How Much Credit to Extend to a New Customer With No Credit History

In short: the hardest credit line to calibrate is the first one, granted to a customer with whom you have no payment history yet. Without that data, which is normally the most reliable, the decision rests on financial soundness, public signals and prudence, with an initial credit line deliberately more limited than what you would grant after a few orders paid on time.

Why the first credit line is a different decision from all the following ones

With an existing customer, the strongest data for deciding the credit line is their own payment behaviour towards you: if they have been paying on time for a while, it is the most direct signal possible. With a new customer, that data does not exist yet: the decision necessarily rests on external sources, with a greater margin of uncertainty that must be managed with a more cautious starting credit line, not with the same generosity you would use after a consolidated history.

What to look at in the absence of a payment history

• Financial soundness from the filed financial statements, where they exist: net equity, share capital, and the date of the financial statements (an old set of accounts still gives a basis, even if not very up to date).
• Estimated operating credit line from an external report: a reference point calculated on objective data, useful precisely when there is no direct history to rely on.
• Payment behaviour towards other suppliers: where available, it is the closest substitute for the direct history you do not yet have. A customer who pays other suppliers on time sends a different signal from one that already pays everyone late today.
• Beneficial owner: if the same person controls other companies, their history (including corporate events: closures, other past difficulties) adds context that the new customer's financial statements alone cannot give.
• Age of the company: a customer set up just a few months ago, without filed financial statements yet, calls for the same prudent approach explained for young suppliers: start with limited orders, not a full credit line on the first contract.

How to grow the credit line over time, instead of deciding it once

The cautious initial credit line is not a permanent sentence: after a few orders paid on time, the customer builds the history that was initially missing, and the credit line can grow accordingly, following an explicit and communicable rule ("after three punctual orders, the credit line rises to X"), not an arbitrary one.