The importance of credit investigation showed by an investigation case

Written by an experienced investigator, this article describes one of those typical cases handled by him. It shows the effectiveness and importance of credit investigation for prevention beforehand. Business activities are becoming frequent with the development of market economy in recent years. Commercial trade and commercial investment are doubling even increasing by several ten times. It happen mistakes in business handling, and some illegal businessmen are taking every opportunity to gain profit. Frauds appear correspondingly. An effective commercial investigation will help reduce the mistake and fraud in business activities, for commercial frauds would be found out quickly. In June 2000, one company in Nanjing sent an official letter to Steele, saying that it invested RMB50 million in one building project development and then wanted to transfer it. To avoid misplays in the operation, it demanded Steele to conduct due diligence on two real estate developers (A and B) so as to make a good choice.

After deep and thorough investigation by our operators, the credit status of A and B were clear and a comprehensive report was provided. The investigation result showed Project Department A was only in charge of the development of building A and did not engage in other real estate development and management whereas Project Department A was an independent company. Its registered capital of RMB20 million came from the transformation of debt into shares. In addition, all of its capital had been invested in the construction project of building A and the building A had been held up because of lack of following-up fund. A couldn't get support from bank because it had no land tenure certificate as the land transfer rent was not paid. Until then, A owed more than RMB10 million to construction companies. Project Department A was unable to pay for the rent of its offices so there was no fixed office location at that time. Moreover, the investigator found another important clue that the boss of A got on well with one of the vice-presidents of our trustor. He attempted to speculate in building land to get profit illegally with the help of this vice-president.

Co-established by local labor administration, real estate administration and company employees, B was turned out to be a limited-liabilities company with registered capital of 5 million Yuan. Employees held as much as 80% of total stocks. Although small, B was running well. It paid total taxes in time and employees could get a dividend of 30% annually. It was preparing actively to take the project transferred by the Nanjing Company. The design plan had been already submitted to local design bureau for approval. Future partner had been found, too. B had no debt other than short-term bank loan and got a good credit reputation, for it paid back the bank loan in time.

According to the investigation result provided by Steele, the company in Nanjing made decision in a short time about the company to transfer and was satisfied with the transfer result.

The above-mentioned case showed that the leaders of Nanjing Company had a consciousness of prevention before action. Risks are everywhere in economic transactions. What we can do is to try our utmost to prevent the risks and reduce the risks to the minimum. It is better to prevent beforehand than to compensate afterward. The first step of prevention is to do credit investigation, which will decrease the blindness of investment and the risk of operation to avoid misplays in making decisions, further ensuring the invincible position in the more and more fierce marketing competition. Therefore, the credit investigation in business security investigation is described as "a conqueror of business fraud" in foreign countries.