Tough economic times mean wholesalers have to be careful who they sell to, Dione Kenyon, president of The Jewelers Board of Trade, told the Diamond Manufacturers and Importers Association at a recent meeting in New York.

“Don’t rely on just one piece of information to make your decision,” she said. “Credit ratings are important, but they can change quickly, and they don’t tell you everything you need to know. Everyone’s risk appetite is different.”

In evaluating a new company, she advised the following steps:

• Be sure to get a completed credit application. They are available at the JBT Web site (www.jewelersboard.com), she noted.

• Get at least five references and make sure you check them.

• Use JBT credit report data to verify credit application data. Things to look at include: business name, date of origin, legal structure, address, phone, the principals, and their histories.

• Review the data both individually and as a whole, and look for inconsistencies. Does the credit report information support the size and type of transaction you’re considering?

• Check if there has been a high amount of credit inquiries by others on this company in the past 90 days.

• Visit the company if you can or ask a salesman to. “You can learn a lot by seeing the operation,” Kenyon said.

• Give it all a “gut check.”

She listed the following red flags to be aware of before selling to a new customer:

• Credit reports with very little information, or notes like “all information declined” or “attempts to reach a principal were unsuccessful.” “Remember, JBT contacts every listed company to request updated data,” Kenyon said.

• Principals with no experience in the industry, or a new business. “We like a three-year track record at least,” she said.

• Principals who decline to report where they have been in the past.

• Companies that hit JBT’s “Weekly Frequent Inquiry Report” (in its weekly alert).

• Companies with claims placed in JBT Collections.

• A company name that’s very close to a renowned name (e.g., “Tiffeny’s”). Kenyon cited a recent example of a name that was “very similar” to an established company.

• Few credit references or experience.

• Prior bankruptcies.

• Losses or thefts.

• Secured debt, shown by UCC filings. Kenyon noted that secured debt is not necessarily bad, but it means other companies will come ahead of you if things go wrong.