Lina Chindamo, DIrector, Enterprise Accounts, Creditsafe
Building a strong business credit profile helps position your company for growth and financial success. A trade reference is one of the tools businesses can use to demonstrate their creditworthiness. If you’ve ever wondered what a trade reference is and how it works, you’re in the right place. Understanding these references can help you navigate credit evaluations and foster strong financial relationships.
A trade reference is essentially a statement or testimonial from a supplier, vendor, or creditor that provides insights into your company’s payment habits. It reflects real-world payment experiences with your trade partners and contributes to shaping your business credit profile, supporting opportunities for financing, credit terms, or partnerships.
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Chapter 1
Why Do Trade References Matter?
When your company applies for credit—whether it's with a supplier for inventory, a bank for a loan, or a leasing company for equipment—the creditor will likely review your payment data. This information can be sourced from trade references and provides specific details about your payment history with existing suppliers, helping creditors assess your reliability and financial behavior.
For example, a supplier may report that your company regularly pays its invoices within 30 days of receiving the goods. This type of reference shows potential lenders or partners that you are a reliable customer who honors payment agreements. On the flip side, if your payments are frequently late or you’ve defaulted on a payment, that negative reference could make future credit applications more difficult to approve.
However, trade references are often time-consuming to collect and can slow down the credit approval and customer onboarding process. Many businesses face delays when waiting for references to respond—if they respond at all. That’s why using Creditsafe’s business credit report can be a more efficient solution, as it consolidates payment behavior data from a wide range of a company’s suppliers, saving you time and giving you a comprehensive view of a company’s reliability.
Chapter 1
How Are Trade References Used?
Trade references serve as a risk assessment tool for lenders, suppliers, and other businesses. If you’ve built a history of paying your suppliers on time, that information can help you negotiate better payment terms (like extended payment periods) or lower interest rates on loans. For a business looking to grow, having multiple positive trade references can make a big difference when expanding relationships with new vendors or securing financing.
However, it’s worth noting that relying on individual trade references has limitations. Businesses could potentially “game the system” by selectively providing trade references only from companies they always pay on time, while excluding others where payments may be less reliable. Creditsafe addresses this issue by collecting and combining trade data from multiple sources. This helps ensure that you’re seeing a complete, balanced view of a company’s payment behavior across all its suppliers and vendors, which is crucial for making informed credit decisions.
Chapter 1
Example of a Trade Reference
Imagine you’re running a construction company, and you purchase building materials on credit from a supplier. If you consistently pay your supplier within the agreed-upon 30-day terms, that supplier can provide a positive trade reference. This information will be factored into your business credit report, which can then be used by other vendors or financial institutions to assess your reliability. Having a solid track record of on-time payments boosts your business’s credibility, helping you secure better terms in future transactions.
While trade references play a crucial role in showcasing your business’s financial reliability, they can be time-consuming, and sometimes unreliable. Our credit reports are based on aggregated payment data from multiple sources, providing a clear and accurate picture of a company’s payment behavior across a wide range of suppliers and vendors. This approach not only saves time but also prevents the limitations of selective reporting, giving you a more complete view of a company’s creditworthiness. By understanding and using both trade references and Creditsafe’s comprehensive credit reports effectively, you’re setting your company up for long-term success and credibility in the marketplace.
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About the Author
Lina Chindamo is currently Director, Enterprise Accounts at Creditsafe Canada, and a Certified Credit Professional (CCP) with over 25 years of experience in credit risk management. She has held senior leadership roles with leading companies in multiple industries in the Canadian market such as Sony Electronics, Maple Leaf Foods, and Mondelez Canada. Her experience as a credit professional along with her current role as Director, Enterprise Accounts who works closely with c-suite partners and credit teams across all industries makes her a well-rounded credit professional who is well respected in our industry.