Working with outside vendors, borrowers and tenants can offer a number of great benefits to your business, including increased exposure, greater profit and operation expansion. But when involving third-parties, a certain amount of risk is also involved. So how can you reduce the risk to yourself and your company when working with vendors and borrowers? The guide below has some steps you can take.
Get to Know the Vendor
When looking for a vendor or borrower, sit down and interview them or participate in outside-work events with them if you have the chance. This should allow you to get to know the vendor or borrower and see what kind of person or organization they are. Ask for recommendations from people you already know and trust. Go to industry-specific gatherings or events to see who shows up and how they present themselves. Take some time to talk to the representatives there (or better yet, the owner) to see if they might be a good fit for you. You can also take to social media and pick up some clues there, especially if their personal profiles are public.
Keep Updated Proof of Insurance on File
When working with a vendor, always, always, always ensure they have proper insurance. Have a policy as to what amounts and types of coverage are required to do business with you. Generally, worker’s compensation and liability insurance are what you should be requiring, but you also might decide other, additional coverage would be prudent. Also check and verify any relevant certification or licensing the vendor should have. Vendors and borrowers can also lose or change their insurance coverage, so make sure to get yearly updates and keep them on file as proof. You wouldn’t want your business getting dragged into legal action because the vendor didn’t have proper insurance and you didn’t check.
Perform Background Checks
Whether dealing with a vendor or a tenant, doing background checks is nearly always helpful. These checks will help you determine if that vendor or tenant will be a good one or not down the road and reliably pay their bills. There are even quality tenant screening you can employ to run hassle-free background checks on both tenants and vendors to make sure they carry the proper amounts and types of insurance. If there has been prior legal action, bankruptcies or criminal convictions, for example, that’s all important information to know.
Try Before You Buy (Or Sign)
Seeing if a vendor will offer a free or paid sample is a great way to reduce risk, as you will then have tangible proof of what they can and will do for your business. You can also issue smaller loans to a borrower to gauge how they handle it before giving them loans of greater value. As for tenants, you can always start with a contract of lesser duration and prolong the lease if they prove to be a good tenant. You can also protect yourselves when dealing with contractors who work on an annual contract basis by seeing if you can work with them on a trial basis for a short amount of time to analyze their work. Also make sure there are escape clauses you can utilize to get out of any contract before the time is up if need be.
While working with vendors does open up additional risks for your business, there are also a number of ways to mitigate those risks. Hopefully these tips will help you, but always listen to advice given to you by lawyers or your own insurance company to further reduce risks for your business, contractors you work with, borrowers and your tenants.