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When you see a construction crew paving a road, laying cement onto a highway, or demolishing a building, it’s not just a one-man job. It requires multiple people and heavy-duty equipment like bulldozers, cranes, pavers, excavators and tractors. And then you have e-commerce businesses like Amazon, which rely on a large fleet of vehicles, vans and trucks to deliver their customers’ goods to their doors.

But these fleets aren’t easy or cheap to buy and fix. According to data from the American Trucking Associations’ Technology & Maintenance Council and Decisiv Inc., parts and labour costs rose year-over-year in Q4 2022 by 14.4% and 10.8%, respectively, while combined expenses were up 13%. You get the picture – it’s expensive.

Not all companies are in the same boat as Amazon. You may not be able to afford to buy your own fleet and need financing. According to Automotive Fleet, 80% of companies with mid-to-large size fleets lease their vehicles, while only 20% exclusively own their vehicles.

But fleet financing isn’t the easiest process to navigate. And many fleet financing companies require a minimum credit score of 640 if you want to qualify for the best rates and not have to fork out a down payment.

Just like with personal credit scores, business credit scores can fluctuate often and drop drastically depending on how well you manage your cash flow, how much of your credit you’re using, how long it takes you to pay your invoices, if you have several legal filings on your report and other factors. I haven’t even gotten into how an economic downturn, pandemic, decline in sales, increase in equipment costs, rising interest rates and inflation can all lead to financial troubles that push your credit score down. They can and they do.

The truth is – no company’s financial health stays the same forever. You may have lost some of your top customers recently who accounted for a significant portion of your recurring income. Or you could have had unexpected expenses to pay for that cut into your cash flow and caused you to pay some of your suppliers late.

That’s why you should be checking your business credit report every week. Things happen and circumstances change. You need to know if those changes have affected your company’s financial health. But you should also be checking the credit reports of every customer you work with. This will give you a true sense of their financial strengths and weaknesses. Plus, it’ll give you a strong indication of whether they’ll pay your invoices on time.

I can’t tell you how many times I’ve heard business leaders say – ‘Oh, we don’t check the credit reports of customers we’ve worked for a long time – they’re a friend; we trust them.’ That’s one of the biggest mistakes you could make. I’m not saying you should mistrust everyone. But it’s better to use hard data than your gut to make business decisions. And as our State of Credit Risk: 2022 report found, it took American companies at least 16 days longer than the agreed payment terms to pay their invoices in 2022.

At the end of the day, you need to look out for your own company’s interests first. And you need to remember, your customers are doing the same.

Now, you might be thinking – what do my customers’ credit reports have to do with whether my company will get approved for fleet financing? It has a lot to do with it. If over 30% of your customers pay late and you set a Net 60 payment terms with them, it could be several months before you see a first payment. That’s money you originally accounted for in your accounts, but it’s not. And you still have your ongoing expenses, including the expensive fleets and equipment you need to keep your business running.

A few things can happen as a result. If you keep spending and buying inventory as usual (without having enough income), your cash flow will take a serious hit. And you’ll likely become a late payer yourself – picking and choosing which suppliers get paid first and which must wait. So, then the payment data in your business credit report will show how well you pay your suppliers, how many of your payments are past due and how much money you owe in past due payments.

Your payment information will be shown through specific data points, including:

  • DBT (Days Beyond Terms): This tells them how many days longer than the payment terms you typically pay your invoices. The higher your DBT score is, the less creditworthy and reliable you’re seen to be. Let’s look at Rent-A-Center Inc. as an example. Our data shows that the company has a very low DBT of 2 – meaning it typically pays its invoices no later than 2 days after the payment terms date. This is a good indicator that the company has a positive cash flow.
  • % Past Due: This refers to how many payments you have missed and is often considered together with the DBT. Usually, when a company has a high DBT, they tend to have a high amount of past due payments. So, if we go back to the Rent-A-Center example, our data shows that only 13% of all its payments are past due.
  • Past Due: This displays the amount of money (in USD) that your company owes. If your payment data shows that you have over $1.5 million past due and if your DBT score is high, that could indicate that you’ve got larger financial troubles that are putting a strain on your cash flow. It could also raise alarm bells that your company won’t have enough cash on deposit to repay your debts. Financing companies will certainly think about that when deciding whether to approve or reject an application.

Here's the reality – you will need fleet financing at some point or another. The best thing you can do is to get very familiar with both your company’s credit report and the credit reports for your existing customers. The more you know, the better your financial health will be and the closer you’ll be to getting the fleet financing your business needs.