Strong Business Credit Can Help You Win Supplier Contracts

There are specific ways having a strong business credit profile can help suppliers

Landing a supplier contract can jump-start your business—helping it grow and moving your products or services into new markets. However, as many businesses learned, getting those contracts can be tougher than you think. There is a lot that goes on behind the scenes when a business is deciding with which company it should contract and, many times, business owners never learn why they were passed up for a supplier contract. Fortunately, there are ways to help influence how your business is perceived during this crucial decision time.

One important way is to closely monitor and manage your business credit file. There are several companies that create business credit profiles for companies, including D&B and Experian.  Having good scores and ratings and accurate information in your business credit profiles can help you look trustworthy to other businesses, which can be essential when you’re trying to land a new contract.

What Is a Business Credit Report?

A company’s business credit file may contain information such as a unique identification number, company history, your exact line of business, and any judgments, suits or liens associated with your company.

These reports also tend to include scores and ratings, which are based on historical behaviors and predictions from each company’s proprietary formulas. These scores and ratings can indicate if the potential partner historically paid its lenders on time and predict the timeliness of how it will pay its bills over the next 12 months. In addition, a business credit report can help predict the likelihood of whether or not a business will go out of business in the foreseeable future, among other things.

Altogether, the scores and ratings in the business credit report can help showcase your company’s strengths to potential partners, vendors, suppliers and lending institutions.

Why Good Business Credit Can Be Especially Important for Suppliers

Going into business with another company can turn out to be a really good investment or a really bad one. In an effort to help mitigate risk, before entering into a contract, many companies check their potential partner's business credit report to help research the potential partner’s credibility and reliability.

Because businesses perform this check before signing on the dotted line, managing your business credit profile can be especially important if your business is competing for supplier contracts. Your business credit report can help frame your business as successful and trustworthy. In short, your business credit file can be a deciding factor in whether your company wins a contract.

Other reasons a business credit report can be important for you as a supplier may include:

  • Some companies require that you have bonded insurance in order to work with them. For some insurance companies, you must maintain your business’s scores and ratings within a certain threshold in order to keep your policy active.
  • When negotiating terms and conditions, suppliers can leverage their good business credit profiles to help get paid on a more favorable schedule.
  • If your customers don’t pay you in a timely manner, you may need access to funding in order to cover working capital needs. Some companies have a practice of paying invoices anywhere from 30 to 90 days from when the invoices are received, and the suppliers for these companies may need to cover costs for supplies, rent and other expenses while waiting to be paid. Lenders may require that your business credit scores and ratings be within a certain threshold before they consider your loan application. 

Special Advice for Small Business Suppliers

If you're a small business, and are interested in subcontracting or becoming part of the supply chain, monitoring and influencing your business credit report and credibility can sometimes be more important than it would be for a large business. 

Small businesses usually do not have an established reputation, so a strong credit profile can be more impressive when companies they are trying to partner with are comparing them to other small businesses. 

Running a small business can be very competitive and many larger companies want to know that you're operating your business in a trustworthy and intelligent manner. The question could be asked, "If you're not paying attention to your business credit, what else are you neglecting?" This can be especially true for consulting firms that need to show strength and reliability when giving other companies recommendations on how to run their businesses. 

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