There are plenty of good reasons to run business credit checks. If you’re considering extending credit to a customer, you want to know whether they’re paying their bills on time. If that customer was facing bankruptcy or was way behind in paying other suppliers, it would certainly affect how you approach the process.
If you are counting on a new vendor to provide you with the inventory you need for your busy season, you’d want to know if they were defaulting on payments to their suppliers. Failing to see the warning signs could put your profitability at risk.
Business credit reports can get you this type of information and help limit your risks.
Now, if you are asking how I can run a credit check on a business, we have the answer, along with best practices to do so safely and reduce your liability.
What’s In a Business Credit Report?
Business credit reports provide information on a company’s financial health. Similar to how a personal credit report works, you get an overall business credit score. You also get a breakdown of the information that went into the score calculation. Depending on the type of business credit report you choose, you can see information such as:
- Payment history, including any past dues or defaults
- Trade line details
- Public records showing liens, judgments, or bankruptcies
- Risk of repayment and loss predictors
- Financial stability risk scores
- Corporate family trees
- Credit limit recommendations
There are three business credit reporting agencies: Equifax, Experian, and Dun & Bradstreet. Each is slightly different, so you will want to compare them to find the best fit for you.
How Can You Do a Credit Check on a Business
So, how can you run a credit check on a business? You can go to any of the credit reporting agencies, or you can pull reports quickly and easily with Command Credit. You can get business credit reports instantly, on-demand, without having to sign up for a subscription service. You can also choose reports from one of the credit reporting agencies or all of them in one location.
Command Credit also offers reports for international business. For startups, independent contractors, and businesses with limited credit history, you can also get personal credit reports with permission.
Best Practices for Safe Business Credit Checks
While business credit reports produced by the reporting agencies are safe, how you conduct them and what you do with the information is crucial to avoid liability.
Consistent Policies
You should have established policies for when you extend credit and under what terms to avoid any impression of favoritism or bias. This starts with developing standard procedures for conducting and reviewing credit checks.
Consent Where Needed
You don’t need consent to run a business credit report, although many organizations ask for consent as part of their credit application. You do need explicit consent if you want to run a personal credit report for a company’s owner.
While business credit data is considered public information, personal credit reports are protected under the Fair Credit Reporting Act (FCRA), which requires consent.
Documentation
You should document each credit check and your review process. This should include:
- Any credit applications you require
- Business credit reports you pull
- Decision-making process and outcomes
- Your decision
Such documentation can help if you are ever accused of bias or discrimination as long as you have followed all of your internal policies and applicable laws.
Ongoing Monitoring
Financial health can change quickly. Someone who has a high credit score and is a good risk can turn into a bad risk quickly. So, it’s important to monitor business credit reports regularly, especially for your high-value customers and suppliers.
For customers, you want an early warning if their financial health deteriorates so you can talk to them and avoid defaults. For suppliers, you need to make sure they can deliver the goods and services you need to run your business effectively. Proactive account monitoring can be a significant competitive advantage.
How Can I Run a Credit Check on a Business?
Whether you're evaluating potential customers or suppliers, monitoring your existing accounts, or checking your own business's credit health, Command Credit enables you to make smarter and better-informed decisions.
Get started today with Command Credit’s business credit reports.