Customer due diligence for an MSME means a fixed set of checks before the first credit sale, a risk tier for each buyer, a credit limit tied to that tier, and triggers for review. Write it on one page and apply it to every buyer, including friends of friends. FundRaksha Trust can run the GST, court, credit and defaulter checks and keep receivables and credit limits in one place, free.
Onboarding: what to collect
- GSTIN and GST registration certificate
- PAN of the business (and of the proprietor or partners)
- Udyam registration number, if the buyer has one
- Registered address and delivery addresses
- Names and mobile numbers of the owner and the accounts contact
- A cancelled cheque or bank letter for the account that will pay you
- For companies: CIN, so you can read the MCA master data
Store this in a buyer master, not in a WhatsApp chat. It is also the information you will need for a legal notice if the buyer later defaults.
Risk tiers and limits
| Tier | Typical profile | Terms |
|---|---|---|
| A: low risk | Active GSTIN for several years, regular filing, no court cases or reported defaults, good owner score | Normal credit period and limit |
| B: watch | Some late filing, a small dispute, or a new business with a clean record | Lower limit, shorter period, part advance |
| C: high risk | Missing returns, cheque bounce cases, reported defaults, or no consent to checks | Advance or cash on delivery |
These map closely to the three outcomes in a Trust report: safe to give credit, give credit with care, and avoid credit. See credit limit for a new buyer.
Review triggers
Re-check a buyer when any of these happen, rather than on a fixed calendar:
- The buyer asks for a higher limit or a longer period.
- A payment is more than 15 days late, or a cheque bounces.
- The buyer changes its name, address or GSTIN.
- You hear from the market that the buyer is slow with others.
- A watchlist alert: Trust notifies you when a new defaulter report on a watched buyer is approved (99 RP per buyer per month).
A one-page policy you can adopt
- No credit sale without a verified GSTIN and a name match.
- Every new buyer gets an Advance GST report; orders above an amount the partners fix also get a GST + Financial report.
- The tier and limit are recorded in the buyer master and approved by a partner.
- Invoices state the due date and, for micro and small suppliers, the MSMED Act terms.
- A reminder goes out on the due date, a payment follow-up at 15 days, and a legal notice decision at 30 days.
- Defaulters are reported so other suppliers are warned.
Worked example: a Kanpur leather-goods unit adopts this policy and applies it to a long-standing Delhi wholesaler who wants his limit doubled to ₹8 lakh. The Trust report shows two recent cheque bounce complaints by other suppliers. The unit keeps the limit at ₹4 lakh and moves the wholesaler to 30 days.
Record keeping that pays off later
Keep each buyer's onboarding documents, Trust reports, purchase orders, delivery challans and reminders in one folder. If the buyer later defaults, a legal notice, an MSME Samadhaan claim or a cheque bounce complaint will need exactly these documents, and finding them months later is much harder than filing them on the day. Paid Trust reports never expire and can be reopened at no charge, so the report you ran at onboarding remains available as a record of what you knew when you gave credit.
Sources
Last reviewed: 2026-10-21. Information for Indian businesses; not legal advice.