As a trade reference data point, other creditors are able to determine how much issued credit a customer is utilizing. Customers who utilize close to 100% of their credit may be a higher risk customer than those who utilize less than 50% of available credit. Also called the manner of payment, it’s a description of the payment method used by the customer. This might be a business credit card, check, ACH, wire, or even cash.
What’s considered a trade reference is completely up to the business approving your application. In some cases, utilities aren’t considered trade references. A small business or startup are not always the best references either.
Let your customers know you report to business credit; that’s an incentive for them to pay on time. Reporting will help your customers build business credit. You get trade references by doing business with companies that allow you to buy goods or services and pay them later. This arrangement comes in “net terms” such as net 30 terms where payment is due in thirty days after the due date. Longer terms are available with those businesses that are established and considered good customers. One good indicator of the difference between a good and bad trade reference is where it is coming from.
It is mandatory to procure user consent prior to running these cookies on your website. Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. The aggregate of balances that are past due — the vendor’s credit terms define past due. Any balance that remains outstanding past its due date will be considered past due and reported. This is simply the date that the payment experience is submitted to D&B.
As a supplier, managing the credit checking process costs your AR team a lot of time. They have to get the customer to fill in the credit application, call the trade references, decide on a credit limit. Floating net terms credit ties up cash flow and there’s still a risk of non-payment.
Credit Reference Types A credit reference can be anyone who has given you credit or otherwise had a financial relationship with you. Examples might include your credit card company, local bank, investment firm, previous landlord or a local business that gave you a payment plan. Trade references can be used in a wide range of business situations but they are mostly seen as requirements asked by credit suppliers.
Assuming you have good credit, lenders can better verify that you are a low default risk through your business credit profile. Of course, other factors, such as your business’s performance, also determine your access to credit. Month-to-month payment histories represent an accurate picture of a business’s true financial viability. Even companies with good cash flow may be risk takers at the expense of suppliers.