Giving a new customer credit for the first time

The order is bigger than usual, the buyer seems reasonable, and they have asked for thirty days. Your competitor probably offers forty-five.

You are not deciding whether to trust them. You are deciding how much of your own money to lend a stranger, unsecured, at zero interest, because that is what trade credit is. Frame it that way and the next twenty minutes make obvious sense.

The register will not tell you whether they will pay. It will tell you how much weight this company can plausibly carry, and it is free until the last step.

First, get the entity right

Take the legal name from the purchase order or the contract, not from the email signature or the website. Then get the CIN.

Two failure modes here, and they are boring and expensive.

The group problem. A buyer with three companies orders on one letterhead, pays from another, and disputes from a third. You can only sue the entity you contracted with, so the entity on the PO is the entity you are extending credit to. Fix it now, when they are keen, not later when they are not.

The name-similarity problem. Near-identical company names across states are extremely common. Confirm by CIN, and put the CIN on your own paperwork.

Two free fields that size the credit line

Whether the entity is real and still on the register is the two-minute check on whether a company is real. Anything other than Active, and the conversation about payment terms is over.

The two-minute check does not tell you how much credit this company can carry. Two free fields on the same page do, and they are the ones a credit line should be tied to.

How old is it? A company two years old is not a bad customer. It is a customer with no track record, and the credit line should reflect that rather than the size of the order.

What is its paid-up capital? This is money shareholders actually put into the business. It is your crudest and most useful anchor. A first credit line that is large relative to paid-up capital is a decision to fund the customer, not to supply them. That may still be the right call. It should be a call you made deliberately.

What is already pledged? The index of charges, free, tells you which lenders hold registered claims over the company’s assets.

For a supplier this is not academic. Look specifically for charges over stock, inventory or book debts. A bank with a registered charge over the company’s receivables has a claim over the money your customer’s customers owe them, and that ranks ahead of your unpaid invoice. What a charge means covers how to read the index, including the trap that a repaid loan can sit there unreleased for years because nobody filed the form.

The check that costs ₹100, and when it is worth it

The free layer answers “is this real and roughly what size”. It does not answer “is this business getting stronger or weaker”, and for a credit decision that is the question.

Set a threshold in advance. Something like: if the exposure would hurt, buy the filings. Only you know where that line is, and having it written down stops you making the decision emotionally on the day.

What you are reading for, in order:

Has it filed at all? Two or more consecutive missing years is the loudest signal in the whole exercise, because late filing accrues ₹100 a day per form and nobody forgets for two years. How to read a filing gap sets out when a missing year is genuinely missing rather than simply not yet due.

Revenue, three years of it. One year is a number. Three are a direction.

Trade payables. If payables are climbing while revenue is flat, the company is already paying its existing suppliers later. You are about to join that queue at the back.

Borrowings, read against the charges. Debt rising while revenue falls is the shape you least want under a new credit line.

The auditor’s report. A going-concern remark is not boilerplate.

What the register cannot do for you

It cannot tell you their cash position. Nothing public can. A company with respectable filed accounts can be out of money this month.

It cannot tell you whether they pay other suppliers. A good payer and a bad one look identical from outside.

And it is out of date. Accounts filed in January 2026 describe the year that ended in March 2025. You are reading history and inferring a trend.

Which is why the register is one input to a credit decision and not the decision. Trade references, a first order paid in advance, and the customer’s own willingness to answer questions are worth as much.

Structuring the first line

The point of the checks is that they change the terms, not just the yes or no.

Start small and let it earn. A first order at a fraction of what they asked for, paid on time, is better evidence than any filing. Raise the limit after two or three clean cycles.

Take an advance on the first order. Standard, unremarkable, and it tells you something either way.

Tie the limit to something you can see. Paid-up capital, or filed revenue, or a fixed rupee cap. Anything but the size of the order in front of you.

Get the paperwork right while they are keen. The correct legal entity, the CIN, agreed payment terms in writing, interest on delay stated, and a clear description of what happens if payment is late. Nobody negotiates this cheerfully after the first default.

Know your own leverage before you need it. If you are a micro or small enterprise, sections 15 and 16 of the MSMED Act 2006 are worth knowing about, and if that registration is not in place yet, the timing of it decides whether any of this helps: how to check a client before you take the work covers registering before you invoice. Section 15 requires payment by the date agreed in writing and provides that “in no case the period agreed upon between the supplier and the buyer in writing shall exceed forty-five days from the day of acceptance”. So forty-five days is a ceiling on what you can be talked into agreeing, not a grace period the buyer is owed. With no written agreement, payment falls due on the “appointed day”, fifteen days after acceptance under section 2(b). A corporate customer also has to declare what it owes you twice a year, in the filing where your buyer says what it owes you.

Section 16 then charges compound interest with monthly rests at three times the RBI bank rate, “notwithstanding anything contained in any agreement”. It cannot be contracted out of. The protection runs to a “supplier”, which section 2(n) confines to micro and small enterprises, so check that you actually qualify. That is a real lever and most small suppliers never mention it.

Know the limit of the other lever too. The Insolvency and Bankruptcy Code has a floor: the Central Government fixed the minimum default at one crore rupees by notification S.O. 1205(E) dated 24 March 2020, under the proviso to section 4. That threshold governs the whole of Part II, which is where an operational creditor’s application sits, so below ₹1 crore the Code is not available to you whatever the merits. A lower ₹10 lakh threshold exists for the pre-packaged process open to MSME corporate debtors. Either way, this is precisely why the checks before the sale matter more than the remedies after it.

Then check again

The check you did in March describes the company as it was in March, using accounts from the year before that.

If a customer becomes a meaningful share of your receivables, re-run the free checks annually, and re-run them immediately if payments start slipping. A new charge appearing, a director resigning, or a year of filings going missing are all visible for nothing, and any of them is a reason to tighten terms before the problem is yours.

If it does slip, the checks change shape: what the filings tell you about whether a customer can pay picks up from there.

The twenty-minute version

1. Legal name and CIN from the purchase order. In writing.
2. Status and incorporation date. Free.
3. Paid-up capital, as your anchor for the limit. Free.
4. Index of charges, looking for stock and book debts. Free.
5. Filing history for the last two years. Free to see whether it exists.
6. The accounts, three years, if the exposure would hurt. This is where the ₹100 goes, and what a retrieval covers is the whole file rather than a summary of it.
7. Set the limit, write the terms, take an advance on the first order.
8. Diarise a re-check.

None of this makes a new customer safe. It makes the number you write on the credit line a number you can defend, to your finance team, to your bank, and to yourself in eight months.

Written by the Entiva team, who read Indian company filings for a living. Not legal or credit advice.