Published By Credit Suite at August 25, 2016
Trade references are like financial references for your business. Most business credit applications ask for 3 trade references.
Dun & Bradstreet also lets you add trade references to your D&B report if you sign up for their “Credit Builder” program. This is unique to D&B and is a “value added” service for enhancing the usefulness and attractiveness of your business credit report to lenders.
Why are trade references important?
Trade references are important because they give banks a clearer picture of how you manage your business finances.
They are not typically listed on commercial credit reports (with the exception of companies who use D&B’s Credit Builder), and they are often from companies who do not usually report credit except in negative circumstances.
In other words, the companies (commonly suppliers or vendors) that you list as trade references usually won’t be reporting any payment experiences on your business credit report.
What this means is that trade references serve to give lenders a look at how your business performs OFF of the official credit record, so to speak.
They can be seen as an extension of your business credit. While not normally on a credit report, they are just as important as the information found on your business credit report.
Banks will check your trade references and get information on each reference such as the length of time the account has been open, how many times it’s been paid late, and what the credit limit is.
When filling out a loan application, it’s a good idea to use trade references from both outside and inside your industry.
Companies that “have to” be paid usually aren’t acceptable as trade references. For example if you fail to pay your rent or your electricity, there are immediate consequences.
For most companies, these core services are the highest priorities to be paid, and the least likely to reflect negative payment experiences.
More likely candidates are vendors and suppliers who your company pays on time, even though they could in theory be put off for some time without consequence.