Every person wants to invest in safe heaven, from where he can not only get his investment back but also get some profit on the investment. Just like personal credit report, a business credit report lets you determine the facts if your investment will be safe in a business or not. In short it lets you analyze the credit worthiness of a company. One can find credit report of any company by ease on various online directories that save them for reference for lenders.
Importance of a Credit Report:
A detailed and in depth study of business credit report is must for credit risk management by any company. As businesses expand companies find themselves short of resources, to cope up this, businesses go in partnerships and joint ventures to boost up their operations. Before you go hand in hand for some venture, you might want to make sure that your partner does not have anything in its background that could put your investment at risk in future. Going into business with a firm which you hardly know may be risky but with the help of a thorough study of business credit report of the company, this risk can be minimized.
Things to look in a Business Credit Report:
Every company makes its credit report on annual basis but they may use deceptive tactics to make their company look like scoring good on credit rating. It’s now your job to dig down deep to make a decision that the company is worth your salt or not. Many independent rating agencies also do this task to make or analyze credit reports for company in exchange of some compensation.
A detailed analysis of a business credit report gives you many useful insights into a company’s credit history ranging from Key personal running the company to any case filling against it in any court. But the things to look for in this report are as follows;
Credit Worthiness: By the detail study of the credit report you figure out the credit worthiness of the company by the help of the credit score and their payments schedule.
Productivity: The credit report tells you how productive the company is in utilizing their financial resources to manufacture the goods to selling them and finally repaying their sellers. Thus their cash cycle may tell you how effective they are performing in the competitive market.
Legal Issues: The credit report tells you any legal issue that the company might had to face in the past, the nature of that suit and what were the outcomes of the legal proceedings. Getting into legal suits is not a big deal from cooperate point of view, but the outcome of that suit is what matters most.
Along with these core indicators, you will know few other things at the end of your analysis of the credit report. These allied indicators are payment history of the company to the suppliers, bankruptcies and Uniform Commercial Code (UCC) filings and factual risk indicator and more. Thus in short a detailed analysis of the credit report is must before investing in a company.
