If you have ever tried to rent an apartment or lease a vehicle, you are probably familiar with the personal credit system. Your Social Security Number is attached to credit reports generated by major credit bureaus. Potential lenders then use your credit score to assess your ability to borrow money. Much like how a Social Security Number is connected to your personal credit profile, a DUNS Number provides a credit profile for your business.
But what exactly is a DUNS number, and how does it work? We cover the ins-and-outs of the DUNS system and how establishing a credit profile can help your business. We also address how the federal government has moved away from the DUNS system for the purpose of awarding government contracts.
What is A DUNS Number?
DUNS stands for the “Data Universal Numbering System”. The DUNS Number was created by data services company Dun & Bradstreet (D&B), and is designed to mimic the personal credit reporting system but for commercial businesses. Lenders widely recognize the system as the universal standard for establishing the creditworthiness of companies.
Much like credit scores in the personal credit system, the DUNS generates a “Paydex score” for each company. D&B evaluates the borrowing behavior of a company and assigns a Paydex score running from 0-100. A score of 75 or greater is considered to be good credit. This is similar to a credit score above 730 in the personal credit system.
Do I Need A DUNS Number?
Using a DUNS number to build a credit profile for your business can be beneficial whether you are a large multinational corporation or a small mom and pop shop. A high Paydex score can help you secure larger loans. This is ideal if your company requires substantial amounts of operating capital to either support its business or to expand.
Commercial credit can also be useful for small businesses and sole proprietors. A company with a solid Paydex score may be able to assume assets under the name of the business without requiring personal guarantees from its owners. In a way, this allows owners and managers to maintain separation between their personal assets and the creditor liabilities of these businesses.
How Do I Get a DUNS Number?
To get a DUNS number, you first must form your company as a legal entity in a US state of your choice. Entity options include LLCs, corporations, limited partnerships, and others. After establishing your business entity, you can contact Dun & Bradstreet to request your number for free.
To obtain your DUNS number, D&B will require specific information regarding your business entity. This includes the following:
- The entity name;
- Formation date;
- State identification number or filing number;
- Nature of the business;
- Number of employees;
- And the Employer Identification Number (EIN).
To obtain a DUNs number, a company must disclose specific information about its beneficial owners. Some states, like Delaware, do not require this information on any of the incorporation documents that are filed with the state. The DUNS Number application requires the names, phone numbers and addresses of all beneficial owners. D&B will independently verify the information by contacting whomever is listed as the ultimate beneficial owner. After verifying that all necessary information is correct, they will issue the DUNS number for the entity.
Changes to the DUNS System
In the past, the federal government required all public and private entities to have a DUNS number in order to bid on government contracts or apply for grants. As of April 4, 2022, the government will move away from the DUNS system. The Unique Entity Identifier Number (UEI) will take its place.
The UEI system is more centralized and avoids making companies go through a non-governmental organization to acquire a credit identifier. The federal government has tasked the General Services Administration (“GSA”) with managing the new UEI system. The GSA claims to have generated cost savings through competition by having Ernst & Young (EY) and D&B bid against one another for providing credit reporting services. The agency ultimately assigned the contract to EY. The goal is to create a more sustainable process without the need to transition again in the future.
How Do I Get A UEI Number?
The government administers Unique Entity Identifier Numbers through the System for Award Management website. You can visit SAM.gov to obtain a UEI for your business. Note that if you have already registered your company in SAM.gov, it will already have an existing UEI number.
The existence of the UEI does not completely remove the need for a DUNS number. Commercial lenders and vendors still use the DUNS system and Paydex score to assess the creditworthiness of commercial entities and enable them with better access to credit.