Do the owners of the privately held companies you sell refuse to provide their financials? Here are ten tips on how to get what you need.

Obtaining financial statements from small, privately-owned companies has always been a challenge. Small business owners may feel that their business financials are more of a personal nature when compared to CEOs of larger companies who are more open about them. There is always a concern about confidentiality.

During this uncertainty, it is more important than ever for you to be able to evaluate the creditworthiness of new or existing customers, particularly smaller, more vulnerable companies. A financial statement can be one of the most revealing sources of information available. You can look at trends, project potential results, and benchmark against the results of similar companies in your accounts receivable portfolio.

Here are 10 tips that may help:

1. Set up a video call or if possible, an onsite visit. The owner may be more open to discuss their financial results face to face

2. Offer to just view the financials, rather than asking for copies (soft copies or otherwise)

3. Let the owner know a review of their most recent three years of financials is a routine and periodic requirement right at the start of the business relationship

4. Go directly to the owner or a decision-maker, not the company accountant or bookkeeper

5. Tell them you are completing a routine update of all your customer files if they are reluctant to share the financials

6. Offer to sign a confidentiality agreement (also called non-disclosure agreement or NDA) if they are concerned about sensitive information being made public

7. If they will not disclose the entire financial statement, ask if they would send at least one of the components, a balance sheet, income statement, or cash flow statement

8. Explain that in order to provide the credit they need it will be essential to review and discuss their financial information. It is in their best interest to provide what you are asking for.

9. Remind them that trade credit is a form of a loan, providing them the working capital needed to sustain their business especially if they tell you that they only provide their bank with financials, not their suppliers. Remind them that, unlike a bank, trade creditors are typically unsecured, making it even more important to understand a customer's financial situation.

10. Let them know that based on a positive trend now, or in the future, you may be open to extending a growing credit limit, enabling them to purchase more product they can sell at a profit.

The key is to first understand why the owner is reluctant to provide you with the financial information you are asking for. They may have valid concerns, or they just want to hide the facts from you. Address their concerns by offering alternative ways for you to get what is needed. Emphasize the advantages to their business that come from sharing their financials. If they are just hiding alarming results from you, their reluctance to provide financials could be a valuable warning sign.

Also see: Customer Visit Best Practices for a Credit Manager