Dun & Bradstreet

What is Dun & Bradstreet?

Dun & Bradstreet (D&B) is a global leader in providing business decisioning data and analytics. For over 180 years, D&B has helped businesses and lenders worldwide assess creditworthiness, evaluate risk, and identify growth opportunities. Their extensive database compiles information on millions of public and private companies, offering insights into their financial health, payment history, and operational stability. In real estate, particularly commercial and investment property sectors, D&B reports are crucial for evaluating the financial standing of business entities involved in transactions, such as borrowers, tenants, or joint venture partners.

How D&B Data Impacts Real Estate Investors

For real estate investors, understanding a business entity's financial stability is paramount, especially when dealing with commercial properties, multi-family assets, or large-scale developments. D&B provides critical data that lenders, partners, and even landlords use to make informed decisions. This data helps mitigate risk by offering a transparent view of a company's past performance and future potential.

Key D&B Products and Services

• D&B Credit Reports: These comprehensive reports provide a detailed financial history of a business, including payment patterns, bankruptcies, liens, judgments, and legal filings. They offer insights into how a company manages its financial obligations.
• D&B Risk Scores: Utilizing predictive analytics, D&B generates various risk scores, such as the PAYDEX Score (payment performance) and the Financial Stress Score (likelihood of business failure). These scores help lenders and investors quickly gauge a company's financial health and potential for default.
• D-U-N-S Number: A unique nine-digit identifier for businesses, the D-U-N-S Number is widely used by lenders, suppliers, and government agencies to identify and track businesses. It's often a prerequisite for obtaining commercial loans or government contracts.
• Company Information: Beyond credit, D&B provides extensive company profiles, including industry classifications, corporate family trees, and key personnel, which can be valuable for market analysis and due diligence.

The D-U-N-S Number

The Data Universal Numbering System (D-U-N-S) Number is a proprietary identifier developed by Dun & Bradstreet. It serves as a global standard for identifying businesses and is critical for establishing a business credit file. Many commercial lenders, including banks and government-backed programs like SBA loans, require a D-U-N-S Number as part of their loan application process. For real estate investors operating through an LLC or other business entity, having an established D-U-N-S Number and a positive D&B profile can significantly streamline financing and partnership opportunities.

Leveraging D&B for Investment Decisions

Integrating D&B data into your real estate investment strategy can provide a competitive edge and reduce potential risks. It's a key component of thorough due diligence, especially for commercial transactions.

Step-by-Step: Using D&B for Due Diligence

1. Identify Relevant Entities: Determine which business entities associated with your investment (e.g., your own LLC, a potential commercial tenant, a joint venture partner, or a seller's operating company) require a D&B review.
2. Obtain D-U-N-S Numbers: Request the D-U-N-S Number directly from the entity or search the D&B database. If your own entity doesn't have one, apply for it through D&B's website (often free for basic registration).
3. Order D&B Reports: Purchase the appropriate D&B credit and risk reports for the entities you are evaluating. These reports can range from basic summaries to in-depth financial analyses.
4. Analyze the Data: Carefully review the reports for key indicators such as payment history (PAYDEX Score), financial stress scores, any outstanding liens or judgments, and overall business stability. Look for consistent payment behavior and low-risk indicators.
5. Integrate Findings into Risk Assessment: Use the D&B insights as a component of your broader due diligence. A strong D&B profile can bolster your loan application, validate a tenant's reliability, or confirm a partner's financial health. Conversely, red flags should prompt further investigation or reconsideration of the deal.

Real-World Example: Commercial Loan Application

An investor, operating through their LLC, Prime Properties LLC, is seeking a $3.5 million commercial loan to acquire a retail plaza. The lender requires a D&B report for Prime Properties LLC. Here's how D&B plays a role:

• Scenario: Prime Properties LLC has been operating for five years, consistently paying its vendors and other business debts on time. It has a D-U-N-S Number and a well-maintained D&B profile.
• D&B Report Findings: The D&B credit report shows a strong PAYDEX Score of 85 (indicating prompt payments) and a low Financial Stress Score, suggesting minimal risk of business failure. There are no recorded liens or judgments against the LLC.
• Lender's Decision: Armed with this positive D&B report, alongside strong personal financials and a solid property appraisal, the lender views Prime Properties LLC as a reliable borrower. This favorable assessment contributes to the LLC securing the loan with competitive interest rates and favorable terms, potentially saving tens of thousands of dollars over the loan's life.
• Contrast: If the D&B report had shown late payments, high-risk scores, or public filings, the lender might have offered less favorable terms, required additional collateral, or even denied the loan, highlighting the direct financial impact of a D&B profile.

Important Considerations

• Beyond Borrowing: D&B reports are not just for loan applications. They are invaluable for screening potential commercial tenants, evaluating joint venture partners, and assessing the financial health of businesses you might acquire or merge with.
• Maintaining a Strong Profile: Just like personal credit, a business's D&B profile requires proactive management. Ensure timely payments to vendors, keep your business financials updated, and regularly monitor your D&B reports for accuracy.
• Cost of Reports: While obtaining a D-U-N-S Number is often free, detailed D&B credit and risk reports can be costly. Factor these expenses into your due diligence budget, especially for significant commercial transactions.
• Complementary Data: D&B data should be used in conjunction with other financial analyses, such as personal credit reports, financial statements, property-specific metrics (e.g., Net Operating Income), and market research. It's one piece of a comprehensive risk assessment puzzle.