Good credit in a bad economy can be the difference between thriving and not surviving. Good business credit provides cash for expansion, capital expenditures, and staffing when your creditors shrink due to lack of funds.
Cash flow and liquidity can be improved through trade credit. A cash-rich business can take advantage of time-sensitive opportunities without jeopardizing daily operations.
Dun and Bradstreet owns the commercial credit evaluation market in the United States. If you want to play the business credit game, you have to master its court. Putting yourself in a position to take advantage of a good credit rating is smart business. Trying to recover from a bad grade is next to impossible.
D&B is a private, for-profit company. You must deal with them carefully to reap the rewards so that your own information is not used against you.
D&B Rating measures a company’s business credit rating against other companies in the same field. Data on net worth, equity, number of employees, and financial stability and risk are provided. Other factors include the age of the business, business payments, payment history, and public filings.
Dun and Bradstreet makes money by selling this information to banks, insurance companies, vendors, and government agencies.
More and more companies examine a supplier’s D&B qualification before entering into contracts. Upfront cost savings from a risky vendor can jeopardize large corporations and projects if that vendor goes bankrupt before completion. Dun and Bradstreet help assess those risks.
Even if you don’t need credit yet to expand your business, you’ll want to sign up with Dun and Bradstreet. Even with federal, state, and local contracts, a DUNS number is a basic bidding requirement for most projects.
A DUNS number is required to register with the Central Contractor Registration System (CCR) for federal government contracts. CCR is the primary database for the Departments of Defense, Transportation, and Treasury, as well as NASA and others. As of October 1, 2003, a vendor must be registered with the CCR in order to receive contracts and purchase orders from most federal agencies.
To establish or improve your profile with Dun and Bradstreet, the following strategies should help:
1. Update your information at least once or twice a year, or as changes occur within your company.
2. Pay your bills on time. Make it the religion of your company. Nothing will help your D&B rating more than other companies knowing you pay on time.
3. For a new business, consider paying before you even get the bill. Organize. Please pay when you receive the goods. Your Paydex score is based on how quickly you pay, not just the due date.
4. Make sure your business has a business listing in your local yellow pages or support directory. A business landline shows that you are here to stay, even for a home-based business.
5. Establish Equal Lines of Credit (ELOC) before you need them. As Harvey Mackay once titled his book, “Dig Your Well Before You’re Thirsty.”
6. If you are paying your creditors and vendors on time, make sure those payments are recorded in your profile.
7. Although your personal and business credit files are separate, keep your personal credit up to date. You don’t know when a potential bank or creditor will want to reach your maximum level of personal creditworthiness.
Business credit has become a primary method of determining business loan terms, lease payments, and insurance premiums. Using your D&B report, companies will determine whether or not to sell your company, lease equipment, offer a line of credit, or even do business with you instead of your competitors.
Improving your business’s credit profile will help your business obtain lower interest rate loans, lower your cash outflow, lower your insurance premiums, and acquire new customers. You can improve your D&B rating by monitoring and updating your file online, or hiring professionals to help you.