What Is a Trade Reference? 

As a business owner, you’ll often need financing for certain aspects of your operation. A trade reference can help you secure your funds by strengthening an individual loan application or helping you build a good business credit score. 

A trade reference is a document that summarizes your payment history with a vendor or supplier. You can share them with your prospective creditors or add them to your business credit report. 

Let’s explore how trade references work, how to secure them, and how they benefit you in more detail. 

What Is a Trade Reference Example? 

Trade references are a lot like the references from prior landlords that you submit when applying for an apartment. They speak to your trustworthiness as a borrower and show that you’ve previously handled trade credit responsibly. 

Generally, there are two ways to use trade references: 

- Prospective creditor validation: Trade credit account applications often let you list the names of businesses you’d like to serve as your trade references. While considering your application, your prospective creditor should call them or send them a trade reference letter to request the details of your payment activities. 

- Manual addition to your credit report: If you have a credit account with a vendor who doesn’t report customer activities to the business credit bureaus automatically, you can manually submit your relationship with them to Dun & Bradstreet (D&B) and potentially add it to your credit file as a trade reference. 

The data points in trade references can vary slightly, depending on the business that provides them. However, they must include seven pieces of information to be eligible for submission to D&B, which gives us a helpful template. 

Here are the details D&B requires: 

- Date of the trade reference 

- Date of the last sale 

- Terms of the last sale 

- Last sale’s manner of payment 

- Current amount past due 

- Current total amount owed 

- Highest amount of credit used in the last 12 months 

You should only request trade references from businesses with whom your history is positive. If your trade reference shows you made a late payment, it can hurt your ability to qualify for credit or decrease your business credit scores.  

Why Do I Need a Trade Reference? 

Whenever a lender or vendor offers you credit, they’re taking a risk that you might not pay them back. There’s no way to eliminate the potential for loss entirely, but they can take steps to minimize it. 

One of the primary ways is to double-check that you have a history of paying back your debts on time. A trade reference is another lens into your creditworthiness they can use to help determine the level of credit risk involved in lending to you. 

The less business credit history you have, the more impactful each data source becomes. As a result, trade references are especially beneficial to new business owners, often being the only proof they have of their reliability. 

If you’re interested in applying for financing someday, trade references are a great way to establish your business credit foundation. You can use them to help secure vendor tradelines and improve your scores until you’re ready for more advanced forms of credit. 

How Do I Get a Trade Reference? 

You must establish trade credit accounts with other businesses to get trade references. They can be with any vendor that's willing to offer you revolving credit lines or extended repayment terms, such as net 30 accounts. 

For example, some good options include:  

- Net 60 vendors like Faire, Abound, and Creoate 

- Net 90 vendors like Lenovo, Dell, or Bzaar 

Some vendors will report your trade account to the business credit bureaus independently. That will add the details of your relationship to your credit report as a vendor tradeline and make using them as a trade reference redundant. 

However, some businesses won’t report your activities because it’s too expensive or too much work. Credit accounts with these companies are good candidates for trade references, assuming you use them responsibly. 

You’ll typically need to maintain a credit relationship with a business for six months to one year before they’ll serve as a trade reference. It’s hard for them to give a meaningful opinion without at least that much experience collecting payments from you. 

In addition, it may be a good idea to ask if you can use them as a trade reference before listing them on an application. Not only is it a courtesy, but it also helps ensure that you provide the correct contact information for them. 

How Do I Submit a Trade Reference to D&B? 

One of the best ways to leverage a positive trade reference is to add it to your D&B business credit report. That can bolster your business credit scores rather than just helping you with a single credit application. 

However, you must subscribe to D&B’s CreditBuilder program to be eligible for trade reference submissions. You can choose from the following two tiers: 

- CreditBuilder Plus: For $149 per month, you can submit up to 12 trade references to D&B per year. 

- CreditBuilder Premium: For $199 per month, you can submit unlimited trade references to D&B per year. 

However, there’s no guarantee any trade references you submit to the commercial credit bureau will go through.  

All accounts are subject to review and verification before acceptance, during which D&B will contact the vendor to double-check your payment activities. 

In addition to businesses that already report their customers to the credit bureaus, trade references from the following are not eligible for submission to D&B: 

- Landlords 

- Bank and credit card references 

- Companies related to your business 

- Companies without D&B business credit files 

- Anonymous, foreign, or known untrustworthy companies 

D&B also states that trade references can’t include anticipated payments, which refer to those you plan to make to your trade creditor but have yet to complete. 

Trade Reference vs. Credit Reference 

A credit reference generally refers to any document that supports or demonstrates your creditworthiness, often containing details about the credit history between you and the organization providing the reference. 

As you might infer from that, trade references are a type of credit reference. They specifically refer to those from vendors with whom you have trade credit accounts, such as an agreement to net terms. 

However, credit references can also come from organizations that specialize in extending credit, like banks, credit unions, and online lenders.  

In these cases, you’ll have a financial tradeline with the provider, such as a business credit card or business loan. 

You must often provide credit references when applying for a new lease or credit account.  

Like with trade references, that usually means having your prospective creditor contact your previous creditor to verify your payment history or adding it to your credit report. 

Can I Get a Trade Reference With Bad Personal Credit? 

Getting a trade reference is still possible for a business owner with a bad personal credit score. Vendors won’t necessarily initiate a hard personal credit check when you apply for one of their trade credit accounts. 

However, some will run a soft inquiry and factor the results into their decision. That won’t damage your personal credit score, but it could cost you the account if your credit rating is below a certain threshold. 

Fortunately, there are ways to build both types of credit simultaneously. One of the best options is to sign up for eCredable’s services.  

We can add an unlimited number of recurring expenses to your credit reports and offer both personal and business subscription options. 

In addition to your ongoing payments, we can add up to 24 months of historical activities. That makes eCredable one of the few legitimate shortcuts to building credit, capable of significantly increasing your scores virtually overnight. 

There’s also no credit check and no cancellation fee, so give it a try today!