Business credit bureaus are companies that compile information about how businesses handle credit and sell that information to lenders, suppliers, insurers and factors. Well-known examples in the US include Dun & Bradstreet, Experian Business and Equifax Business.
How it works in factoring
Bureaus gather data from several sources:
- Trade references: suppliers report how quickly a business pays its invoices
- Financial institutions: some lenders and card issuers report account performance
- Public records: UCC filings, tax liens, judgments and bankruptcies
- Company information: ownership, location, industry and size
Reports usually summarize this into payment indexes, risk indicators and suggested credit amounts. Each bureau uses its own methods and data sources, so the same company can look different from one report to another.
Factors use bureau reports mainly to evaluate the seller's customers, since those customers will pay the invoices. They also check the seller for liens, judgments and signs of financial strain.
Unlike consumer credit reporting, business credit reporting is not governed by the Fair Credit Reporting Act in the same way, and a business may not be told when a report is pulled. Correcting errors is done directly with each bureau.
What to check
- Pull your own business reports from more than one bureau
- Ask your reliable suppliers whether they report your payments
- Make sure your legal name, address and industry codes are correct
- Monitor for new liens or judgments, which factors will see
Clean, accurate business credit files make it easier for factors to approve you and for your customers to extend you terms.