A Business Credit Profile is a resume or picture of all the businesses information. The information provided in the businesses resume should always be kept current and accurate. It is important that the information contained within the business credit profile paints a complete and unbiased picture of the businesses ability to borrow and pay back according to agreement terms. The business credit profile is the primary source used by lenders or creditors in determining the businesses credit worthiness or the risk of lending to the business. Companies rely on your business credit profile to decide whether to:
- Sell products and materials to the business
- Lend money to the business
- Lease equipment to the business
- Increase the business credit lines
- Secure inventory
- Give the business favorable financing rates and terms
A Business credit profile includes a variety of data and information about your business such as: the date the business started; the skills and experience of the businesses founder and employees; the number of employees; the total annual sales. In additional the business credit profile provides scores and ratings that are derived from your businesses past lending, credit and payment behavior. All of the information contained within the business credit profile is used by potential lenders to predict the future behavior of your business. The lender wants to see that the businesses had the ability and has been willingly paying bills on time in order to factor the businesses ability and likelihood of paying bills on time in the future.
Why the business credit profile important to a business?
A good credit profile is the lifeline for receiving business credit. It will enable the business to obtain funding for: expansion, capital expenditures, research, development, and staffing. It is also the contributing factor to the businesses future growth and provides the cash necessary to survive. A good business credit profile also allows the business to keep cash flow moving through the business to keep the doors open and profitability. A business that has solid liquidity provides the business the ability to respond quickly to time-sensitive requirements, without halting or compromising the operations of the business.
Building a business credit profile is not just about the businesses ability to gain access to financing. A good business credit profile is the key to obtaining favorable terms, conditions, interest rates, insurance premiums and even lease payments.
Staying informed about the Businesses Credit Profile
The business should appoint someone to regularly monitor the businesses credit profile, to ensure that the information being reported is accurately portraying the business and that the businesses information is current and accurate. The profile should provide detailed answers to the following:
- Does the information give a positive profile of the business?
- Does the credit scores positively affecting the interest rates being assessed to existing loans?
- Is the business receiving the best terms and conditions by lenders and creditors?
- Have your scores improved enough to be able to refinance existing loans?
- Have changes to the businesses credit profile allowed for increases in existing credit lines?
- Does the business credit profile attract new suppliers who would extend you more favorable credit lines and terms, than existing suppliers?
- Would the businesses credit profile give you the ability to pay suppliers on Cash on Delivery (COD) terms?
- Are your competitors obtaining better terms with the same suppliers?
- Have you lost potential suppliers, lenders or creditors because your competitor had a better credit profile?
If the answer to any of the above questions is “I don’t know”, the businesses credit profile may not be working to its advantage – it may actually be costing the business money.
Other information contained in a businesses credit profile?
The business credit profile also contains the following information:
- Lawsuits
- Liens and judgments
- UCC Filings
- Business Registrations
- Incorporation Information
- Bankruptcy filings from state and county courthouses
- Corporate financial reports
- Contracts
- Grants
- Loans,
- Debarments from the federal government
- Web mining
- News and media
- Yellow Pages and other print directories
And, with Dunn & Bradstreet they will conduct investigations and interviews with company principals (i.e. self-reported data) and other companies that you work with to ensure the information contained in the businesses credit profile is accurate. They will red flag or black list any entity that has not provided accurate information or who has not self-reported changes of the businesses information.
Avoiding mistakes and omissions on the businesses credit profile?
Consumer credit reports are developed using information from a variety of sources, most of which are reported by third-parties. With a businesses credit profile, the information is both self-reported and third-party reported. It is more important for a business to proactively manage the information being self-reported, more so than with a personal consumer credit report.
The pace at which a businesses information changes is rapid, in the next 60 minutes:
183 business phone numbers will change; 43 business addresses will change; 7 businesses will file for bankruptcy
Publicly traded companies, under legal regulations, communicate changes within the business organization on a more efficiently, as they employ publicists whose sole responsibility is informing the public of the organizations changes. However, more than over 85% of all businesses are small business who are not registered as publicly traded companies; therefore, they do not have to comply with legal regulations. So it is the responsibility of the small business to self-report changes to the organization to Dun & Bradstreet, Experian business, Equifax business and any of the other business reporting bureaus in a timely manner. It’s essential that the businesses credit profile reflects the most current information as the businesses credibility is enhanced when the information is correct and up-to-date.
When the businesses credit profile provides little or no information it suggests to lenders or creditors that the business is a high risk borrower. Incomplete business credit profile information can be more harmful than poor credit activity. Ever potential lender or creditor will run their own risk analysis on a business prior to issuing a final lending decision; unknown or missing qualities of the business profile are flagged and considered risky factors. The low the flagged risk factors the higher the chances of being approved by the lender. For these reasons, it is essential that the business credit profile provide clear, current and accurate information about the business.
It is essential to keep the businesses credit profile current and up-to-date. Self-Report any changes in the businesses address, phone numbers, licensing, management, industry, etc. Managing the businesses credit profile will eliminate potential mistakes and omissions when a lender runs a risk analysis on the business providing a low risk borrower report to lenders and credits.
Being confident about the information contained within the businesses credit profile will be a signal to lenders and creditors that the business representative will actively challenge the process by which they will determine the businesses ability to borrow and any decision other than approval for funding.
