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The most sensible way to approach writing a reference is to stick with the facts, avoiding unnecessary praise, criticisms or options of any kind. Let the facts you write speak for themselves and let the reader draw their own conclusions.

In this case you feel you cannot provide a positive reference about the customer in question. So keep the letter short and brief without adding any unnecessary criticism of the customer.

Stage one:

Open the letter by stating quite clearly that you do not feel able to comment positively upon this company's creditworthiness or reliability.

Stage two:

End by advising your reader to make further investigations.

[Date]

[Name]

[Address]

Dear [Name]:

In response to your query concerning [business] of [location] I am afraid we do not feel able to comment positively upon their creditworthiness or reliability.

We would advise you to make further inquiries into the matter.

Yours Sincerely

[Your Name]

[Your Title]