Commercial and Business Credit Reports are a valuable asset for many industries, including property management, automotive, franchising, legal, insurance and banking. But the value that credit reports offer businesses does not solely exist for these industries.
Thorough screening for any company, or individual, that you’re planning to work with can be critical to your success. By ensuring that you work with the best possible candidates, you can increase revenue, protect your brand image, minimize exposure to legal liability, and reduce the number of resources devoted to problem resolution.
Here are just 5 of the many ways that in-depth screening and credit reporting can help your business.
1. Approving Potential Customers
Before you extend credit to a new customer (be it an individual or a company), it’s imperative that you look at the prospective customer’s credit history.
A negative credit history is an indication that the person, or company seeking credit, may not be able to repay the debt in a timely fashion, or that they may default on the debt completely.
By ensuring you have all the background information, you can determine whether regular terms are or appropriate, or whether an alternative payment strategy to reduce the likelihood of broken contracts and defaults would be more suitable.
Comprehensive credit reporting helps you to measure the level of risk that granting credit creates for your business, allowing you to make the best decision possible when setting up terms.
2. Approving Potential Suppliers
It’s always worthwhile to ensure that your supplier has sufficient cash flow so that they will deliver what you want, when you need it. You depend on your vendors for products and services so that you can satisfy your customers and clients.
A credit report will assist you in determining whether your supplier’s credit indicates that they are in difficulty and could fail to supply or not meet obligations for products or services.
3. Human Resource Acquisitions
Hiring the right people is critical to any business. The people you hire need to fit with your team, represent your brand, and you need to trust that they will act in your company’s best interest.
Studies show that 10% of all candidates could have a criminal record, and up to 30% of all candidates exaggerate on their resume. A third of applicants that make exaggerated claims do so about their education, and 11% of applicants have a red flag about their previous employment. This makes it incredibly difficult to ensure that the employees you hire are exactly what they say they are, based on their resume alone.
It is no surprise that many companies are looking to enhance their pre-employment screening procedures and an in-depth credit report is an excellent way to do this.
4. Entering into Partnership / Joint Venture
Due diligence is a crucial step when deciding whether (or not) you should enter into a partnership or joint venture. You'll want to know:
Is the business financially stable?
- Do they have any negative credit or legal issues?
- Do they already have joint venture partnerships with other businesses?
- How are they performing in terms of production, marketing and personnel?
- What do their customers and suppliers say about their product, services, and trustworthiness?
Commercial credit reports will ensure that you have reliable and timely answers to these questions, and more.
5. Business Acquisitions
Acquiring another company can be an effective strategy to help your company expand, but choosing the right company to acquire can be a difficult decision. This decision can be made easier with effective due diligence reporting, providing complete and relevant information about the business you are purchasing, or the individuals you want to engage in business with.
Get Insight Before Making Decisions
It’s not unusual for a company to extend credit to business partners. A financial institution wouldn’t extend credit before they verify the prospective borrower's credit history and ability to repay. Your company should also limit risk by obtaining credit information and insight.
Businesses offer clients terms with payment dates after delivery, pay a manufacturer in advance to deliver finished goods, enter into a joint venture believing the other party will perform as promised, and hire employees or prospective franchisees with the hopes that they will positively represent their brand.
That’s why it is imperative that you screen your business partners before going into business with them, screen potential hires before employing them, and screen prospective fanchisees before selling to them.
Tags: Business Credit Reports
