawyer at Sprintlaw, with experience working at both a market-leading corporate firm and a specialist intellectual property law firm.