As a business owner, you know how important it is to do your research before making any important decisions. With that in mind, you shouldn’t be surprised when another business owner purchases reports on your Dun & Bradstreet business credit file, because they are likely just doing their research.
Often, a business will purchase reports on another company’s business credit file before they decide to contract with them, or a bank may purchase a company’s business credit file before deciding to offer them a loan, or before determining the terms of the loan. Whether you know what’s in your business credit file or not, other businesses may be using the information to make critical decisions that could help or possibly hinder your business.
What D&B Customers See When They Purchase Reports on Your Business Credit File
Here’s a breakdown of the scores and ratings in your D&B business credit file, and what they mean.
D&B business credit reports include:
- D&B PAYDEX®The D&B PAYDEX score measures a business’ past payment performance. On a scale from 1 to 100, scores of 80 and above are considered “low risk,” and could potentially increase a business’ credibility to creditors.
- D&B® Delinquency Predictor ScoreThe D&B Delinquency Predictor Score offers insight into the likelihood of a business making a late payment, going bankrupt, or having future payment failures. On a scale of 1 to 5, a score of 1 on the D&B Delinquency Predictor suggests a low chance for delinquency, and a score of 5 suggests a high chance of delinquency.
- D&B® Financial Stress ScoreThis score also uses a 1 to 5 rating, similar to the D&B Delinquency Predictor Score, but pertains to the business’ likelihood of financial stress – like filing for bankruptcy – in a 12-month outlook.
- D&B® Supplier Evaluation Risk RatingThe D&B Supplier Evaluation Risk Rating is crucial for suppliers and businesses interested in joining supply chains. The SER rating helps predict the chance a supplier will become inactive or shut down in the next 12 months. Since an inactive supplier could seriously disrupt a company’s supply chain and overall business, the SER rating can be an important part of a business credit report for companies doing research. On a scale from 1 to 9, a score of 1 indicates “low risk,” and a score of 9 indicates “high risk.” This rating can be especially important for suppliers interested in working with larger corporations because certain big-box companies such as Wal-Mart often require a low score.
- D&B® Credit Limit RecommendationA D&B Credit Limit Recommendation is created by analyzing the size, industry, and payment history of a business. Banks and other creditors may use the credit limit recommendation to determine how much credit they will offer a business. A good recommendation could help a company get the loan it needs to run or grow its business.
- D&B® RatingThe D&B Rating combines a company’s size and its balance sheet information (the company’s assets, liabilities and the owners’ equity), and uses it to create an overall rating for the business’ creditworthiness. This score can help viewers make sense of all the information in business credit report by giving an overall indication of a company’s credibility.
Other key components of a D&B business credit report:
Finally, a D&B business credit report includes the company’s important events, which may include bankruptcies, lawsuits, liens, mergers and acquisitions, changes in ownership and other important happenings.
How Are Businesses Using the Information in Your Business Credit File?
Now that you know what scores and ratings are included in a D&B business credit file, it may benefit you to learn how other businesses are using that information. There are many different use cases for the information in your file, depending on what type of business you have. Here’s how companies may be using your business credit file if you’re a supplier, a manufacturer, or a construction business:
As mentioned above, the Supplier Evaluation Risk Rating can be especially important to suppliers. If you’re a supplier, or a business trying to break into a supply chain, other companies may be looking at this score specifically when they purchase your report. Since some large corporations require a low risk SER rating, this can be one of the main uses for your file. If you have a medium or high risk rating, you may find it more difficult to break into a supply chain or to work with certain large companies.
As a supplier, the information in your file could also be used to ascertain whether or not you make payments on time and forecast if you will continue to do so in the future. If you’re part of a supply chain, any late payments your business makes could affect the other companies in your chain, and those companies may be using your business credit file to anticipate any issues.
Manufacturers and suppliers are similar when it comes to the way businesses use the information in their business credit file. Just like with suppliers, businesses will want to know that the manufacturer they are researching will be able to deliver. Since manufacturers sell to other companies, and other companies may have to meet certain criteria (low SER ratings), manufacturers need to be able to show they can deliver to those companies per their contract, so that those companies can deliver to their customers. Since one business in the chain can affect all the others, its important that each company have strong scores and ratings.
There are several reasons a construction company may have other businesses purchase their D&B business credit file. A construction company not only has to pay its workers on time, it also has to work with credible vendors and meet hard deadlines. Businesses looking to hire a construction company may use the information in its business credit file to see if it pays its workers on time, if there is any financial stress within the company that may prevent it from meeting deadlines or even falling through on a contract. Having strong scores and ratings as a construction company could mean winning more bids and getting more business.
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