What Is a Trade Reference?
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Trade references have the potential to help your business qualify for financing and establish good business credit scores. But if you don’t understand how the process works, you might miss out on the benefits that good trade references have to offer.
Below is everything you need to know about trade references. You’ll also find a behind-the-scenes look at how to get trade references as a new or existing business.
What Is a Trade Reference?
A trade reference is a type of report. The report details how your business has managed a credit obligation with a supplier or vendor.
A business credit bureau can use trade references to build or supplement a business credit file about your company.
When a credit bureau receives a new trade reference about your company, it may add an account (also called a tradeline, payment experience, or trade experience) to your business credit report.
New lenders or suppliers might also review a trade reference letter when you fill out a credit application. Looking over your past payment history on other accounts can help these businesses determine whether your company is a good credit risk.
Good trade references can be a valuable asset. They can help your company establish positive business credit. Trade credit references showing consistent, on-time payment history could make it easier to access affordable credit (like business loans and more) in the future.
Trade Reference Example
Below are some of the key details you might find on a trade reference report.
- Account Name
- Most Recent Reporting Date
- Credit Terms (i.e., net-30, net-60, net-90, etc.)
- Credit Limit
- Highest Amount of Credit Used (during last 12 months)
- Account Opening Date
- Total Amount Owed
- Past-Due Balance (if applicable)
- Day Beyond Terms (past and present)
- Date of Last Sale
- Payment Method (i.e., business credit card, ACH, cash, etc.)
If a trade reference appears on your business credit report, the details above could impact your business credit score.
With the Dun & Bradstreet PAYDEX Score, for example, late payment history could set you back. But if your firm has trade references with on-time or early payments, those should benefit you.
Getting a Trade Reference for Your Business
Before your business can get a trade reference, it needs to secure trade credit from a supplier or vendor. This process can be different for new versus existing companies. Below, you’ll find a few tips for each type of business.
Tips for New Businesses
One simple way to get excellent trade references as a new business is to open accounts with suppliers that offer payment terms (and then pay on time). Payment terms can also help with cash flow. They give you the ability to buy now and pay later for goods and services.
Net 30-terms, for example, describe a credit transaction that lets your business purchase goods or services now and pay for them up to 30 days after receiving an invoice. Net-60 terms require payment within 60 days after invoicing, and so on.
There is, however, a hurdle to overcome here. As a new business, it can be difficult to find vendors that are willing to extend trade credit to a company without a borrowing track record.
On a positive note, some vendors are willing to take a chance on working with newer companies. Below are lists of vendors you might want to consider if you’re trying to add a trade credit experience to your business credit report:
Your goal should be to open a trade credit account with a vendor that automatically sends trade references to the business credit bureaus. And, above all, make sure that your business always pays on time. Better yet, pay early and you might see an extra credit score boost.
Tips for Existing Businesses
For an existing business, it might be easier to get a trade reference. Your company might even have some trade credit experience on its business credit report without realizing it.
Start by checking your business credit reports to see if your company has any existing tradelines reporting to the business credit bureaus. You can visit the business credit bureaus directly to purchase copies of your credit reports:
If you find that your business doesn’t have established credit or if you want to add more trade credit to your report, consider opening vendor accounts like those listed above. You might also ask vendors you already have relationships with if they’re willing to extend credit.
Dun & Bradstreet will accept manual trade reference submissions through its CreditBuilder™ program. When you add eligible trade references to your credit profile, they might impact your PAYDEX Score and other Dun & Bradstreet ratings.
Do Good Trade References Help You Qualify for Financing?
Excellent trade references can build good business credit. Having positive business credit history can reduce your risk in the eyes of a lender. Anytime you apply for business financing, providing evidence that your company is a good credit risk can be helpful.
Certain lenders may also be willing to accept trade references outside of the information on your business credit report. If you can provide a reference letter from a supplier that confirms your business has a history of paying on time, it could look good on a credit application.
How to Send Trade Reference Requests to Business Partners
Adding positive payment history to your business credit report has the potential to improve your business credit score. So, if you have trade credit experience with a vendor that doesn’t report your credit history to Dun & Bradstreet, asking for a written trade reference might help.
Dun & Bradstreet accepts manual trade reference letters from vendors except those that:
- Don’t respond to D&B for verification.
- Voluntarily report to D&B on their own.
- Have an internal credit policy against D&B reporting.
- Are located outside the United States.
- Don’t have a D&B profile.
- Have legal ties to your company.
- Are prohibited by D&B for untrustworthy practices.
As long as a supplier or vendor doesn’t fall into any of the categories above, D&B should accept your manual trade reference submission. However, you will first need to sign up for a D&B CreditBuilder™ Plus account. This service starts at $149 per month.
Once you set up your CreditBuilder™ Plus account, you can submit up to 12 trade references to the business credit reporting agency per year. To start a request, visit the CreditBuilder™ dashboard.
Of course, before you submit a trade reference request, it’s important to have a conversation with your supplier or vendor. You want to make sure the business is on board with providing a good trade reference for your company before D&B gives them a call.
A new vendor might not feel comfortable giving you a credit reference yet. It can take time to build trust. But if you have a good customer relationship and a long history of on-time payments with a creditor, it may be more likely to agree to your request.
FAQs
What if You Don’t Have a Trade Reference?
As a small business owner, establishing good business credit should be a priority.
If your business doesn’t have any trade references, you should consider finding vendors or suppliers that are willing to extend you credit and provide trade references to the business credit bureaus based on your payment history.
But remember, trade references aren’t the only way to build good business credit. Opening financial tradelines, like a business credit card or business credit builder loan, could also help you with your credit-building goals.
How Do I Find a Trade Reference?
If your business doesn’t have any trade references yet, you might consider opening a net-30 account (or a few of them). Be sure to choose suppliers that report to the business credit bureaus. As a bonus, trade credit may also improve your cash flow.
Does your business already have good relationships with several vendors or suppliers? If so, you could ask those companies for favors. See if your vendors or suppliers are willing to provide trade references to D&B on your business’s behalf.
What Are Other Options to Improve Your Business Credit Scores?
Aside from getting excellent trade references, there are numerous other ways to build good business credit scores for your company. The key is to open accounts with lenders that report to one or more of the business credit reporting agencies. Then manage those accounts well.
Business credit cards, for example, can be an excellent way to establish business credit. However, be aware that you typically need good personal credit to qualify for these accounts.
You’ll probably need to sign a personal guarantee as well, accepting personal liability if your business defaults on its debt.
Looking for other options that might help you build or improve your business credit? A business credit builder loan might be another good fit.
You can open a Credit Strong Business Credit Builder account once your company is just three months old. There is no minimum credit score requirement.
With this account, you don’t receive the funds you borrow right away. Instead, a portion of the money you pay each month is locked in a business savings account. Once you pay the loan in full, you gain access to the funds. And you can close the account at any time for free.
The lender reports your monthly payments to several of the major business credit bureaus. As you pay on time, you have the potential to establish up to 120 months of positive payment history for your business.
Can I Get Trade References With Bad Personal Credit?
You may be able to find vendors and suppliers that do not check personal credit scores. If you can locate such companies, bad personal credit shouldn’t stand in the way of opening an account for your business.
Next, you’ll want to make sure the company will also report your company’s payment history to the business credit bureaus. Once you find a supplier that meets both of these requirements, you should be able to get business trade references with bad personal credit.
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