Lenders and suppliers generally ask – either by phone or in writing – how long an account has been open, the credit or purchasing limit, and how many times the account has been paid late. Creditors value customers with longstanding payment histories, and they often reserve their best deals for those with exemplary trade references and credit profiles. Unlike consumer credit, corporate credit bureaus give you the option of adding payment history to your file using one of their paid services. While onboarding a new customer, credit references act as recommendations to justify whether the customer should be granted credit or not.
Businesses must be able to determine the risks they’re taking when extending credit or net terms payment options to a customer. Floating net terms (i.e. waiting 30 days to get paid) impacts their cash flow. There are different ways to determine if a customer is creditworthy and if you should offer them trade credit. One method is to pay for a business credit scores report and another is to check the trade references. The trade references are typically collected in a credit application form.
That’s just another way of saying that building trade references takes time. If someone is going to allow you to list them as a trade reference, they want to know you’re credible and that your business is reliable. Gatting 30 day or 60 day net terms from a supplier is much easier than using a business loan to help your cash flow. Some vendors are willing to accept trade reference letters or will do a verbal verification with your existing suppliers if your business credit scores aren’t strong. Again, this is why they may ask for the names of trade credit references on a credit application.
Don’t fall into the trap of buying vendors, faking payment history, or cross-contaminating your company’s credit with false or fraudulent data. If they charged your business credit card, they probably have your company listed in their system. This includes major corporate suppliers, a single-owner shop, or a contractor you’ve hired. Initiate the bank reference verification process with the help of Confirmation.com. Confirmation.com partnered with HighRadius automates bank reference verification to ensure faster credit reference checks.
Establishing trade references can be crucial to the success of your business if credit is important to you. A history of solid payments shows that you are a low credit risk. Companies will be more willing to extend credit to you for this reason. Lack of trade references can mean poorer credit terms and higher interest rates on loans. A typical business credit application will ask for three trade references, according to the Credit Guru website. These are generally creditors and suppliers within the industry, as opposed to utilities such as phone and electric service.
Digital net terms solutions like Resolve manage the entire net terms process for you. Everything from credit checking, net terms financing, to payment processing and reminders. Resolve specializes in helping manufacturers and wholesalers. Good trade references can absolutely be helpful when it comes to qualifying for small business financing. When filling out a credit application for business financing, you may be asked to provide the names of your vendors or suppliers so your payment history can be verified.
As a buyer, it’s important to know that trade references may be used in different ways. These can cost between $50 – $150 USD, so you can see why it’s easier to check trade references. Companies and banks which loan money and extend credit want to be sure that their customers can pay their debts on time and in full. Excellent trade references are an important asset which successful companies should place a high value on. They can play an extremely important role in protecting your business from unnecessary risk while allowing you to reap the benefits of selling to the right customers on credit.