Staying on top of your business credit profile

By Mike Fayle, North State Finance
16 October 2013

Did you know that your business — even the smallest company — may have a credit profile that can affect its success and may contain errors? If you’re not nurturing your credit profile, you could be losing opportunities for financing, new customers, and credit with suppliers.

It’s common practice for businesses to check customer credit reports, but how often do you review and update your company’s own credit profile?

Knowing your credit profile helps you understand how business customers, lenders and suppliers view your business. Any company wanting to do business with you is going to want to minimise their risk with a reassurance that your operation is financially sound.

That’s why, just as with your personal credit report, you need to be on top of what’s in your business credit profile. If your company is in good standing, is free of legal hassles, and has a good reputation, your credit profile has the power to work for you.

A good business credit score can lead to lower financing costs on loans and credit cards and enable your business to qualify for better credit terms from suppliers.

Conversely, negative information, even if it’s incorrect, can leave your business with higher interest rates and lower credit limits. Not to mention a possible loss of revenue should customers decide not to risk doing business with you.

Information in a business credit report from agencies such as Dunn and Bradstreet (D&B) and Veda is gathered from a variety of public and private sources and may include:

    • Business summary
    • Corporate relationships
    • Payment history
    • Public filings
    • Financial statements
    • Scores predicting likely business failure or late payments
    • Industry payment benchmarks, and
    • Credit limit recommendations.

Does your company have a credit profile?
To find out if your company has a credit file, contact Dunn and Bradstreet or Veda. If your company doesn’t have a credit file, the following 5 steps can help you get started:

1. Open a commercial bank account in your business name.

2. Transfer some business expenses into your business name and pay those from your commercial account. Obviously, you want a spotless record for on-time payment as this generates positive feedback on your business credit file.

3. Over time, transfer more business expenses into your business name and pay for them out of the commercial account. A good policy might be to transfer a few accounts each month. Just don’t get overextended and end up with black marks on accounts that bear your business name.

4. Your business credit profile will eventually include information from public and private records, such as how long you’ve been operating, contact details, parent-subsidiary relationships, affiliations and number of employees.

5. Update and monitor your credit file regularly. Some credit agencies have a do-it-yourself update system that you can use to keep a close eye on the information that shows up, add data and correct errors.

You may also want to contact Dunn & Bradstreet to request a DUNS number. This is a unique 9 digit number that’s widely recognised as a means of checking your business. Companies that want to work with you might ask you for your DUNS number. By obtaining a DUNS number, your business becomes part of the company’s searchable database that includes more than 140 million businesses worldwide.

When checking your credit profile for accuracy, check what isn’t included. Your company may have an impeccable payment history with a supplier or vendor that doesn’t show up in your credit history. You can contact the credit agencies and provide them with the details. You can also contact suppliers or vendors and ask them to report your credit. If you’re a good customer, they’ll likely be happy to help.

Improving your credit profile

Even inaccurate, negative information on your credit report can keep others from doing business with you. That’s why periodic monitoring of your credit file entries is vital. If you find inaccuracies, contact the credit agency and correct the information.

Just as with personal credit, the most important thing to get back on track is to pay bills on time. So beware of overextending your business commitments. Get, and keep, payments into the manageable category. Remember, paying creditors outside the normal credit terms can have a negative impact on your company’s credit profile.

If the problem is cash flow, get it under control by vetting credit customers more thoroughly. Use the same credit reporting agency that others use to check out your business when deciding whether or not to extend credit.

Copyright © 2013

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  1. […] Your business may have a credit profile that can affect your success when applying for finance. If you’re not nurturing your credit profile, you could be losing opportunities for not only finance, but also for attracting new customers and obtaining credit with suppliers. Find out how to stay on top of your business credit profile. […]

  2. […] Your business may have a credit profile that can affect your success when applying for finance. If you’re not nurturing your credit profile, you could be losing opportunities for not only finance, but also for attracting new customers and obtaining credit with suppliers. Find out how to stay on top of your business credit profile. […]

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