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What is a Business Credit Report?

What is a Business Credit Report?

A business credit report is an indication of the company's financial capacity. This document is most essential when the owner considers taking a loan to expand the business. In this article, you can learn more about this report.
Gaynor Borade
A business credit report contains detailed information on the credit obligations, payment history, legal implications, and background overview of a business. It is generated by any of the six commercial credit bureaus: Cortera, Dun & Bradstreet, Experian Business, Equifax Small Business Financial Exchange (SBFE), PayNet, and National Association of Credit Management (NACM). The report is important from the point of view that it offers the entrepreneur and lenders, comprehensive financial information. It helps a lender decide if a particular company can remain buoyant in the wake of additional financial obligations. One glance at the statistics contained helps to identify whether or not the company is empowered with funds to pay additional obligations on time.

Sources of Information

The content of the business report comes from the financial information that is collected by representatives of the issuing bureau. This information is accessed directly from specially designed accounting software. The information on legal filings is collected from the offices of local and state courts. Background information on a particular company is accessed from a variety of firms, who hire professionals to source sensitive business data.

Objective

The main objective of this report is to provide accurate and critical business related information. The information is primarily assimilated to enable the entrepreneur, lenders, or any person financially associated with the company, to take informed decisions. In the volatile fiscal world and amidst intense competition, it is very important for an entrepreneur or lending institution to know whom to do business with and at what risk.

Information Accessible in a Business Credit Report
  • Financial information to identify business risk involved with extended credit levels.
  • Factors that determine credit risk, to assess the possibility of its increase.
  • Information on banking and collection history to identify erratic/profitable growth strategies.
  • Information on past liens and registrations to determine the possibility of a favorable decision.
  • UCC or Uniform Commercial Code rating, to assess the credit position in comparison with competitors.
  • Background information to determine the creditworthiness of a company.
Need for a Business Credit Report

This is the safest foundation for important financial decisions. The accurate and professionally compiled fiscal data, and subsequent analysis and rating, enables the entrepreneur, competitors, and lending institutions, to determine the amount of business that can be extended, the interest rates that can be applicable (in case of a loan), line of credit that can be extended, and the business' position in the market.

Importance of Monitoring a Credit Report

Just as defamation of character has an upsetting influence on your emotional and mental makeup, any error in the credit score results in a tarnished image in the business world. It is important not only to monitor the score of your own company, but also that of competitors and companies associated with the business in some way financially, like its suppliers.

Access to sensitive financial data makes a big difference to the calculation of the company's profit and loss and subsequently, success and failure. It is important to access the report and scan through the entries. If there is an error identified, the issuing bureau should be informed about the same, along with relevant documentation, for timely credit repair.

A credit score influences a number of delicate and highly sensitive decisions an entrepreneur may take in the lifetime of a business. The entries on the document have the potential of ruining a venture or attracting outside investment. The credit report should be filed and maintained for reference at any point in time. There are a number of online resources that claim to enable instant access to the score; however, it is recommended to access only government authorized bureaus.