Understand Your Business Credit Rating

Dun & Bradstreet, operators of the biggest database of business information in the world, collect data on over 100 million companies worldwide. At the moment, over 150 thousand businesses use Dun & Bradstreet for gathering information to develop profitable business relationships. These relationships include those between a business and their partners, suppliers, and customers.

The Dun & Bradstreet database is created by collecting millions of transactions from banks and trading companies: public utility bills, bankruptcy court info, the offices of the US Secretary of State, and those of individual business owners. In addition, D&B pores over magazine and newspaper articles in trade publications, as well as electronic media. Additionally, D&B interviews a large number of business people and managers. Through all of these sources, D&B can collect up to 1500 elements of data on one single business, adding 200 million transactions to the database each year. This info is updated a half million times per day, to be sure that the overall info is the most up to date info available.
A smart business knows that the ability to manage their business credit rating can save them money in the long term. If you don't know quite what you'd find in your business credit records, you don't know if your business is favorably represented there. A poor or missing profile can negatively affect the bottom line, and good access to credit is the lifeline of your business. This credit will help you find the resources for expansion, capital expenses, and development. Your ability to grow depends on this credit rating, as does your access to the cash flow needed for consistent survival. Liquidity with cash flow allows fast response to changing scenarios, eliminating the need to pause and wait for installments of cash.

Many business data points are shown in your business credit profile: executive leadership, business start date, annual sales, and number of employees on staff. By maintaining an excellent credit rating your business can take advantage of lower interest rates - and your credit record is the primary method which other businesses will gauge whether or not they want to partner with you, and on what terms. That's because these companies will depend up on your credit-worthiness when making the important decision to lend you money, expand your line of credit, lease equipment, or take you on as a business partner.

Overall credit-worthiness is determined by the four 'Cs' of business credit: capital, capacity, character and conditions.

Capital - does the business have the resources to pay its debts? This part of the report is generally the most important part to a review analyst, particularly the rating of net worth, working capital, and cash flow.

Capacity - does the business have the resources to satisfy accounts payable, including debt? This area includes debt structuring and defaults.

Character - how long has the company been in business? What's the workforce size? Is the company willing to share info? What's their legal judgments record?

Conditions - how do outside influences affect the company, including market change, industry expansion, legal regulations or currency prices?

The fact is, other businesses must take heed of your credit history and profile no matter what size it is. You, too, should understand your own business credit and those of the companies you do business with. All transactions affect company profiles. Making payments on time will help keep the costs of debt lower. When evaluating your own profile, be sure that the information there is true and accurate, as well as updated. A strong credit rating can help improve cash flow and interest rates, giving your business the advantage it deserves.