Credit playbook

How to Set Up Customer Credit Terms

A credit account is you lending equipment and trusting the customer to pay later. Get it right and you win the loyal contractors who rent every season and never make you chase a dime. Get it wrong and you are financing someone else's payroll with your iron, watching invoices age while the machine sits on a job you cannot collect against. Most yards either extend credit too freely, because saying no feels like losing the deal, or clamp down so hard they push good contractors to a competitor. This guide walks through the credit application, setting limits that match real risk, writing terms that hold up, and knowing when to pull the plug before a slow payer becomes a write-off.

The credit application is your underwriting file

Before you let a machine leave the yard on terms, you are making a lending decision, and the application is the only file you have to make it on. Treat it that way. Collect the legal entity name, not just the name painted on the truck, plus the business address and how long they have been operating. Ask for trade references — other suppliers who already extend them credit — and actually call one. A contractor who pays the lumber yard on time will usually pay you. Get a bank reference and the names of the people who sign, because those names matter if you ever need a personal guarantee. For contractors, ask where the iron is going and who the general contractor is. That job is your backstop if the invoice goes unpaid.

Setting limits that match real risk

A credit limit is a ceiling on your total open balance with one customer, and it should reflect what they have proven, not the size of the deal you want to close today. A brand-new contractor with no trade references gets a limit that covers one modest rental. An account that has paid on time for a couple of seasons has earned a higher ceiling. The mistake yards make is setting the limit to fit the rental in front of them — a contractor walks in wanting a telehandler and a couple of attachments, and the limit gets stretched to make the deal work. Resist that. Raising a limit after someone proves themselves is a phone call. Recovering exposure after the iron is already out on a bad account is a lawsuit.

Deposits, guarantees, and terms that hold up

Credit limits, deposits, and personal guarantees are three separate tools, and confusing them costs you. The limit caps your total open balance. A deposit caps your loss on a specific machine — useful when a new account takes a high-value wheel loader to a remote site you cannot easily repossess from. A personal guarantee makes an owner responsible even if the business folds, which matters most for small contractors operating behind a limited liability shield. Write your terms plainly: when payment is due, what counts as late, and what a late balance does to their account. The point is that every slow-pay conversation becomes a conversation about the signed agreement, not about you changing the rules on someone mid-job.

Tracking exposure across active rentals

A credit limit only protects you if you can see the customer's real-time balance the moment a new rental is about to go out. The danger is a contractor with several machines on different jobs, each rental booked separately, no one adding up the total until it blows past the limit. Your accounts and sites setup should roll every active rental, every open invoice, and every unbilled day into one number per customer. When the dispatcher is about to send another telehandler out the gate, the system should flag that this account is already at its ceiling. Tie that visibility into billing so the open balance updates as invoices post and payments clear. Exposure you cannot see is exposure you cannot control.

Knowing when to pull credit

The hardest part of credit is not approving it — it is pulling it back from someone you like. Set the trigger before you need it. A customer who stretches past terms once, with a heads-up, is managing cash. A customer who goes quiet and lets two invoices age without a word is a different problem. When that happens, freeze new credit immediately. Do not let another machine leave the yard while the existing balance grows. Get on the phone, ask for partial payment on the oldest invoice, and put them on cash or deposit until they catch up. Most contractors respect a yard that holds the line, because the ones who pay you on time are subsidizing the ones who do not.

Key takeaways

A credit application is your underwriting file, not paperwork — collect trade references, bank info, signer names, and which job the iron is headed to before you approve a dime.
Set credit limits to match proven payment history, not the size of the deal in front of you; new accounts start small and earn their way up.
Keep deposits and credit limits separate — a deposit caps your loss on one machine, a limit caps your total open balance across every active rental.
Write your terms down and bill the same way every time, so a slow-pay conversation is about the agreement, not about you suddenly changing the rules.
Watch for the good customer who starts paying slow — it is the earliest warning you will get, and acting on it beats a write-off later.

These pages cover the EquipFlow modules, equipment types, and verticals that intersect with the topic above.

Related guides

Frequently asked questions

“What information should a credit application actually collect from a contractor?”

Pull the legal entity name, business address, years in operation, and trade references from other suppliers who extend them terms. Get a bank reference and the names of owners or signers who can be held personally responsible. For contractors, ask which jobs the iron is headed to and who the general contractor or property owner is. That tells you whether a lien on the project is a realistic backstop if the invoice goes unpaid.

“How do I set a credit limit for a brand-new contractor with no history?”

Start small and let them earn room. A first-time renter with no trade references should get a limit that covers a single modest rental, not an open account big enough to bury you. Watch how they pay the first few invoices. Contractors who pay on time and communicate before they are late are the ones who deserve a higher ceiling. Raising a limit is easy. Clawing back exposure after the iron is already out is not.

“Should I require a deposit even from an approved credit customer?”

It depends on the unit and the exposure. A well-established account renting a small attachment probably does not need a deposit on top of an approved limit. A new account taking a high-value telehandler or wheel loader to a remote site is a different risk. Deposits and credit limits are separate tools. Use a deposit to cap your loss on the specific machine, and use the limit to cap your total open balance across every active rental.

“What do I do when a good customer suddenly starts paying slow?”

Treat it as an early warning, not a billing annoyance. A contractor who has always paid on time and suddenly stretches past terms is usually telling you something about their own cash position. Call before the next rental goes out. Freeze new credit while you work down the existing balance, and ask for partial payment on the oldest invoices. Catching a slide early, while the relationship is still good, beats discovering it when they owe you for a full yard of iron.

“How should personal guarantees factor into credit terms?”

A personal guarantee makes an owner responsible for the debt even if the business folds. For small or new contractors operating as a limited liability entity, a guarantee is often the difference between extending terms and requiring cash up front. It does not change how you bill, but it changes your odds of collecting if a job goes bad. Make it part of the application for accounts above a threshold of risk, and be plain about why you ask for it.

See how EquipFlow handles this on a live yard.

Bring your fleet count and a rough sense of your current workflow. Twenty minutes covers the dispatch board live, MSA billing, and an honest answer on fit.

Book a demo

Stay in the loop

Yard ops notes, once a week.

Operator-written. Covers dispatch, billing, maintenance, and what we ship. No fluff.