Every business wants to have good credit and those businesses extending the credit need to make sure those borrowing off of them will pay back their debts. That is why there are new tools that are being launched that give a better picture of what a company's financial health looks like.
Most Canadians know that their consumer credit reports are major determining factors in how much money they can borrow. The business person is someone who needs to be even more familiar with their credit report; their commercial credit report. This is because the commercial credit report is the financial tool that is used by lenders to evaluate the eligibility of the company when the company seeks business credit.
In recent days, Equifax Canada launched a credit report that has been redesigned, which enables executives to decide in just a matter of seconds whether or not to extend credit to other commercial entities. There are both French and English versions of these reports available.
Experts will tell you that any time you are granting credit to a small, medium, or large business, it is important to know everything about that business so that you know exactly how much risk you are taking on. This will also let you know how fast you are going to get paid back.
The New Report
The new report makes reading the report much easier. On page one of the report, Equifax points out specific financial signals. This gives at-a-glance information regarding bank investigation reports, bankruptcy alerts, delinquent accounts, and credit inquiries. Instead of having to go through every page of the report, you can see exactly why a credit request should be approved or denied.
There are also two important warning signals included. There is the Commercial Delinquency Score (CDC), which represents the probability that a business will not pay their credit payment within 90 days. There is also the Business Failure Risk Score (BFRS) that shows how likely it is the business would go out of business within the next year.
Both of those warning metrics can be customized to better predict the chances that a company will not pay its bills or close its doors. Now, the chance a business will go 90 days delinquent is classified on a scale of 1 to 10 rather than a 1 to 5 risk-level classification. If a business has only a 1 in 10 chance of being 90 days delinquent, it is easy to decide whether or not to extend them credit.
If more research needs to be done, the alerts link to the more detailed information in the report. It is here that you can get the information that you need.
More In-Depth Information
The new business credit report also includes "trade styles", which lists the different company names the business operates with. No matter which of these names you search in the database, the same report is retrieved under the query. Lenders can see whether any of the trade names that are in the Equifax report were mentioned on the application of credit. If not, then the lender has the right to investigate why that information was not included.
Also included are the Standard Industrial Classification (SIC) and the North American Industry Classification System (NAICS) codes, which helps to identifies the company’s industry. For example, 5812 is Retail-Eating Places. In other words, 5812 is the code for restaurants. Furthermore, the report design allows reviewed to get down to small details, such as any returned cheques, lawsuits, collections, and any other activity that could be considered negative.
Basically, the new business credit report gives a lot of information on a firm. It can tell all about its past history by allowing reviewers to scan the section summaries and use the user-friendly navigation tools. The charts focus on trouble spots that are specific to the company and this allows the reviewers to see what the short- and long-term risks are. The tables within the report show even more details about the financial obligations and payment habits of the business.
Ordering The Report
For you to be able to order the business credit report, you must have an account with Equifax and submit payment to them with your credit card. When you need to pull a credit report, the cost to do so is under $100 and you can receive a discount if you need to pull a large volume of reports.
Unlike the many other monitoring tools that Equifax provides, the biggest issue with the business credit report is that it gives a snapshot of a business at a specific point in time. This means that a current version of the report will have to be ordered every time one is needed. This is especially true when additional credit is requested.
It is also important to note that personal credit is not as volatile as business credit. This is because granting commercial credit is driven by the always changing market conditions. This is one reason why the decision makers in Canada need tools like the Equifax business credit report to evaluate a business before they extend credit to others. Most importantly, they can do so quickly so that they can continue moving forward.
As for the usability and the readability of the report, it receives a grade of "A." It is expected that this new report will catch on because there are businesses throughout Canada in different industries that will be able to benefit from the report. They can quickly assess the financial credibility of customers, businesses they may extend credit to, and potential partnerships.
Overall, the new business credit report is a way that businesses can become stronger. Those that will be seeking credit will work to make their reports stronger, while those that extend credit will make fewer high risk loans and other forms of credit.