Best Practice: Obtaining a Credit Report for the Correct Entity
You likely review a potential customer’s existing credit references and history before making a credit decision. Pulling and reviewing a credit report is simple. The first and arguably the most important step, when reviewing credit viability, is to know your customer. Unfortunately, obtaining a credit report on the correct entity can be trickier than you’d expect. Here are a few tips on obtaining the correct credit history/information for your customer.
Important Company Information to Obtain
1. Corporate Legal Name
First, you should have your customer’s corporate legal name. Easy, right?
It’s not always that simple. In fact, you may be surprised to know how many folks don’t actually know their company’s corporate legal name.
When your customer provides you with their company’s name, you should also ask for any dba names (assumed names) as well as previous names. If a company changes its name and does not alert the various credit bureaus, their credit information may be listed under the previous name.
Once you have the company name, you should confirm the name and the entity type (sole proprietor, corporation, partnership, LLC) by running a corporate search. Typically, you can confirm the entity’s name by locating the Articles of Incorporation through the Secretary of State’s website.
You may also encounter situations where your customer has multiple operating units. If this is the case, you should ask which entity is associated with their trade credit – if it is not the same entity you will be doing business with, you should ask for more information from your customer (i.e. is this a parent entity?).
2. Officer/Owner/Partner Information
You also need to have primary contact information for the officer(s) and/or owner(s) of the company. Having this information may help you identify the correct entity, because you can match the names of primary contacts to those that may be listed in the Articles of Incorporation or in the credit reports.
Be sure to get the addresses of these individuals as well. Sometimes the individual’s address is the address used at the time a company becomes a company – meaning, when a business is first starting out, the owner or principals may use their personal address or other address when registering the company and applying for credit. Once a business is up and running, they may move to a more permanent location, but if they don’t notify the credit bureaus, the new address may not be reflected in the credit query.
3. The Entity’s Address
The address of the principal is important, but for obvious reasons, the address of the entity is imperative.
Not only should you request the current address, but you should also ask about previous addresses. Some credit applications request the address information for a specific time period “Please provide your current address as well as any previous addresses from the last 10 years.” This should include physical addresses and P.O. Boxes.
4. Web Address
In the age of the digital footprint, a company’s webpage can provide additional information and even history.
Review your customer’s website; compare contact information, including phone/fax/email and physical/mailing addresses. Sometimes a company will list primary contacts on their site – this can be useful before extending credit, but it can be just as useful in the event you need to collect past due/unpaid monies.
Best Practice ~ Example
Here’s an example of the importance of the information mentioned above and how it all works together to ensure you obtain credit history for the correct entity.
At the time of the credit application, the customer advised their company name was “Blattner Energy” and that they are located at 392 County Road 50, Avon, Minnesota.
A query in NCS Business Credit Reporting, with just the entity name, city & state, provided us with two search results, neither of which matched Blattner Energy 100%.
The credit report query tells me that D.H. Blattner & Sons, Inc. is likely the entity I’m looking for, because there are 22 current trades for that entity & 0 for Blattner Holding Co. and the addresses are similar (not identical).
But I still need more information before I grant credit based on the D.H. Blattner & Sons, Inc. report.
Because I don’t know if either of these entities is related to “Blattner Energy”, I need to do additional homework.
First I ran a corporate search through Minnesota’s Secretary of State and see the following entities are incorporated:
- Blattner Energy, Inc.
- Blattner Holding Company
- D.H. Blattner & Sons, Inc. (This entity appears to be the initial or original entity, based on its formation date of 1957)
Through the corporate search, I discovered all three of these entities list the same principal and address of 392 County Road 50, Avon, MN 56310. These similarities indicate there is a relationship between these companies, but I still need confirmation.
Next I go to the company’s website and under their “About Us” section, I find that these entities are related:
“The Blattner Family of Companies includes Blattner Holding Company and its several subsidiaries. Including, but not limited to, Blattner Energy, Inc. and D.H. Blattner & Sons, Inc.”
and that one of the original entities was D.H. Blattner & Sons, Inc.
“D.H. Blattner & Sons was founded in 1907 by David Henry (D.H.) Blattner…”
I feel fairly confident that if I review the credit for D.H. Blattner & Sons, Inc., that I will be reviewing the correct credit information, but before I do that, I’m going to confirm with my customer. Ultimately, I need my customer to tell me thatthey open credit under that entity name and not under the entity name, Blattner Energy.
Evaluating credit cannot be taken lightly. It can be time consuming and you may find it helpful to have a company, like NCS, to pull and review Articles of Incorporation.