What Is the Maximum Credit Recommendation?
Dun & Bradstreet’s Maximum Credit Recommendation helps you understand how much business credit, or trade credit, you can extend to your customers. It’s an important component of a comprehensive credit assessment.
The Maximum Credit Recommendation represents the greatest amount of business credit Dun & Bradstreet suggests can be extended, based on monthly payment terms such as net 30. It can cover multiple accounts and multiple invoices for a total outstanding figure.
In this article, you will learn:
- Where Can I Find the Maximum Credit Recommendation?
- Which Countries Have the Maximum Credit Recommendation?
- When Should I Consult the Maximum Credit Recommendation?
- Why Should I Consult the Maximum Credit Recommendation?
- How is the Maximum Credit Recommendation Calculated?
Where Can I Find the Maximum Credit Recommendation?
The Maximum Credit Recommendation is available in our credit risk management platform, D&B Finance Analytics Credit Intelligence; the D&B Direct for Finance API; and our small business suite of credit reports.
Each recommendation is accompanied by an assessment of risk based on Dun & Bradstreet's risk modeling methodology.
- High Risk: These businesses have a high projected rate of delinquency or a high failure risk. A guarantee is also recommended for companies that are assessed as high risk.
- Moderately High Risk: These businesses have a moderately high projected risk of delinquency or a moderately high risk of failure.
- Moderate Risk: These businesses have a moderate projected risk of delinquency.
- Moderately Low Risk: These businesses have a moderately low projected risk of delinquency.
- Low Risk: These businesses have a low projected risk of delinquency.
Which Countries Have the Maximum Credit Recommendation?
Dun & Bradstreet provides a Maximum Credit Recommendation on companies in more than 180 markets. As a global leader in B2B data and analytics, our Data Cloud offers the world’s most comprehensive business data and analytical insights to power today’s most crucial business needs.
When Should I Consult the Maximum Credit Recommendation?
The recommended business credit limit is useful for dealing with a new customer or prospect, with whom you do not have a previously established credit record. The recommended limits create useful starting points that help you assess how much credit to start with.
Why Should I Consult the Maximum Credit Recommendation?
The key benefit is to help you determine an appropriate credit limit, particularly for newer customers you may not be familiar with. The Maximum Credit Recommendation can also speed up the overall credit evaluation process, making it easier to approve or reject credit decisions while maintaining an acceptable level of risk for your company.
Using Dun & Bradstreet’s Maximum Credit Recommendation does not necessarily mean that an account should be rejected or approved, but it may help you place fewer accounts on credit hold, where you need to investigate them further to establish the appropriate credit limit.
Quickly and more consistently approving credit requests helps to:
- Increase sales
- Make customers more competitive in the marketplace
- Reduce and/or maintain risk levels
For existing accounts, credit limits can be used to periodically monitor whether credit limits should be modified - either by extending more credit to prompt-paying customers or perhaps restricting credit to those slow-paying customers.
How is the Maximum Credit Recommendation Calculated?
The local currency guideline amounts are based on a historical analysis of credit demand of customers in the Dun & Bradstreet Data Cloud that have a similar profile to the business you are evaluating in respect to industry, employee size, and risk profile. The guidelines do not address whether a particular business can pay that amount or whether a particular customer’s total credit limit has been achieved (based on their total trade experiences and outstanding balances.)
The recommendations are based on Dun & Bradstreet’s large network of participants in the Global Trade Exchange Program, which is the world’s largest trade data network, as well as our extensive predictive modeling expertise, which were developed using modeling methodology that evolved from years of custom credit limit analysis for customers across a wide range of industries. They have been adjusted and tested over time to ensure the most statistical validity possible.
To develop the recommended limits, Dun & Bradstreet selected several million companies from the Data Cloud. Those companies were further segmented by industry classifications and employee size to determine the spectrum of credit usage in a particular segment. Finally, the risk of potential late payment and financial stress for these businesses was assessed using Dun & Bradstreet’s predictive scoring models.
Together, these three dimensions - industry, employee size, and risk -- make up a matrix of recommended credit limits that is segmented first by industry, then employee size, then by Dun & Bradstreet’s assessment of overall risk - high, moderately high, moderate, moderately low, or low.
So, for example, if you are looking to grant credit to a construction company with 20 employees that Dun & Bradstreet assesses as moderate risk, recommended limits would be suggested based on the historical credit patterns of other companies that share that industry, size, and risk profile.
Download the infographic below to learn more about Maximum Credit Recommendation: