Glossary · Credit management
Trade reference
A trade reference is another supplier who can confirm how a prospective customer pays its bills: on time, late, or not at all.
A trade reference is a business that already extends credit to the customer you are assessing. You ask them how long they have supplied the customer, the credit limit they allow, and whether invoices are paid on time.
References give you recent, real payment behaviour that credit reports may not yet show. Their weakness is selection: a customer chooses which references to give, so they will name suppliers they pay well.
Ask for two or three, contact them directly, and ask specific questions — average days to pay, highest balance — rather than “are they a good customer?”
Example
A prospective client names two suppliers as trade references. One confirms payment within terms; the other says invoices usually arrive around day 50 on 30-day terms. The firm sets a lower opening credit limit.