Trade Reference Definition
Paying for the product or service is a critical part of establishing a good trade reference. The process of establishing trade references is similar to building personal credit. Adding payment history to your D&B report is the fastest and easiest way to build your business credit scores and ratings. These transactions provide background information from your creditors, vendors, and suppliers that wouldn’t otherwise be attributed to your file. It also adds validity, viability, and credibility to your business, sending a message to potential creditors that your company and its creditworthiness have already been proven.
You do not need to have excellent personal credit to start establishing trade credit. Some companies that extend trade credit will not check the business owner’s personal credit reports at all. Others might do a “soft check” to rule out low personal credit scores.
If the answer is yes, then I have prepared a few brief questions. Please send back in the enclosed envelope and we will type it up. We will send it back with another self-addressed, stamped envelope, so you can send us a signed copy. Of course we will enclose a copy for you to keep for your records. Primary and direct references, which include suppliers of items such as computer equipment and raw materials, will be the most valuable. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies.
Supplier credit teams request credit references such as bank and trade references from their new customers. D&B maintains public credit ratings available to potential lenders, suppliers and clients, so executive officers assemble their trade references carefully. Lenders typically require at least three trade references with no adverse payment records or public records, such as lawsuits, within the preceding 12 months. Primary references — suppliers upon which your business depends — carry more weight on credit applications than secondary references. Incomplete transactions, international corporations, banking and periodic exchanges such as utility, insurance and financial services do not typically constitute acceptable references. This is true of both companies looking to extend credit, and banks looking to make loans.
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. You may want to consider reporting your customer’s payment experience to commercial credit bureaus such as Dun & Bradstreet, Equifax or Experian, and/or to the Small Business Financial Exchange.
Creditors naturally place a higher value on customers with longstanding payment histories. So they often will save their best deals for credit applicants with the best trade references and credit profiles. These credit references for businesses are usually presented in conjunction with a formal credit report.
If you don’t have a payment history because you’re new, no one will extend you credit. But if no one will extend your credit, how do you create a payment history? Let’s look at the other side of trade references — the vendor or supplier who’s submitting payment experiences. There are seven data points that go along with each submission to D&B.
A good PAYDEX score can mean lower interest rates, lower premiums, and access to credit lines with suppliers and vendors. Your business is a reflection of you, and your business credit report reflects your financial responsibility. Your payment history is one of the key factor that shows just how strong your business is and how capable it is at functioning on its own merit.