Dun & Bradstreet - Your Business Credit

Dun & Bradstreet - Your Business Credit

On July 20, 1841, Lewis Tappan first established The Mercantile Agency in New York City. This organization's purpose was to create a network of correspondents to function as a consistent, objective, and reliable source of credit information.*

Information Collection

Dun & Bradstreet operates the largest business database in the world, with information on over a hundred million businesses worldwide. This includes thirty-eight million in the US. Dun & Bradstreet is far and away the number one provider of business information concerning marketing, credit and purchasing decision-making.

Currently, over a hundred and fifty thousand businesses of many sizes depend on D&B for the insight needed to build and maintain profitable business relationships.

The information found in the D&B database is compiled by gathering millions of bank and trade transactions, business owner info, public utilities, federal bankruptcy listings, and all the offices of the US Secretaries of State.

They also go over hundreds of magazine, newspaper, trade publication, and electronic news to gather data. In addition, they conduct millions of interviews, with managers and businesspeople.

They can attain up to as many as fifteen hundred data elements compiled on a particular company. Overall, over two hundred million financial transactions are added to D&B's database annually. They update the information on a continual basis; one and a half million times each business day, to be sure the information is the most current available.

Managing Business Credit

It's a good idea to manage your business' credit as this credit rating can either save or cost your business money.

Have you ever been denied a loan? Have you been required to pay a high insurance premium? Have you been required to pay cash on delivery to receive supplies?

If you're not exactly sure of what is in your credit profile, you can't really be sure if your company is being presented in a favorable way. A bad or absent credit profile can affect your bottom line directly. Having good credit is a lifeline to your business. This will let you find the funds to expand, make capital expenditures, create research and development, and hire staff.

Your future growth is dependent on this rating, along with access to the cash needed to survive. Maintaining a good business credit rating also let you keep cash on hand to cover your costs, and this kind of liquidity will allow you quick response to situations that are time sensitive - without the need to wait or pause operations.

Business credit has become the main method of setting the terms of business loans, lease payments, and insurance rates. Maintaining excellent credit can help your business earn lower rates and improve cash flow. Your credit record is the main method which companies will determine if they want to do business with your company or not - and, on what terms.

These companies will depend upon your creditworthiness in order to make important decisions. These decisions include whether or not to sell to your business, lend money, accept you as a partner, increase a line of credit, lease equipment, extend favorable rates of financing, and determine if you compare well against competitors in your field.

A number of business data points are included in business credit: date began, experience of executive leadership, annual sales figures, and the total number of employees. This info is listed with the credit profile, as well as ratings and scores which have been determined though the past behaviors of your business.

For example, past willingness to pay bills is factored into determining the likelihood that you will pay bills in the future. The overall credit worthiness of a business is determined by the four Cs of credit: character, capital, capacity and conditions.

Character includes the total number of years operating in business, workforce size, willingness to share information, judgments or law suits, coverage in the media, stock market valuations, and comments from relevant references.

Capital determines if a business has the resources necessary to repay creditors. Generally, this part of the credit report is most important in the review of an analyst. Top importance is attributed to items including net worth, working capital amounts, and cash flow.

Capacity refers to a company's ability to satisfy its accounts payable. This also covers the debt of the company and how it is structured, including unused credit and defaults.

Conditions are the outside factors which surround the company. These include industry growth, market changes, political or legal factors, and currency valuations.

Loan officers and credit managers answer these sorts of questions by reviewing information supplied by customers, banking information, trading information, and requests for credit check information.

The process is quite like that of gaining personal credit. If you've ever opened a banking account, financed an auto, or used a credit card, you have a personal credit file. This info intends to help you locate the funds to operate your household. Still, not all businesses have a credit profile; this is why some creditors check the personal credit of small business owners.

If you want to reduce your personal liability and operate a business, it is preferable to establish credit for your business and use this to run it. Using personal credit to obtain funds to operate your business could pose some problems.

The bottom line is that other businesses need to take note of your credit profile regardless of the size of your company. You too, need to understand your own business credit profile, to understand how credit worthy you appear there. All transactions affect your profile. On-time payments help keep the cost of borrowing low.

The information about new and old companies are equally available, obtained from numerous sources and added into your compiled profile. Make sure this information is true, accurate and updated. A strong credit score can help you maintain favorable rates, and affect your overall cash flow, the lifeblood of a business.

*The information provided in this article is strictly for informational purposes only. Please consult with your financial advisors regarding any aspects of your credit profile.

Nick Pegley is a marketing expert with All Covered: Technology Services Partner for Small Business, providing information technology consulting and IT services in 20 major U.S. metro areas. Outsource your procurement, installation and technical headaches..

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By Nick Pegley

Dunn & Bradstreet - Love Em' Or Hate Them, They're a Monopoly Here to Stay

If your business is not listed with a public exchange (NYSE, NASDAQ, ect.), then your business' financial condition is an utter mystery to your potential creditors. How are they supposed to know whether or not your company pays its bills on time? How will they know what kind of financial condition your business is in? Dunn & Bradstreet tries to illuminate this mystery, but the key word is "TRIES".

Article Body

Small Businesses dwell in a world of anonymity in that their financial statements are not public record via the Security and Exchange Commission. This obscurity can be overcome with the help of your Dunn & Bradstreet report, but beware, this report can be a blessing and a curse. Let's examine Dunn & Bradstreet's role in the credit decision process in the context of the general factors weighed by underwriters when considering a loan approval.

Lenders crave information when making credit decisions. They love it. It makes them feel more secure. Think about it...If somebody came up to you and asked you if they could borrow $50,000, what questions would you ask this person before agreeing to loan them the money?

• What are you going to use the money for?
• How long will it take you to pay me back?
• What is your current financial condition?
• Do you have a consistent history of paying your bills on time?

The answers to these questions help make up the risk profile of your business. The first 2 questions are pure common sense and don't need any elaboration. Let's concentrate on the last 2 questions.

What is Your Current Financial Condition?

If your company is traded on a public exchange, an underwriter could simply go to Edgar Online and look up the financial statements and disclosures that your company had made to the Security and Exchange Commission.

Your financial condition would be clear and an underwriter would most likely have all that information that they love and crave so much available to them with the click of a mouse. Of course, most small businesses do not report to the SEC. So what does any of this have to do with you?

If an underwriter cannot determine your present financial condition, then you have increased the uncertainty as to your ability to pay. Underwriters hate uncertainty with a zeal equal to or greater than their love of information. This uncertainty raises your risk profile thus raising their required return a.k.a. the interest rate that you will pay.

Let's say that you do not have financial statements available, and/or your financial condition is not what you would like it to be (ex: low profitability, little to no equity, high debt ratio, ect.). How do you overcome this challenge? Well, that leads us to our final question and to an explanation of Dunn & Bradstreet's role in the credit decision process.

Do You Have a Consistent History of Paying Your Bills on Time?

Since nobody has a crystal ball telling them with absolute certainty that you will make all future debt payments on time, the next best thing is to look at your past to see whether or not you have established a pattern of timely debt payments. If you can demonstrate this pattern, your loan will be far less risky in an underwriter's mind.

This is where your Dunn & Bradstreet report comes into play. Dunn & Bradstreet's compile payment history from your company's creditors much in the same way that credit bureaus (Experian, Equifax, and Transunion) compile information on individuals.

Dunn & Bradstreet also assigns your business a credit score in much the same way that the credit bureaus assign individuals a FICO score. This score will be weighed as a factor by underwriters as they assess your risk profile.

Whether you realize it or not, your creditors may be regularly reporting your payment history to Dunn & Bradstreet. These are typically suppliers who have granted you net 30+ terms. They track late payments as well as timely payments.

A favorable D&B report will certainly lower your risk profile and, at the same time, lower the interest rate that you will pay on future loans. A derogatory D&B report will have the opposite affect. This is why you should check your D&B report to make sure it is accurate.

You may be getting declined for loans based on erroneous information being provided to D&B without even knowing it. Since D&B is essentially a monopoly in the field of business credit reports, it is vital that your report reflects correct information.

Luckily, it is much easier to clear up errors with D&B than it is with the three major credit bureaus...so long as you have a good contact. As a small business lender, Dimension Funding has regular contact with D&B and has been able to get mistakes corrected within a few days of providing supporting documentation.

Whether you love them or hate them, Dunn & Bradstreet's monopoly on business credit reports has solidified as credit markets have tightened. Their reports have become more relevant to assessing risk since fewer small businesses show profitability or positive equity due to the recession.

Eric Johnson

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