Caribbean Trade Reference Center
Essentially, trade credit allows you to make a purchase and pay for it later. Not only does that give you some leeway with your cash flow, but it also helps you build your credit. Trade references can help you jumpstart the process of building business credit while helping your startup improve cash flow. Good trade references can be the difference between a successful business and a failed one.
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.
The business customer could then use the reference on an application for a term loan, line of credit, or credit card. Some of the companies you pay on terms will report payments to business credit reporting agencies. On-time payments on these accounts can help you build business credit. Dun & Bradstreet’s score, for example, is heavily weighted toward trade credit experiences. Strong business credit is one of the factors— along with time in business, revenues and/or personal credit scores— that small business lenders may consider when evaluating applications from entrepreneurs seeking business loans for financing.
Watch our best webinar with its credible list of seven vendors to help you build a business credit even in a recession Even though our recession is over. In order to obtain a trade reference, you need to have had trade credit with a company you purchased goods or services from. This is a short term of credit that the vendor has extended to the buyer where the buyer is expected to make payment in full within 30 days of the invoice date. Generally, businesses may offer a range of payment terms, but this ultimately depends on the existing relationship between supplier and customer. For instance, a supplier may request for upfront payment or Net 10 days from brand new clients and/or companies whose time in business is less than 2 years. Conversely, longer terms, such as Net 120 or longer, are offered to established businesses with a good track record of timely payments.
But this work can certainly pay off in the form of lower loan interest rates, lower premiums, and better credit terms with vendors and suppliers. When a business pulls your D&B credit report, it can simply view your PAYDEX score for a quick evaluation of your creditworthiness. Remember, for a creditor to become a trade reference on your credit report, it must manually submit your payment history to the credit bureaus.
Businesses may be able to put off suppliers for a month or two, but missing an electric bill risks a cold, dark office. Trade references are an essential component for lenders and business-to-business suppliers who must decide whether to extend credit to the applicant. These references are typically in addition to a formal credit report by an established business credit-rating agency such as Dun & Bradstreet. Companies and banks that lend money and extend credit want to ensure that their customers can pay their debts in full and on time. Exemplary trade references are a prime asset that successful companies value as much as profits.