Small Business Loans | Unsecured Credit

Dedicated Business Loan Specialists

What Exactly is the Paydex System?

The Paydex is a system developed by Dun & Bradstreet (D&B) to provide reports to credit agencies, banks and financial institutions, as well as other businesses, on the payment record of companies. D&B compiles this information from data collected through banks, credit agencies and individual businesses, who report on the payment habits of their dealers, distributors and suppliers.

This information is then recorded in D&B's computer system, which produces a score on how well each company performs in paying its bills. This score is called the "Paydex Score".

A higher Paydex Score means that a company almost always pays their bills on time to suppliers and other businesses. A lower Paydex score means that a company is quite often late in making these payments.

The Paydex Score is regarded by many in the business community as a direct indicator of the management and financial health of the business.

Companies with a low Paydex Score often have difficulty making supply and credit arrangements with other businesses and in some cases, have to pre-pay all or part of their orders in advance. That makes it very difficult to operate in many areas of business and can even cause a business to go under.

Banks, other lending institutions, and credit reporting agencies rely heavily on the Paydex Score to determine the creditworthiness of individual businesses. Low Paydex Scores will usually mean limited access to business credit and almost always results in higher interest rates and higher costs to the company.

On the other hand, a higher Paydex Score is seen as an attractive element of a business portfolio and can often lead to expanded business credit opportunities, as well as the most advantageous lines of business credit and rates.

In order to maintain a high Paydex Score companies must be vigilant in making payments to suppliers and other creditors within the agreed upon terms of payment. There may often be situations when it is not possible to meet these deadlines, but businesses are encouraged to contact their creditors and make alternative arrangements if they want to keep their favorable Paydex Score and high business credit rating.

If a business has difficulties that lead to a poor Paydex Score they can take actions to have Dun and Bradstreet review their file and their Paydex Score. This includes making arrangements with creditors directly. But it can also help to provide letters of reference from satisfied customers and suppliers who are prepared to proclaim their satisfaction with the payment ability and performance of the business.

The most significant way to keep a high Paydex Score is to pay all your outstanding bills on time and within the allowed time frame.

The D&B Rating is a widely used tool that represents a firm's size and composite credit appraisal.

Rating Classification (Based on Worth Composite Credit appraisal from Interim or Fiscal Balance Sheet)