Status Enquiry, Collection Trade Letter

03/01/2021 1 By indiafreenotes

The letter that is written for obtaining information about a business enterprise is termed as business status inquiry letter. Generally, one business enterprise writes this letter to another business enterprise for collecting information about a prospective customer.

When a business firm wants to buy goods on credit, it gives one or more references to which the seller can ask for some information about the credit seekers. Usually, banks, trade associations or competing business firms are mentioned as references. The seller then writes the inquiry letter to the referees requesting them to provide some information about the customer.

The purpose of writing this letter is to obtain information related to:

  • Financial capability or creditworthiness
  • Goodwill
  • Nature of business dealings
  • Honesty
  • Relationship with business association, etc

In light of the above discussion, we can conclude that when a business enterprise writes an inquiry letter to another business enterprise, financial institution or trade association to obtain information about creditworthiness or financial capability of a customer who has applied for credit purchase, it is called business status inquiry letter. Basing on the information supplied by the referees, the seller decides whether to establish business transactions with the firm.

Objectives or importance of business status inquiry letter

Business status inquiry letter plays an important role in modern business. The following are the major objectives of writing this letter:

  • Obtaining information about the financial capability of prospective customers.
  • Determining the risk of credit sales.
  • Deciding whether to enter into credit transactions.
  • Getting information about honesty, goodwill and business morality of the probable buyer.
  • Knowing about the relationship of the prospective buyers with other business community and associations.
  • Enhancing sales with various parties by evaluating their financial and business viability.

Subject Matter in Status Inquiry Letter/Factors to be considered for status Inquiry Letter

Status inquiry letter seeks confidential information from a third party. Drafting of such a letter requires the consideration of the following factors:

  1. Applicant’s Name and Address: The person regarding whose information to be asked should be clearly mentioned with his name and address. As a result, there will be no confusion and this will clearly identify the right person.
  2. Causes of Inquiry: The reason behind the inquiry should also be mentioned in the letter so that information provider me, him, etc. i, e, the referee can reasonably answer the letter.
  3. Necessary information: The information, which is necessary, should be asked with a polite and definite appeal.
  4. Neutrality: The referee must remain neutral while providing confidential information regarding the applicant. Such a tone should be communicated through a status inquiry letter.
  5. Promise for information secrecy: They must be promised that whatever information would be provided by the referee will be kept secret by the sender (employer).
  6. Similar future assurance for help: If the referee needs any similar help in the future, he will be entertained and such assurance should be specified in the letter.
  7. Return Envelope with stamp: For the benefit of the referee, a return envelope with a stamp must be attached with such a letter. This will help the referee to bear no cost to assist the person who has asked for information.
  8. Signature and Designation: The person who is asking for information should sign the status inquiry letter with his respective designation at the end.

If the status inquiry letter is drafted considering the above factors, it will gain the desired result.


PQR Enterprise

(Wholesaler of Quality Steel)

20, Mumbai 850705 India

January 07, 2021



Mahan Boutiques and Fabrics,


Sub: Inquiring the financial status of John House, Washington, New York.

Dear Mr. XYZ,

Will you please respond to the following questions about John House, Washington, New York, which has listed your name as a credit reference on its letter for credit purchase?

  1. How long LMN has a credit account with your company?
  2. What is the credit limit you currently extend to them?
  3. What is the maximum amount of credit you have ever extended to them?
  4. Has it ever been delinquent in paying his dues?

I assure you that information provided by you will be treated confidentially. If you send answers to the above questions with December 25, 2019 will be highly appreciated. We will be highly glad to provide you any such help in future.


(Mr. LMN)

Manager, Credit Division

Collection Trade Letter

A collection letter (also known as dunning letter) is a notification sent in writing, informing a consumer of his past due payments. Debt collection letters’ function is to remind the debtor of his delinquent payment owed to a creditor. As sometimes delayed payments can derive from the reason that the same payments have been forgotten, a debt recovery letter is an appropriate method for early debt recovery, as it is cost effective and can produce positive results of default collection. Usually recovery letters are to be issued consecutively, consisting of 2-5 serial written reminders. The number of default collection letters depend on creditor’s or DCA’s (Debt Collection Agency’s) policy of recovery procedures. A collection letter is to be sent, when debtor’s invoice has become past-due. Financially, this means that the consumer has fallen behind with his regular payments and owes a certain amount to the lender.

Features of collection or dunning letter

Collection or dunning letters possess some distinct features that differentiate them from other business letters. Some of the features of the collection letter are as follows:

  • Parties involved: Buyer who buys on credit and seller is involved in a collection letter. Seller writes this letter to the buyer for payment of dues.
  • Series of letter: Collection letters are written in a series. The series includes a remainder letter, inquiry letter, appeal and urgency letter, and warning letter.
  • Objective: The prime objective of writing collection letter is to realize the dues from the customers.
  • Governing principle: The governing principle of the letter is to collect the dues by retaining the customers with the company.
  • Referring the previous letter: When dunning letters are written in a series, every subsequent letter mentions the reference of an immediate earlier letter.
  • Threat for legal action: The last letter of collection letter series warns the customer that the matter has been handed over to the lawyers for taking necessary legal action.
  • Sent through registered post: The seller sends collection letter especially, the last letter of the series though registered with acknowledgment to avoid unnecessary delay, or missing of the letter or denial from the part of the customer.
  • Language: The letter is written by using friendly, persuasive but straightforward language.

Types of collection letters

Debt collection letters are divided into general reminders, inquiry letters, and official collections letters. The official ones consist of demand letters (also known as appeal letters) and warning letters (before action). The standard reminders represent letters with friendly tone, notifying the consumer of his past-due payments. If the debtor settles these amounts on time, the collection process is ceased. If not, the recovery proceedings will continue, using letters of demand and letters before action. During the process of sending the written documents, the tone becomes stricter after each recovery letter.

Late payment demand letters consist of a specific date, marked as a deadline for settling the debt monetary amount. Demand letters represent a formal notice to the person in debt (consumer) and indicates debtor’s legal obligation to clear the debt amount in full. Last collection letters before action (LBA) represent another variety of debt collection documents & letters. They can apply for both commercial and consumer debts and can be addressed to both individuals and business debtors. Such letters are the last resort before proceeding to court actions. They are also known as legal threat collections letters, which warn the indebted subject about future court actions. If the debt is not settled until the date specified in the letter, another letter will follow, informing the debtor that the debt matter issue has been handed over to legal representatives and court proceedings have begun.

If requested by the subject of debt, the debt recovery agency is obliged to send the debtor a debt validation collection letter. Debt validation is a written and official verification, which confirms the size and type of debt, also proving information that such debt exists and has to be paid to a certain first-party (creditor) marked in the default collection document.

A collections letter of settlement is another kind of debt recovery letters graph. Such letters comprise all types of written negotiation sent to the debtor. Debt settlement documents offer the subject of debt more convenient payment plans. The debt can either be paid at once, using one single but smaller payment that the original debt amount; or the subject of debt can chose the option of monthly transactions to the creditor/DCA equal to the full monetary debt sum.