The Inside Scoop on Business Tradelines

Having a well-rounded business credit profile with a healthy number of business tradelines updated to credit, can deliver more opportunities and greater success to a firm.  When looking for financing at the best rate, a business must have a good history of credit. Since this is necessary, a business in need of capital can become quite desperate and seek out high interest or ‘bad credit’ financing options, but what is the cost of a quick fix?

If you search on Google “business tradeline”, listed are a variety of virtual companies that sell “seasoned business tradelines”. This may be an appealing option for a company with little-to-no established business credit looking to improve their current business credit profile(s). If you are considering this – it’s a risky and costly endeavor for any business owner.

What is a business tradeline?

A business tradeline is an account/line of credit between a business and their vendor, lender, or creditor.  Usually, these credit extenders will check the business credit profile, and often check the principal(s) personal credit, before agreeing to a business arrangement. In most cases, a newer company with no business credit, has better chances getting approved line of credit through a vendor or creditor than going through a bank – depending on the vendor, of course.  If approved, a vendor may require the first few purchases are paid on receipt and then issue net-15 or net-30 payment terms. If the vendor reports your payment information to a commercial credit bureau and bills are paid within the terms, it can help establish business credit.

Why do companies sell seasoned business tradelines?

A “seasoned business tradeline” is a vendor or creditor account with an, older, well-established credit history.

Some companies use their strong credit history as a lucrative business by selling tradelines to companies with poor or no business credit. In other words, for several thousand dollars your business can be “piggybacked” to appear more creditworthy. This practice is not illegal, but it is frowned upon by the largest business credit reporting bureau, Dun & Bradstreet.

Dun & Bradstreet does not legally have the power to stop a business from selling or purchasing tradelines, but they do have the power and a track record of “shutting down” the credit file for any business that they find is using this method for credit building. So while this may seem like the more convenient option for a business looking to procure a low interest loan, line of credit, or government bid it can be much less effective and much more expensive in the long term than making an effort to build your business credit the right way – especially if Dun & Bradstreet catches on.

Another major concern is that businesses who do not qualify for a loan, whether it’s due to poor credit or an unestablished profile, often do not have the funds and/or management skills needed for staying up-to-date with paying back a large loan. It may not always be fair, but there is a reason that banks check your business/personal credit profile and income before authorizing a loan – it not only protects the bank but also protects the borrower from financing that they’re not yet able to manage.

Be sure to check your business credit profiles regularly (even if you don’t think you have any); if you notice inconsistencies in your profile, it is lacking information, or if you need help establishing a business profile please reach out to one of our FICO Certified Credit Experts rather than risking your future credit profile and paying to purchase another businesses creditworthiness. We can help you build, establish, correct, and monitor your profile(s) so that when the time comes for expansion you are prepared.