In response to the current economic situation, many businesses are being more deliberate when it comes to deciding who to work with and hire. This includes their relationships with other businesses. Not surprisingly, conducting business background checks is fast becoming a standard practice among companies big and small.
Getting information on potential business partners or clients is important- especially for small businesses. Knowing about a company’s credit rating, financial status, reputation, and legal standing can help business owners and their management avoid risky business-to-business transactions.
Here are few tips for conducting effective business background checks:
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Start with a simple Internet search. By doing a search on the business’ name you should get an initial glimpse of its web presence. This includes the business web site as well as any other posted articles or references. This is a good place start your background check.
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Check out the company’s local reputation and references. Ask the business for a list of current references. This list may include clients, partners, vendors and creditors. Make sure to get in touch with at least three of the references provided. You can also check out the local Chamber of Commerce and Better Business Bureau to see if they have any information on the particular company.
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Look at the company’s business credit report. The three credit bureaus, Experian, Equifax and TransUnion, as well as Dun & Bradstreet provide extensive credit and financial reporting on millions of companies. Armed with this information, business owners can assess another company’s operational health and its ability to pay off a debt. For a fee, any business seeking this kind of information can open an account with each of the credit reporting agencies.
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Conduct a legal background search. Search for any lawsuits, judgements, liens, and bankruptcies connected with the company, as well as any criminal records held by its owners or management. Usually this information is available at the local courts. Click here for a listing of court websites. You can also consult the Office of Foreign Assets Control’s (OFAC) Patriot Act Search Database for criminal backgrounds on both individuals and companies. This is a government watch list of criminals and terrorists collected from databases around the world.
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For publicly held companies, consult the SEC. The Security and Exchange Commission provides financial and business information about publicly held companies via EDGAR the Electronic Data Gathering, Analysis, and Retrieval System. All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Anyone can access and download this information for free.