How To Spot Good And Bad Trade References
Each business that is registered with D&B gets a DUNS Number, a unique identifying number for a business used only by D&B. In this article, you’ll learn all about trade references, including why they are beneficial to your business, how they impact credit limit decisions, and how to get and maintain trade references. Get your full business credit reports & scores, PLUS Nav reports your account payments to the business bureaus as a tradeline.
But you’ll have to pay for any product or services in full. Larger and more reputable businesses have established credit policies and may provide your business with some of the best credit terms available. Lenders and suppliers generally ask – either by phone or in writing – how long an account has been open, the credit or purchasing limit, and how many times the account has been paid late. Creditors value customers with longstanding payment histories, and they often reserve their best deals for those with exemplary trade references and credit profiles.
Trade references allow credit bureaus to evaluate your creditworthiness based on payment history. Once you have at least three trade references with D&B, your PAYDEX score can be calculated. A good PAYDEX score can mean lower interest rates, lower premiums, and access to credit lines with suppliers and vendors. If you want to take out a loan or even open a business credit card, having a solid business credit history can help. When you first open your business, this may not be top of mind, but there will likely come a day down the road when getting financing makes sense to grow your business.
To get trade references, new businesses may want to see out companies that offer vendor terms and are open to working with businesses that are less than two years old or don’t have an established business credit record. You may be asked to provide financial information about your company in the application process. Some vendors will cap how much trade credit you are extended, so be sure it makes sense for your needs. This will perhaps give you a more meaningful insight into the payment habit of the applicant. It is a normal practice to ask for three trade references on a Credit Application.
Here’s how to spot the difference between a good and bad trade reference. Also called the manner of payment, it’s a description of the payment method used by the customer. This might be a business credit card, check, ACH, wire, or even cash. Let’s look at the other side of trade references — the vendor or supplier who’s submitting payment experiences.