How to Build Business Credit with Dun and Bradstreet?
Using business credit is one of the best ways for companies use to finance their expenses and growth. Business credit is not dissimilarly to an individuals credit score like FICO. It takes time, effort and a plan to do it right.
Obviously before lending a business any money, lenders need assurance that they will get paid back with interest. These lenders consume information provided by credit agencies as social proof that the company they are about to lend to is reputable and has historically paid back it’s obligations. The better a company does at building its business credit score with these agencies, the better rates they can expect for loans and other financing options from financial institutions. So putting effort into building your company’s credit score, can save you lots of money.
In addition, many contractors, vendors and potential partners will evaluate the business credit of a company before doing any work, pitching their services or even get into business with them. This credit score can give an indication of the type of company they are working with and if they do provide services on credit that the business will pay the account receivable punctually and as per the agreement.
The best place to start to improve your credit score is Dun & Bradstreet:
Who is Dun & Bradstreet?
For more than a century, Dun & Bradstreet have provided businesses with commercial data, analytics and impactful business intelligence. Businesses entrust Dun & Bradstreet with trade information, which is being used for building good business credit.
Dun & Bradstreet started as Mercantile Agency in New York City when it was established by Lewis Tappan in 1841. It was then reformed as R.G. Dun & Co, in 1859 when it was bought out by Robert Graham Dun. By 1931, the company acquired National Credit Office and by 1851, it had launched its own credit rating system. In 2001, it was officially renamed as Dun & Bradstreet and news was all over the corporate world thanks to the publication of The Wall Street Journal.
One of the innovative products by Dun & Bradstreet is the DUNS or the Data Universal Numbering System. Dun & Bradstreet uses DUNS to help its business clients in credit reporting. The DUNS categorizes businesses worldwide and makes it easier for them to make partners from the same industry.
Tips to Build Credit with Dun & Bradstreet
Here are some of the best ways to build your business credit with Dun & Bradstreet
1. Establish Your Business as a Separate Entity
The first step in building business credit is, of course, to establish an independent business entity. The business structure is also part of how lenders will evaluate businesses and will also affect the business’ credit ratings.
In most cases, the owners’ credit scores affect the company’s ratings, both in a negative and positive way. That is why it is best to separate the business from the owner’s credit scores.
You can establish your business as a Limited Liability Corporations (LLCs). Doing so will make your business as independent entities, and you can build your credit scores from scratch. If you are confident with your credit rating or behavior, then you can register your business as a Sole Proprietorship. Lenders and prospect partners will then treat your personal credit score as the same with your business credit.
2. Register for a Dun & Bradstreet D-U-N-S® Number
After successfully registering your Business as an Independent Entity, you need to have a DUNS number. A DUNS number is a unique identifier for your business, and the best thing about it is, it is free! Lenders and prospect partners can easily look up your business profile and even the business credit by using the DUNS number.
It is important to get a DUNS number before getting any loans or partnership contracts. DUNS number is widely used by businesses across industries worldwide because of its convenience and completeness.
Let your DUNS number do all the talking for you when you pitch to other companies or lenders.
3. Get an Employer Identification Number From the IRS
Paying taxes is part and parcel of running a business. In order to do that, you have to register an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Lenders and business partners will require you to present the EIN.
Applying for an EIN is free, you just have to follow the necessary processes set by the federal government. The paperwork may be troublesome for you but it will be worth it in the end.
4. Make On-time Payments
The best way to improve business credit score is to ensure that you complete payments punctually. Lenders and other potential partners favor those who can deliver on time.
So whenever you have loans approved already, make sure to stick to the payment schedule to avoid decreasing your rating.
Failure to make on-time payments will not only get you a bad rating, it can potentially cost you your business. Business relationships can get sour, and bad reports about your business will start to go around. Surely, you do not want that to happen, right?
5. Monitor Your Business Credit Scores and Ratings
You should be responsible for maintaining a good business credit score. Business credit is crucial for lenders and business partners, so improve it or at least maintain a high credit score.
Getting good business credit does not happen overnight so you have to be careful. Your business credit score can make or break your business because this is important information. Rival businesses aiming to take you down may use your credit score as leverage against you. A lender may deny your request to finance your expansion if you have a bad credit score.
6. Request your vendors submit your AR
Dun and Bradstreet creates a number of different scores for businesses in their database all founded on the information that they collect around the world. These scores and algorithms try to predict your payment behavior. The best predictor of future payment is past payment behavior.
So if you pay your vendors on time, it is important that those vendors report your payment to D&B. Each line of trade that they report helps your score and builds confidence to the algorithm that you are a good company to lend to.
Request that your vendors submit their account receivables (A/R) to Dun and Bradstreet so you can be rewarded for your payments habits. Be aware, this is a double edged sword. If you start paying your vendors late, then those late payment habits will also be recorded and this will penalize your corporate rating.
7. Maximize Dun & Bradstreet’s services
With Dun & Bradstreet, you can share your good credit information to establish a stronger brand presence.
Paired with DUNS number and Dun & Bradstreet’s network, your good credit information will be spotted by businesses worldwide.
You can also trade information with other businesses with the help of Dun & Bradstreet’s services. With Dun & Bradstreet, you can scout potential business partners, plan contingencies against rival businesses, or explore financial backers.
Building business credit takes dedication
Even with the help of Dun & Bradstreet’s DUNS number, it will still come down to your actions regarding your credit. As the famous adage goes “good things take time”, the same goes to your credit score. If you are not mindful of your credit score, then it can quickly go down.
Having a good business credit score can get you access to better financing options or make a successful pitch. Lastly, make sure to follow these tips so you can be successful like the other businesses who followed Dun & Bradstreet.