PAYDEX Business Credit Score

PAYDEX Business Credit Score

The island of Manhattan, from which the term is derived. (Photo credit: Wikipedia A Paydex business credit score is the main credit score used in business.  The Paydex number assesses a business’s lending risk in much the same way a FICO score assesses credit risk for consumers.  Dunn & Bradstreet defines it as follows

PAYDEX Business Credit Score

“The D&B PAYDEX score is D&B’s unique dollar weighted numerical indicator of how a firm paid it’s bills over the past year based on trade experiences reported to D&B by various vendors.”

The PAYDEX Business Credit Score is calculated in a completely different way from the FICO score. A PAYDEX Business Credit Score ranges from 0-100 with 100 representing the highest score you can obtain.  The primary concern with PAYDEX Business Credit Score is whether or not you pay as promised although the number of years you have been in business is important also.  Having a PAYDEX Business Credit Score of 80-100 is very good.  Most lenders and suppliers are looking for a 75 or higher.  Not all lenders and merchants report to PAYDEX.Business Credit Score.  If you’re looking to build up your score you should inquire first.  The highest scores are given to companies that pay the bills prior to the invoice being sent.  This is considered an anticipatory payment pattern…the highest responsibility a company can demonstrate.  The chart looks like this:

  • 100…Anticipates bill and pays prior to invoicing
  • 90…..Pays within the trade discount period
  • 80…..Pays promptly within terms
  • 70…..Pays within 15 days past the due date
  • 60…..Pays 22 days beyond the due date
  • 50…..Pays 30 days beyond the due date
  • 40…..Pays 60 days beyond the due date
  • 30…..Pays 90 days past due date
  • 20…..Pays 120 days beyond the due date

Paydex Business Credit Score very Sophisticated

This very sophisticated service also includes score comparisons of the individual business to the Primary Industry, Payment habits measured against the amount of credit extended, yearly trends, Industry median and even “seasonal purchasing pattern.”

Dun & Bradstreet offers many products and services including the Business Information Report, the Comprehensive Report and DNBi platform.  These provide current and historical information primarily used by lenders and financial institutions to assist in making credit decisions.  D&B also offers sales and marketing products such as the DUNS Market Identifier Database, Optimizer and D&B Professional Contacts which provide sales and marketing professionals with business data for prospecting.

The Character of the applicant is very important to the lender.  Too many recent inquiries could be an indicator of a hidden fire behind the smoke.  Bankruptcy anywhere in the background will arch the lender’s eyebrows.

Cash Flow Loans are made on the basis of net profit plus non cash expenses such as depreciation and amortization.  This is because the borrower does not have to actually write a check for these expenses so they represent somewhat of a cushion.  Sole proprietors should have a debt to income ratio of less than 55%.

Capacity is another term to be familiar with.  It refers to the ability to turn other assets into cash if you have to.  This is also referred to as a “secondary source” of repayment typically consisting of Real Estate, CDs or stocks.  Be prepared to show a personal financial statement or balance sheet if you have a skimpy credit history.

Most loans are secured.  Unsecured loans are given chiefly to businesses that are well established and consistently profitable.

Acquiring a business credit card or business loan can be critical to the success of your business.  Remember that you are playing with the big boys now so stay within your realistic limits, not your wishful thinking limits.

 

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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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