Before you start trading with a new company or partner, you’ll probably want to know whether you can trust that they’ll be able to keep up with payments. There may be very little to worry about if you receive the full payment first before dispatching a product, but if you’re looking to do ongoing business based on credit and repeat orders, you need to know your clients are creditworthy before making any agreements as to ensure the safety of your company.
This may be especially true if you work in the financial industry because you could stand to lose a lot of profit if a client is unable to return the money borrowed in full. You’ll need to do a full background check with every client you deal with, and you may think that will be a difficult task. However, credit reports build up trust before trading with another company, and they’re easy to access quickly so that you can get down to business as soon as possible.
Company credit reports give you an insight into how creditworthy a company is, much the same as credit ratings let financiers know whether or not they can trust individuals to make repayments. In fact, credit reports on companies also provide a rating between one and 100 to give you a quick overview of their creditworthiness, but they also offer a lot more valuable information to help you even further.
What You’ll Find in a Credit Report
Understandably, you’ll probably want to know what kind of information you’ll find in credit reports before you invest in a service that can provide you with them. All the data in the reports is gathered from third-party sources, and it includes information on:
- Balances outstanding – A credit report will tell you how many balances outstanding a company currently has, which you might use to determine how likely it will be able to pay you back on time.
- Payment habits – Payment habits will give you an insight into how trustworthy a company is with regards to making timely and full payments. You’ll also be able to see whether or not the company has been late or defaulted on payments in the past.
- Bankruptcy – Some businesses are able to find new success after filing for bankruptcy, and that will be reflected in their current credit rating. However, you might still be interested to know whether they’ve let any other businesses down in the past.
- Demographic information – As well as information related to credit history and current creditworthiness, a report will also tell you about the company’s size and number of years on file.
It’s vital that you check a company’s credit report before you agree to trade with them or offer them your services on credit. In a perfect world, you’d be able to depend on everybody you did business with to keep up with payments, but in reality, you need to make sure everybody you trade with is creditworthy in order to protect your profits.