This document discusses credit letters and status inquiries. It provides information on: 1. Status inquiries are letters sent to trade references and banks to inquire about a customer's financial standing and payment history before granting credit. 2. Replies to status inquiries should be marked confidential, provide factual information about the customer's relationship and payment record, and offer an opinion on granting credit. 3. Letters granting credit approve the terms, note regular payment policies, and express goodwill. Letters refusing credit politely explain the reasons for refusal but leave open the possibility of reconsidering in the future.

1. Gokhale Education Society’s
S.M.R.K. B.K. A.K Mahila Mahavidyalaya, Nasik-5.
CREDIT LETTERS: THEORY :2
Ms. Geetanjali Gitay
Assistant Professor
CC English (HL)
S.Y.B.Com. Sem III
Unit 3

2. CREDIT LETTERS
In the first part we discussed :
1. Need for Credit in Business
2. 4 C’s of Credit
3. Types of Debtors
4. Types of Credit Letters
5. Asking for Trade Reference and its examples.
In this part we will discuss :
1. Status Enquiries
2. Replies to Status Enquiries
3. A Favourable Reply to a Credit Enquiry
4. An Unfavourable Reply to a Credit Enquiry 2

3. STATUS ENQUIRY
 After receiving the trade references from the customer, enquiry
regarding a customer’s financial standing and paying habits done
to the trade references and to the bank. This enquiry is known as
a Status Enquiry.
 A positive reply to a Status Enquiry can grant the customer credit
whereas as a negative response may result in the refusal of credit
to a customer.
 The enquiry should be specific and clear.
 Questionnaires can be used if necessary.
 The information is given as favour so the request should be polite.
 Assure the reference that whatever information is provided
by him or her will be kept in strict confidence. These letters are
marked “ Confidential” and are addressed to an individual
official and not to a company or organisation in general. 3

4. STATUS ENQUIRY (CONTD)
A Status Enquiry will include :
1. Name and address of credit applicant stating their name has been
suggested as a reference, amount and period of credit requested.
2. Request for information on specific points e.g. amount and period of
credit allowed, details of delay in payment by the customer), and opinion
on advisability of the proposed transaction.
3. Offer to help in return in similar situations and promise to keep given
information confidential.
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5. EXAMPLE
5
Source : Business Communication, Rai Urmila & Rai S.M., Himalaya Publications, Mumbai
(Fourth Edition).

6. BANK REFERENCE
 Banks don’t provide information about customers to public. One
has to request one’s bank to take up enquiry with the prospective
customer’s bank.
 A letter to the bank should include :
1. Name, address and business of credit applicant, with amount and period of
credit requested for.
2. Name and address of applicant’s bank and Account Number
3. Request to bank to provide the information suggest whether to allow
or refuse credit.
4. Assurance that the information given will be treated as confidential.
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7. EXAMPLE
7
Source : Business Communication, Rai Urmila & Rai S.M., Himalaya Publications, Mumbai
(Fourth Edition).

8. REPLY TO STATUS ENQUIRY
 Replies to Status Enquiry must be marked “Confidential” and addressed by name to
the individual who has signed the enquiry letter.
 The information provided must be helpful to the enquirer as well as fair to the credit
applicant.
 The behaviour of the customer may not be same with all his creditors.
 The letter should inform about facts like the length of business relationship with with
the customer, the amount and period of credit granted, and the longest
extension of time the customer has taken to repay the credit.
 General market opinion can be given to balance the personal opinion.
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9. FAVOURABLE REPLY TO STATUS ENQUIRY
Source : Business Communication, Doctor Aspi & Doctor Rhoda, Sheth Publishers, Mumbai
(Fifth Edition).
Confidential
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10. MIXED REPLY TO STATUS ENQUIRY
Source : Business Communication, Rai Urmila & Rai S.M., Himalaya Publications, Mumbai
(Fourth Edition).
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11. GRANTING CREDIT TO THE CUSTOMER
 After doing the Status Enquiry, getting a favourable or unfavourable
reply, checking your own financial position and credit limit capacity,
you can decide whether to grant or refuse credit to a customer.
 Granting Credit
The letter of granting credit should include following points :
1. Statement that the credit is approved.
2. Information about regular terms.
3. Message of goodwill.
4. Terms of shipment of goods and payment of bills.
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12. LETTER OF GRANTING CREDIT
Source : Business Communication, Rai Urmila & Rai S.M., Himalaya Publications, Mumbai
(Fourth Edition).
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13. REFUSING CREDIT TO A CUSTOMER
 After doing the Status Enquiry if you decide to refuse the credit to the
customer, it should be done tactfully.
 It is better to give clear and specific reasons for not granting the credit.
 Conditions and circumstances don’t remain same, and the customer
may do business with you in future. Make every attempt to keep
the customer.
 An offer to reconsider the application at a later date may soften the tone
of the letter.
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14. REFUSING CREDIT TO A CUSTOMER (CONTD)
 The letter should include following points:
1. Statement that the enquiries related to credit are complete.
2. Explanation of what you consider to be the strengths and
weaknesses of customer’s position.
3. Statement of refusal, with apology.
4. Suggestions for improvement , showing advantages of present cash
buying.
5. Express confidence that the customer will understand the
situation and place orders on cash.
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15. LETTER OF REFUSING CREDIT
Source : Business Communication, Rai Urmila & Rai S.M., Himalaya Publications, Mumbai
(Fourth Edition).
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