What Is A Trade Reference On A Credit Application?
Additionally, you’ll keep building a solid business credit profile with D&B. Banks may not report negative payment histories to the national credit bureaus until borrowers are 30 or 60 days late. Some suppliers, especially smaller businesses, do not report client histories at all.
In addition, some of the companies you pay on terms will report payments to business credit reporting agencies. A trade reference is a source that provides past payment experiences between a business and a vendor. This report tends to include information about how long the account has been open, the account’s credit limit and the business’s payment history with the vendor. An exemplary trade reference, if accepted and verified by credit rating agencies, may positively influence your business credit score.
Ideally a supplier providing the trade reference would submit this information in a letter/memorandum on their company letter. Over time it has become common practice for Exporters to complete this form, thereby making it a regularly-used document in particular by Multi-Buyer policyholders. EXIM Bank and its Multi-Buyer policyholders use the Trade Reference Form approximately 6,500 times annually. Thus the Trade Reference Form is critical to EXIM Bank and in particular to over 2,300 Multi-Buyer policyholders during their foreign buyer credit review process. You do not need to have excellent personal credit to start establishing trade credit.
When it comes to obtaining small business funding, having good trade references can be really beneficial. You may be required to supply the names of your vendors or suppliers when filling out a credit application for business funding so that your payment history can be checked. Also, some companies you pay on terms will disclose your payments to business credit reporting agencies, which can help you build business credit when your payments are on time. A Trade Reference is a report detailing the payment history between a business customer and its supplier or vendor. Trade references may be supplied verbally, in the form of a trade reference letter, or by reporting payment history to commercial credit reporting agencies such as Dun & Bradstreet, Experian or Equifax.
Dun & Bradstreet’s score, for example, is heavily weighted toward trade credit experiences. If you’re a new client, it’s a great idea to build business relationships with your suppliers. The more a supplier or vendor knows you, the more likely they are to become a trade reference. They’ll be happy to give you a reference letter when another company asks for a trade reference request.