Equifax Business Credit and Overall Fundability

Business credit is just one of many factors that affects the fundability of your business.  Your Equifax business credit score, your D&B business credit score, your Experian business credit score, and any other agency your lender may pull a credit score from all have a huge impact on your ability to get funding for your business. 

They might use reports from any of these agencies or a combination.  Since you can’t know which reports they will look at, you have to understand each one.  You need to know what information it gives them and where that information comes from. It is important to understand Equifax business credit. 

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How Equifax Business Credit Can Affect the Overall Fundability of Your Business

In order to build and maintain strong fundability, you need to understand everything you can about the reports from each of the big three credit reporting agencies, and what they tell lenders about your business.

Equifax Business Credit Reports

Equifax collects information similar to Dun and Bradstreet, including data from the following sources. 

  • information from public records
  •  financial data from the business
  •  payment history from creditors
  • Credit utilization is also a factor, which accounts for how much credit you are using versus the amount of credit you have available to use.

The information is used to calculate various scores, including the business credit risk score and the business failure score. The first measures how likely it is that a business will become 90 days or more delinquent on bills over the next year.  It ranges from 101 to 992.  

The second, ranges from 1,000 to 1610.  Likewise, it predicts how likely it is that the business will file for bankruptcy over the next 12-month period.  A lower score indicates higher risk. 

They also calculate what they call the business payment index.  This is the Equifax version of the Dun & Bradstreet PAYDEX.  It even runs on the same scale of 0 to 100.  It’s an indicator of payment history over the past year. In contrast to the PAYDEX however, you must  reach a score of 90 or higher for it to be a good score.  

In addition, Equifax offers business identity reports to confirm a company actually exists. It verifies details such as the company’s tax ID, number of employees, and yearly sales. 

Equifax does not allow business owners to request a file be opened for their own company.  They decide themselves when to start a credit file on a specific company. 

Financial and trade data are combined, and they add in utility and telephone payment data.  Public records are also a source of information.  

Equifax Business credit scores include: 

The Small Business Credit Risk Score for Suppliers

It is scored on a scale of 1 to 100, with 90+ indicating that a business has paid its obligations as agreed.  An 80 to 89 means they are 1 to 30 days past due, 60 to 79 indicates they are 31-60 days overdue, 40 to 59 is 61 to 90 days past the payment date.  It  just goes down from there. 

Business Failure Risk Score

This score indicates the chance of a company paying its bills late on the following scale: 

  • 497 – 816: 25% or less chance of payment being overdue
  • 452 – 496: 26 – 50% chance of payment going overdue
  • 415 – 451: 51 – 74% chance of delinquent payments
  • 101 – 414: 75 – 100% chance of delinquent payments

Public Records Report

The purpose of this report is to list bankruptcies, judgments, and liens along with the amount, date of the most recent filing, and how they were satisfied. 

Credit Usage Report

This a pie chart that shows your company’s credit usage.  It gives a visual of what percent of your available credit you are using. That is known as your credit utilization ratio, and it has a pretty big impact on your overall credit score.

Credit Report Summary

The summary report shows the number of your business’s credit accounts, as well as the date each one became active. It also lists any amounts past due, along with your most severe status of the past 24 months. 

The highest amount of credit extended, the median balance, and the average open balance are included as well. 

Additionally, the report lists recent activity such as number of new accounts opened recently, delinquent accounts, number of updated accounts, and inquiries. 

Financial Account Highlights

This report shows details for the past 36 months, including credit accounts and leases. It lists the status, open and close date, original and current credit limits, and any past due amount for each.  In addition, the payment amount and frequency for each account, as well as whether or not it is secured are also noted.

Does Equifax Business Credit Really Matter? 

Yes, all business credit matters! Why do you need separate business credit? Here’s why. According to Inc.com, small business owners who understand their business credit scores are 41% more likely to get approval when they apply for a business loan. You can’t understand it if you don’t have it. Right? 

Keep your business protected with our professional business credit monitoring

Also, if the unthinkable happens and your personal credit tanks, you need to be able to continue to run and grow your business. If your business credit is strong, you can still do that no matter what is happening with your personal credit. 

It’s true, a new business will not have any business credit.  However, it doesn’t have to stay that way. Building business credit is important, so that when the time comes, you can keep your personal credit separate and finance business growth using your business credit. 

How Can I Improve my Equifax Business Credit? 

What if your Equifax business credit isn’t so great?  Here are some simple things you can do to boost it. 

Add New Trade Lines

Don’t pay for them. There is no proof that buying tradelines actually helps.  If you do things the right way, it happens for free and it for sure works. There are a few ways to get it done. 

First, you can ask the vendors you already work with about starting a credit relationship.  Ask if they will extend you credit based on the merits of the business relationship. Then, ask if they will report the payments.  Even if you only get one or two reporting, your credit score will increase with every on-time payment recorded. 

Next, you can ask utilities, telephone companies, and internet companies to report the payments you already make to them on a regular basis. They don’t have to do it, but there is no harm in asking and it is an easy way to get more accounts reporting without actually opening new accounts.

Lastly, if you have a poor credit score, you can work with starter vendors in the vendor credit tier.  These are retailers that sell things you use everyday in your business anyway.  Often, they will extend net terms on invoices without a credit check and report your payment to the credit agencies.  

Ask to Delete Paid off Collections

Did you know that if you have an account that goes to collections, it will stay on your credit report even after you pay it off?  That’s right. The negative hit stays on your report even if you pay off the account in full. However, you can ask that they remove it. 

Ensure All Information is Correct and Up to Date

Take the initiative to notify credit agencies of changes in address, phone number, email addresses, etc.  In addition, monitor your business credit reports so you can dispute any mistakes.  

Update the details if there are errors or the information is incomplete. Do this for Equifax here: www.equifax.com/business/small-business. 

Ask for An Increase to Your Credit Limit 

Your credit utilization ratio is the amount of debt you have in relation to the amount of credit you have available to you. If you are using a ton of your available credit, your ratio will be high, and vice versa.  When people ask themselves how to increase business credit, they often realize this. The next step, for most, is to add accounts to increase the amount of credit available. 

However, this isn’t always the best option because the average age of all reporting accounts affects your credit score as well.  If you are adding new accounts, that average age decreases, which negatively affects your account.  

Another option, which works much better, is to ask your current accounts to raise your credit limit.  This way, you have more available credit, decrease your credit utilization ratio, and leave your average age of accounts unaffected. 

Make Payments on Time!

The number one way to increase Equifax business credit is to make consistent, on-time payments.  Here’s a bonus tip too. If you find that you need to stop carrying so many balances and have the means to pay a little extra on minimums, pick the balance with the highest interest rate and put all of your extra onto that balance.  

Once it is paid off, take the total payment amount and pay that amount extra on the balance with the next highest interest rate.  This will create a sort of snowball effect. As you see your balances getting paid down, you will see your business credit score increase. You’ll save money on interest also, since you are paying off the highest interest rate balance first. 

Monitor Your Business Credit Regularly

It’s important to monitor your Equifax business credit to know which accounts are reporting, which are not, and to catch any mistakes that may pop up.  Because you will catch mistakes faster, this could help you build business credit faster. 

You can purchase reports directly from Equifax.  Unfortunately, you can’t get a Equifax business credit report like you can a personal credit report. 

The only real way to get a free copy of your credit report is if you are denied a loan based on your business credit.  Of course, this is not a fun way to see your business credit reports for free. After denial, you will receive a letter in the mail from the agency that provided the lender with your report.  You will have the opportunity to request a free copy of the report that the lender saw, so that you can see why the result was denial. You have 90 days to submit your request. Note that if your lender did not use Equifax, you will not be getting a copy of your Equifax report.

Other than being denied for a business loan, here are a few other hacks to get you at least a sneak peek  of your business credit. 

Nav

Nav is a service that will let you see a summary of your credit reports from all three of the major credit reporting agencies.  However, these are only summaries, not full reports. Generally, that means you can see your score, and maybe the accounts you have listed.  While this will help you see where you stand, it will not suffice for the purpose of correcting mistakes or even to show you what you need to do to improve your score. You do have the option to pay for more information though.

Credit.net

Credit.net does not offer ongoing free business credit reports.  However, you can get a free trial. There is no credit card requirement either.  After you pull the report, you have 30 days to check it out. This means at least once you can get a totally free look at your report, because there is no fear of missing a cancelation deadline and having to pay anyway. 

Scorely 

This is a lesser known credit reporting agency that will let you see your credit report for free before you pay for an ongoing subscription.  Unlike Nav or Credit.net, they are actually calculating their own score similar to the big 3 (Experian, Equifax, and Dun & Bradstreet.) They strive to be totally transparent and to make their reports easy to understand. Seeing your Scorely report will give you an idea of where you stand, but it will not help you know exactly what your Equifax business credit report says. 

Keep your business protected with our professional business credit monitoring

Your Equifax Business Credit Can Have a Huge Impact on FundabilityEquifax Biz Credit Report Credit Suite

Really, all business credit definitely has a huge impact on fundability.  I mean, in truth your scores from all of the big three should be similar because they are pulling information from the same general sources.  They will likely not be exact however, and there is no way to know which one a lender may pull. 

That is why it is important to understand each one and how they impact fundability.  Remember though, there are lots of factors that affect fundability. Even if your business credit score is stellar, you could still run into issues.  You need to take the whole picture into account. 

The post Equifax Business Credit and Overall Fundability appeared first on Credit Suite.

How Does Business Credit Fit into The Big Picture of Fundability?

The terms “business credit” and “fundability” get thrown around a lot.  The truth is, a lot of people think they are interchangeable. In fact, they are not.  Think of fundability as a puzzle, and all the pieces are different sizes. Business credit is a huge puzzle piece that goes right in the center.  

You Can’t Have Complete Business Fundability without Business Credit

Think about the puzzle analogy and you can see how it isn’t really possible to have complete fundability without business credit.  A huge piece of the picture would be missing. On the other hand, you could get a good idea of what the picture is if you have credit in your business name but not all the other pieces of the fundability puzzle.  That is how big this piece is. It is huge. You just wouldn’t have all the funding options that you would if you had all the puzzle pieces. Before we can go further, you need to understand what fundability is, and what business credit it.

Keep your business protected with our professional business credit monitoring.

What is Fundability? 

Basically, fundability is the ability of your business to get funding. When lenders consider releasing funds for your business, does it appear to them to be a good idea to make the loan?  What do they look at to make that decision? 

When a lender considers lending to your business, they are wondering if you are high risk?  Do you seem like a business that can and will pay back the debt?  Lenders are in it for the money. They need to feel like they are making a good investment.  A high credit risk is not a wise lending choice.  

The harder question is how does a business get fundability? This is hard, because so many things affect fundability. Sure, a great credit score for your business is important.  In addition, many of the aspects necessary for a strong business credit score are necessary for fundability as well. 

A potential creditor needs to see that your business is legitimate and profitable.  Many loan applications are denied approval due to fraud concerns.  Others, simply because something didn’t match up and threw up a warning signal. Maybe the addresses or phone numbers didn’t match on a couple of reports and it just looks unprofessional.  

What is Business Credit and Why Do You Need It ?

Biz Credit SuiteWhy do you need separate credit for your business? First, if something bad happens and your personal credit goes down, you need to be able to continue to run and grow your business. If your business has its own strong credit, you can still do that regardless of what is happening with your personal credit. 

While it is true a new business will not have any credit of its own, it doesn’t have to be that way forever. There are ways to build credit for your business quickly so that when the time comes, you can keep your personal credit separate and finance business growth using your business credit.  Learning all you can about business credit is the first step in building it.

The great thing is, building credit for your business and building fundability both start the same way, with the foundation. 

The Setup Affects Both Business Credit and Fundability

You have to set up your business properly.  It has to have a fundable foundation to build separate credit and to build fundability as a whole. What makes up a fundable foundation?

Separate Contact Information

The first step in setting for  fundability is to ensure your business has its own phone number, fax number, and address.   That’s not to say you have to get a separate phone line, or even a separate location.  You can run your business from your home or on your computer. You don’t even have to have a fax machine.  

In fact, you can get a business phone number and fax number pretty easily.  They will work over the internet instead of phone lines.  In addition, the phone number will forward to any phone you want it too so you can simply use your personal cell phone or landline.  Whenever someone calls your business number it will ring straight to you. 

Faxes can be sent to an online fax service, if anyone ever happens to actually fax you.  This part may seem outdated, but it does help your business appear legitimate to lenders. 

You can use a virtual office for a business address. This doesn’t play out how you may think.  This is a business that offers a physical address for a cost. Sometimes they even offer mail service and live receptionist services.  In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person. 

Get an EIN

The next thing you need to do is get an EIN.  It is an identifying number for your business that works similar to how your SSN works for you personally.   You can get one for free from the IRS.

Incorporate

Incorporating your business as an LLC, S-corp, or corporation is vital to fundability.  It helps your business appear legitimate, and also offers some protection from liability. 

You can incorporate as an LLC, S-corp, or full blown corporation.  Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your tax person and your attorney.  You are going to lose any time in business that you have.  When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated as well. 

This is why you have to incorporate as soon as possible.  Not only is it necessary for fundability and for building credit for your business, but so is how long you have been in business.  The longer you have been in business the more fundable you appear to be.  Time in business begins on the date of incorporation, regardless of when you actually started doing business.

Keep your business protected with our professional business credit monitoring.

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will help you keep track of finances.  It will also help you keep them separate from personal finances.  This is necessary for tax purposes anyway. 

In addition, there are several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance.  Also, you cannot get a merchant account without a business bank account. Consequently, you cannot take credit card payments.  Studies show consumers tend to spend more when they can use a credit card.

Licenses

For a business to be legitimate it has to have all of the necessary licenses it needs to run.  If it doesn’t, warning signs are going to go up everywhere.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

I am sure you are wondering how a business website can affect fundability.  Here’s the thing.  These days, you do not exist if you do not have a website. However, having a poorly put together website can be even worse.  It is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders. 

Spend what you need to in an effort  to make sure your website is professionally designed and works.  Also, pay for hosting. Don’t use a free service.  Along these same lines, your business needs a separate business email address.  It should have the same URL as your Website.  Don’t use a free service such as Yahoo or Gmail.

What does all of this have to do with separate credit for your business?  Before your business can have its own credit, it has to be set up as an entity separate from the owner.  The fundable foundation is how you make that happen. 

How Does Business Credit Fit in to Fundability?

Now that you know what fundability is and how to set up your business to be fundable, you need to know how business credit fits in.  

Credit Reports

Business credit agencies issue reports much like your consumer credit report.  They detail the credit history of your business.  It helps lenders determine the creditworthiness of  your business.  

Where do these reports come from?  There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

In addition to the reporting agencies that directly calculate and put out credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data the agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, there are identifying numbers that go along with your business’s credit reports.  You need to be aware that these numbers exist.  Some of them are simply assigned by the agency, like the Experian BIN.  One, however, you have to apply to get. It is absolutely necessary that you do this. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  To get a D-U-N-S number, you have to apply for one through the D&B website

Business Credit History

Your credit history is the main piece of  your credit score. In turn, your credit score is a huge factor in the fundability of your business.  

Your credit history consists of a number of things including: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be.

Keep your business protected with our professional business credit monitoring.

Business Information

On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it.  However, when you start changing things up like adding a business phone number and address or incorporating, you may find that some things slip through the cracks. 

This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up.  Maybe your business licenses have your personal address but now you have a business address.  You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?  

The key to this piece of the business fundability is to monitor your reports frequently.  This way, you can see if any mistakes are affecting your credit, and get them fixed.

Fundability is to Business Credit as Turkey Is to a Turkey Sandwich

I know, I know, another analogy might be overdoing it.  But think about it, you can have a sandwich without turkey, but it’s not a turkey sandwich.  It’s something else. You can have all the pieces of fundability without business credit, but it won’t hit the spot. 

Without true business credit, even if every other part of fundability is in place, you’ll still be missing out on a ton of funding opportunities.  Definitely work on building strong credit for your business. It’s a huge part of fundability. However, don’t let the other facets of fundability slip.  You need the whole puzzle to see the big picture and get the big money.

The post How Does Business Credit Fit into The Big Picture of Fundability? appeared first on Credit Suite.

How to Determine the Recession Fundability of Your Business

Recession Fundability: How Your Business Can Get Fundable

So, recession fundability means what? What does it mean when we say a corporation is fundable? This recession fundability analysis ought to get you thinking about your company – and company credit in a whole new light.

Recession Fundability Means What?

So let’s get what recession fundability means out of the way from the very start.

Recession fundability means of or capable of being funded; deserving of being funded, even in a recession.

But what is the fundable meaning in our context?

In the Business Credit Context, Recession Fundability Means What, Exactly?

Here, recession fundability means something a bit different.

So the fundable definition is still ‘capable of getting funding’. It additionally implies – able to be funded by a lending institution or a credit company.

With this fundable meaning, we look more at what credit providers and lenders want to see. But let’s go back for a moment.

Why Fundability Matters

So you’re an entrepreneur. And like each and every single other business owner, since the beginning of time, your company needs money.

There are a few methods for companies to get cash. Without entering into core details, the main ways for companies to get cash are to:

(1) Sell products or services

(2) Sell their assets such as land, vehicles, tools, or office space in buildings they have

(3) Get crowdfunding

(4) Get angel investing or venture capital payments, or

(5) Borrow money.

So for the purposes of our fundable meaning, we are only looking at # 5.

But lenders and credit providers want to see if your business is a good credit risk. 

Fraud Runs Rampant

Complicating matters is the problem of scams. Per a 2009 Experian report, “fraud-related costs for U. S. businesses are more than $50 billion annually. This figure may understate the extent of the problem, as estimates show that up to 30 percent of all bad-debt commercial losses are due to ‘soft’ fraud, which primarily occurs from material misrepresentation on an application. Combined with the fact that business fraud is estimated to be three to 10 times more profitable than consumer fraud, business fraud has become a growing concern for organizations.”

As a result of so much fraud, lenders and credit providers examine credit applications exceptionally thoroughly.

Basically, they are looking for any way to tell you no when you come to them for money. Their fundable definition includes the element of fitting their requirements for not being scammers. For financial institutions and the like, company legitimacy makes all the difference in the world. No legitimacy, then no funds. It’s that simple.

Due to their careful checks for fraud, lenders and credit providers consider many different aspects of your application. So they look at many aspects of your corporation, as well. And they are even looking at facets of you, the owner.

Your mission is to alleviate their fears of scams. And you do this by getting rid of every reason they might use, to possibly say no to offering you cash.

A Significant Side Benefit to All This Fundability

There’s another reason that fundability matters. Your leads and customers also want to feel that your company is the real deal. They do not wish to do business with what they view to be a fly by night operation. And could you blame them?

Developing and enhancing fundability to lenders and credit providers will have an added bonus. So that is of giving off a dependability vibe to individuals and corporations intending to buy your goods or services.

Fundability Data Details

Fundability begins with understanding what lenders and credit issuers are seeking. Then we’ll take a look at just how to most effectively accomplish and supply what they want.

Fundability all begins with your industry.

Your Industry Can Affect Recession Fundability

Some industries are believed to be high risk or restricted. These industries, by definition, are most likely to have a more difficult time getting funding of any type.

Industry Selection High Risk or Restricted

Normally, restricted and high risk industries have some things in common. There may be high risks of injury at work. Or the industry might engage in a lot of cash transactions. This is true no matter the safety record of a specific firm, or most of its transaction types.

A Look at Some High Risk Industries

Per the SIC, the following industries are high risk: travel agencies. The NAICS concurs.

A Look at Some Restricted Industries

Per the SIC, the following are restricted industries: pawn shops. The NAICS agrees.

Industry Aligned on All Records

This is the concept of congruency. And it is going to turn up over and over. Business credit reporting bureaus and lenders will analyze your corporation meticulously. Among the main ways they do this is by strictly looking for matching records.

Due to this, if your records do not all match, it will turn up as if they are missing. Missing records will activate a rejection, as a loan provider will assume fraud on its face.

Therefore, it is critical to ensure that every record, everything, is identical.

It goes beyond your industry. It’s also your corporate name, address, phone and fax numbers – everything! These must look the same everywhere. So this includes in IRS records. And in your firm’s records with Dun & Bradstreet, Experian, and Equifax. It also means all licenses required to run your company, and incorporation documents.

Copy/paste this information; do not chance it with retyping.

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Demolish your funding problems with 27 killer ways to get cash for your business. Get money even during the worst of a recession.

Even Your Business Name Can Affect Recession Fundability

You can be innovative when naming your company.

So you want to craft the ideal remarkable name which is easy to spell and say. And you want it to evoke your corporation’s mission statement. But there’s also the matter of risk. Including a risky business type in your corporate name will cause financing rejections.

There is nothing misleading, unlawful, or underhanded by doing this. So it’s okay to keep the name of a high risk or restricted industry out of your business name.

Listed ownership uniform

Congruency counts here, too. Your listed corporate ownership must be the same anywhere you list it.

All corresponding pages list uniform business data

It is best practices to keep a record of every place where your corporation has a listing.

Website

A professional website is a must. A small business needs a professional-looking web site. And it must have site hosting from a provider like GoDaddy. Don’t use Weebly or Wix. It needs to be your domain, not domain.wix.com. Use Upwork to employ people who can help you get set up. Get a professional logo from Fiverr.

Industry aligned

Check out the more successful competitors you have in your industry. What do they include? What do they omit? And what do they highlight?

You do not need to copy another website. And it isn’t in your best interests to do so, anyhow. But do not hesitate to crib from a few of their better ideas. If those concepts work for them, then they may benefit you, too.

Business owners listed

Just like on the documents of the business, you need to display the owners of your business. 

Customers and potential customers want to know who they’re dealing with.

And don’t neglect to include your About Us web page on your checklist of locations with corporate information which must be consistent.

Business name and address uniform

Congruency is a requirement here as well. 

Special characters

It’s the exclamation point in Yahoo! or the like. Don’t do this, if you can at all help it.

There are going to be people inputting your company name right into internet browser address bars. By including special characters, you’ve just made it harder for them to do that.

Industry in name

Is it better to place the name of your industry into your company name, or not?

If your industry isn’t high risk or restricted, then it may be a good idea. Making things clearer for your prospective customers and customers is often beneficial.

But do not place the name of a high risk or restricted industry in your company name! There is absolutely nothing deceptive or misleading about this.

Available with state

Is your business name offered in your state? Check your name with your Secretary of State — they may require that a business name be unique.

Searchable

Any web site must be searchable.

Because if you make your customers and prospects go to another web site, they might not return.

Your Business Address Can Affect Recession Fundability

A corporate address must be a real brick and mortar building. It must be a deliverable physical address. This can never be a home address or a PO Box. Do not use UPS mailing addresses. Some lenders will not approve and fund unless this criterion is satisfied.

PO Box PBSA

A PO Box PBSA stands for a PO Box Post Box Street Address. Lenders and credit providers know that these are really post office boxes. They will see these as being non-legitimate ‘addresses’, just like post office boxes.

Physical or virtual office (CMRA)

Many business owners, particularly startup owners, do not have the money for actual office space. But loan providers check USPS and places like Google Maps to see if you’re using a home address. If you are, you often get an immediate decline. Never use a home address on your application. Even if your firm is just you.

Luckily, the good news is, virtual offices are available in all states and many cities.

A virtual address is a great solution. We recommend Alliance Virtual Offices, Regus, and DaVinci.

Same state business is incorporated

Your virtual office, preferably, must be in the same state where your company is incorporated.

Mailing address vs. physical address

In the very same vein as the caution against a PBSA, you need an actual physical address versus a mailing address.

Even Your Business Phone Number Can Impact Recession Fundability

Your corporation must have its very own telephone number. Do not give a personal cell or residential phone as a company phone number. But VOIP (voice over internet protocol) is fine.

Likewise, your business phone number must be toll-free. This is 800 exchange or such.

Uniform number

Again, congruency is an absolute requirement. This includes using the area code anywhere the number is listed.

Mobile, Home, and Business numbers

A cell number or home telephone number as your primary business line may get you flagged as un-established. Your corporate number must only be used for your corporation. It must not be an added line for your family to use.

Recession fundability means the company’s phone is just for the business and no one else.

Voicemail content

Your voicemail greeting should, at an outright minimum, inform the client who they have reached and when you can return their telephone call.

Business 411 Listing

You must list your company telephone number on 411. You can do so on ListYourself.net.

Your phone number needs to have a 411 listing for most credit issuers, lenders, vendors, and even insurance providers to approve you. Check your record to see if you’re listed. Ascertain your information is accurate.

Business name and telephone number uniform

As always, congruency is crucial here.

Time in Business

The amount of time you have been in business is, of course, a sign of reliability and for that reason fundability to lenders and credit providers.

Incorporation date

But what is the day when a corporation starts? It’s the day of incorporation. This is one reason why, the quicker you incorporate, the better.

Business license issue date

Does your business have every one of its necessary licenses to operate in your industry and area? When did you get your licenses? A lender or credit provider won’t consider your company to genuinely be in business if you’re missing essential licenses. The faster you get licensing, the better.

With no license to work in your industry, your ability to attain fundability is cut off at the knees. The lender or credit provider will feel it’s more important to safeguard the public than to give you funding.

A Business Bank Account is Vital for Recession Fundability

A vital piece of the fundability puzzle is having a separate business bank account. You need a business bank account, to keep funds separate from your personal accounts. Commingling personal and company funds and expenses is a recipe for an audit from the IRS. The simplest way to keep these two universes distinct is to have separate bank accounts.

Bank account open date

The day you open your business bank account is an important one in the life of your corporation. The account opening date is the business’s opening date, far as lenders are concerned. A longer history is better.

It’s also the business’s opening date, so far as the business CRAs see it. This is because the business CRAs have seen some firms try to do an end-run around time in business requirements by buying shelf corporations.

A shelf corporation is a corporation with value only in its age and nothing else. CRAs see the practice of buying them as deceptive. As a result, business owners can wind up spending hundreds if not thousands of dollars for a shelf corporation, only to see their cash wasted when the age of the shelf corporation isn’t taken into consideration by the CRAs at all.

Actual business account (not personal)

There are some similarities between personal and business bank accounts. But to open a business bank account, the business owner must submit added documentation. This includes business registration paperwork. It can often (though not always) include proof of having an EIN.

A business bank account lists both the owner and the business. Such accounts may require a certain minimum balance to avoid maintenance fees. Fees in general tend to be higher than those for personal business bank accounts.

Business name, address, and ownership uniform

Congruency is a requirement here, as it is in all other areas.

Checking account history

Financial institutions keep credit ratings which help them determine whether to lend your company cash. Essentially, these are unbiased measures of fundability, per the lender. In part, these scores are based upon the historic actions of you with reference to your business bank account.

A rating of Low-5 is usually believed to be the minimal rating for getting funding.

Possibly the simplest way to accomplish and maintain a terrific bank credit score is to deposit a minimum of $10,000 into your business bank account and keep it there for as long as three months. On top of that, make consistent deposits.

These activities will help in three ways. One, you will have maintained a superb minimum balance for a minimum of three months. Two, you will probably not overdraw with such an outstanding balance. And three, you will be at the magic minimum for a Low-5 bank credit score.

NSFs and Negative Balances

Writing checks with insufficient funds (NSFs), or going into the red are certain ways to ruin your bank rating.

By keeping a minimum balance of $10,000 on a consistent basis, you will, generally, make NSFs and negative balances a distant memory.

Your Business Entity Can Affect Recession Fundability

A business entity defines issues of liability. And it makes a difference when it comes to taxes.

The best business entity for fundability is a corporation.

Corporations are legally distinct from their owners. This is the case even when a business has just one employee or only one owner. Or they are the same person. Whether you choose a C-corporation, an S-corporation, or an LLC is your choice. Speak to an attorney or an experienced tax expert to find out which is the best possible choice for you.

Sole proprietorship

A sole proprietorship means the business owner is it when it pertains to liability and tax obligations. Nobody else is responsible.

DBA

Any complete business name must include any documented DBA filing you use. This is a necessity for records congruency.

But no matter what, if you run a small business as a sole proprietor, the best thing to do is to incorporate. If you have already filed a DBA, you will still have to move onto a corporate business entity. You should only look at a DBA as an interim step on the way to incorporation.

Good standing

Check with your Secretary of State to ensure they have all the needed information for your corporation. See to it that you are in good standing with them. And make sure that your entity is active. You must file annual reports and pay a yearly fee to stay active.

Foreign filing

A foreign LLC is a limited liability corporation formed in one state but registered in another state. It isn’t an LLC formed outside of the USA. A distinct registration is needed because the laws between the states vary.

If your corporation operates outside of your state, it will reinforce fundability to foreign file.

Registered agent

A corporation will also need to choose a registered agent that they show on the Articles of Incorporation. A registered agent receives service of process and legal and tax papers on behalf of the corporation.

Business name, address, owners, and listed ownership uniform

Congruency is necessary here, as in all other areas. This includes if you were in business prior to incorporating, as commonly states will require a business to use a term like ‘incorporated’ or ‘LLC’ in its name.

Date acquired

If you purchased your company from another person, when was that? It will count toward time in business. The longer, the more fundable your business is.

EIN #

Visit the IRS site and get a free EIN for your company. This is also where you pick a business entity like corporation, LLC, and so on.

To open a business bank account, you need an EIN, so get this out of the way first. The IRS has a form for everything, including getting an EIN, the Federal tax ID number. This is form SS-4. When you have filled it out, either mail or fax it to the appropriate office. The form has this info.

EIN issue date

You must get your EIN ASAP, so you have it for filing tax returns and making bank deposits. Per the IRS, if you do not have an EIN by the time your business tax return is due, write ‘Applied For’ and the application date in the space where you’re supposed to add the EIN. Do not put your Social Security Number there. See: 

Being behind in filing your taxes will not do your business any favors regarding fundability.

Business name, address, owners, industry, contact information, and listed ownership uniform

Congruency is a necessity on your EIN application, as in all other areas.

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Your Email Can Even Affect Recession Fundability

Corporate e-mail addresses must be professional. This means something like admin@yoursite or info@yoursite.

Company domain

Your corporate e-mail must be on the exact same domain as your company. Do not use generic free e-mail services likes Gmail, Yahoo, or MSN.

Uniform on all records

As everywhere else, congruency is a necessity for email records.

Business Licenses

A business must have all of the licenses necessary for running.

These licenses all must be in the perfect, precise name of the business. And they must have the very same business address and phone numbers.

This means not just state licenses. But it can possibly also mean city licenses. Check with your Secretary of State’s office. Here, recession fundability means being responsible. 

Business name and listed owners uniform

Congruency is a requirement on your company licenses, as in all other areas.

License obtained when required (not always required)

Your state and industry may have their own licensing requirements, if any. The best place to find the specifics is with the Secretary of State’s office for the state where your company is incorporated. If you do business in more than one state, then check their Secretary of State offices as well.

Business Credit Reports

Fundability often depends upon business credit.

Bureaus

The most significant and best-known business credit reporting agencies (also called CRAs or bureaus) are D&B, Experian, and Equifax.

D&B report

This is the only bureau for credit monitoring strictly focused on business credit. It checks your corporation’s interactions with suppliers and vendors. Many potential suppliers check the Dun & Bradstreet report on your corporation before offering credit terms. This means it is important for you to keep the D&B report of your company updated and accurate.

Experian report

Like Dun & Bradstreet and Equifax, Experian also gathers info available in various public records together with details from collection agencies, credit card companies and various other data sources.

Equifax report

This bureau likewise collects all trade credit information and information from various public records to review your corporation’s creditworthiness. However, their report depends heavily on how your corporation interacts with various banks as well as different traditional lenders like credit card providers.

Business Data Agencies

These businesses gather data and supply it to the business CRAs.

CreditSafe

CreditSafe provides corporate and consumer reports. They also provide monitoring, collection services, and financial statements.

CreditSafe also provides alternative credit, where they base some of their scoring on utility and rent payments. These payments are usually not taken into consideration by other CRAs unless they’re late. CreditSafe reports these payments whether positive or negative.

Utility payments on your CreditSafe report can include power, cable, internet, and phone. You can include other third-party payments like Credit Suite, CRM, and software.

LexisNexis Report

LexisNexis is a source where a number of the lenders denying loan applications get their information from. They offer information regarding likelihood to pay, or not.

Lenders compare LexisNexis info to what you put on your financing application. If the application and LexisNexis don’t match, then loan providers will deny you a loan. They will see the incongruity as fraud.

SBFE

The SBFE collects information on small businesses from its members, which are loan providers. Lenders use this info to make credit decisions.

FICO SBSS

FICO uses its SBSS (Small Business Scoring Service) Score to integrate consumer bureau, monetary, application, and business bureau data. FICO then validates their SBSS versions for deals like Credit line transactions, and term loans. And it looks at commercial card obligations up to $1 million. The idea is to review just how your small business pays off all kinds of loans.

Business credit providers and the SBA use the FICO SBSS score as a tool to choose whether they should authorize a loan to your company.

Identification Numbers

The CRAs use identification numbers to designate your company.

BIN # (Business Identification Number)

Experian’s BizSource assigns a BIN.

D-U-N-S #

Start at the D&B website and get a free D-U-N-S number. If there is no D-U-N-S number, then there is no record and no PAYDEX score. Your D-U-N-S plus three payment experiences gets you a PAYDEX score.

Business Credit History

Your company credit history is the single most important driver of your business credit scores. Here, fundability means paying your business’s bills on time.

Late repayments will impact your business credit score for years. If you pay your business financial obligations off, as fast as possible and as fully as possible, you can make a very real difference in your credit scores. No other aspect of business management more directly influences your company credit scores.

Make sure to pay on schedule and you will directly and favorably impact fundability.

UCC Filings

If the business owner has poor consumer credit, lenders will often take out a UCC blanket lien if they give your corporation funding.

A UCC blanket lien is a note which goes on your credit report. It says that the lender has an interest in all your corporation’s assets until you pay off the loan in full. Thus, there may be dire consequences if you default.

These UCC filings are a matter of public record. Lenders and credit providers take them into consideration when deciding if your corporation is fundable.

Judgments, Liens, and Bankruptcies

These are all a matter of public record. And they can all negatively impact recession fundability.

Together with UCC blanket liens are any other kinds of liens as against your business assets. A lien is a credit provider’s right to retain possession of property belonging to until the financial obligation owned by that individual or company is discharged.

A lien isn’t quite the same as collateral — it’s the property which is subject to the lien is the collateral.

Total number of trade accounts and highest credit limit

These come from credit issuers which give you starter credit when you have none. Terms are generally Net 30, rather than revolving.

The more trade accounts, the better. In general, at least five to eight are necessary before moving onto credit cards which are harder to get. But pay attention to your highest credit limit.

Your highest credit limit is an important figure for credit issuers and lenders. For example, unsecured financing can result in a loan of 5 — 8 times the amount of your highest revolving credit limit account. So, by definition, the higher your highest credit limit, the more you can get from this form of financing.

In addition, some credit issuers want to see a particular high credit limit before they issue credit to your business. In general, a few high credit limit accounts do more to enhance business fundability than a large number of very low credit limit accounts.

Age of trade accounts

How long have your trade accounts been open? This should correlate more or less directly with your time in business. By getting trade credit ASAP, your trade accounts are as aged as they can be.

Don’t buy business tradelines, to artificially inflate the age of your trade account. The FBI has found that the trade line company can be a fake and the primary card holder can be a stolen identity in these kinds of scams. Business CRAs are well aware of these scams. If you or your business are caught, you will be blacklisted by CRAs like D&B and your fundability will likely never recover.

Financial data

Lenders and credit providers want to see your business’s financial data. Without this information, they will wonder if they can trust your statements about your business’s financial solvency. Increase fundability by providing this information when requested.

Open accounts

Opening and responsibly using corporate credit accounts can help you raise your available credit and enhance your credit rating. The trick is to use your credit. Just opening a number of accounts and never using them is not going to do anywhere near as much to improve fundability.

Closed accounts

Closing accounts has a direct impact on overall credit history. If a card is closed and is in good standing, it will fall off a credit report at some point. And as soon as it’s gone, the history which accompanied it is gone, too. A card in good standing can be closed by the card owner or by the credit provider if the card owner hasn’t been using the credit. This is different from a card closed in poor standing, where that info stays on your credit report for longer.

By closing accounts, you are tanking the average age of your accounts. It’s a part of fundability over which you have control — just use your credit and pay it back quickly. This way, your providers won’t feel the need to close accounts for non-use.

Business Information

The most essential issue with your corporate information is to be absolutely sure it is consistent from document to document.

Business name and address, listed ownership, and contact information uniform

Congruency is a requirement in your corporate CRA records, as in all other areas.

Financial Statements

Many credit providers and lenders not surprisingly wish to see your business’s financial statements.

Business Financials

Business financials include if your business is making a profit. And they include if your financial forecasts for the coming quarters.

Business tax returns

Some alternative loan providers currently offer credit lines for $50 — 150,000. They will frequently only want tax returns versus all income documentation. For over $100,000, you must supply a P&L and a balance sheet.

The approval amount is typically 10% of annual sales per company tax returns.

Business financial statements (company/accountant prepared or audited)

Standard company financial statements include your income statement, a statement of retained earnings (AKA the statement of owners’ equity), company balance sheet, and a statement of cash flows.

It will considerably and positively impact your fundability if you have them prepared or at least audited by an accountant or an accounting company.

# of years tax returns filed

For how long has your company been operating? And how many years has it been filing tax returns? Those numbers must be the same, even for years your business loses cash.

Reported income and expenses

What is your corporation’s reported income? Do your reported expenses surpass your reported income? Are they proportionate with those expected from a business of your size, age, and industry?

Taxes up to date

Are your business’s taxes up to date? If payments to the IRS are slow as well as late, it sends a message. And lenders and credit issuers will believe your payments to them will follow the exact same pattern. 

Personal Financials

Particularly for newer companies, credit issuers and lenders will wish to see your personal financials.

Personal financial statements

Can your personal financials be located? Do they show responsible financial stewardship? 

Personal tax returns and how many tax returns can be offered

Are your personal tax returns in order? Can you locate tax returns and supply them if requested? Do you file on time? If you have to pay, do you pay on time? If the answer to any one of these questions is no, then fundability is damaged.

Reported income and expenses

Do they match the earnings and expenses expected from the owner of a company of your size, age, and industry? 

Debt to income

This ratio is all of your monthly debt payments, divided by gross monthly income. This number is how lenders and credit providers measure your ability to pay back whatever you borrow.

Child support and Criminal record

So both affect fundability. Are you up to date on child support payments if you do not live with a minor child? Do you have a criminal record? 

Bureaus

Just like there are business credit reporting agencies, there are CRAs for personal credit.

Experian and Equifax

So in addition to reporting on business credit, Experian and Equifax also report on personal credit.

TransUnion

TransUnion only reports on personal credit. A TransUnion credit report can include your personal mortgage account, even if you completely paid your mortgage off. Your TransUnion report will also show any public records about you, such as judgments against you.

Data Agencies

There are companies which collect data and provide it to the personal credit reporting agencies.

ChexSystems

Some banks and other credit issuers use ChexSystems to get more information on your personal credit habits. They also report on insufficient funds, closed accounts, and overdrafts.

LexisNexis

Lenders use LexisNexis information to cross-check loan applications. So they want to see if loan criteria are being met. They want to determine if what you claim on your application jibes with the records. And they want to know if it’s likely your business will fail.

FICO

Your FICO score comes from your payment history, amounts of owed, length of credit history, credit mix, and new credit. Together, the first three elements comprise over 3/4 of your FICO score. Responsible financial management, over time, will boost fundability the most effectively.

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Personal Credit History Can Affect Recession Fundability

Much like your business credit history matters for what fundability means, so does personal credit history.

Accounts over limit

If the number of accounts over limit is more than zero, it can tank your fundability.

Authorized users

Are the authorized users on your accounts strangers you’re getting to pay you to piggyback on your credit? This is just barely this side of legal and often a prelude to fraud. Most credit issuers and lenders will see it as proof of intent to commit bank fraud.

Short sales

In a short sale, you try to sell your home for less than you owe. But this can only happen if the lender agrees. If the house sells, lender keeps the proceeds. Not all lenders agree to a short sale. Often, homeowners must be 90 or more days late for a lender to so much as consider the idea.

Some lenders may not forgive the unpaid balance on the mortgage. Some state laws let lenders seek deficiency judgments. So those force you to repay the difference between the sale price and the balance due on the mortgage.

Lenders report a short sale to TransUnion, Experian, and Equifax as a charge off, settlement, or deed-in-lieu of foreclosure. Or they can be a loan settled for less than the amount due. How a lender reports the short sale can significantly impact the damage to your credit score.

Any late mortgage payments made before sale will further undermine your score. If lender gets a deficiency judgment to collect the mortgage balance, that also will damage your score. And so will the amount of the deficiency.

So a short sale will drop a personal credit score by up to 100-150 points. The higher your credit score to start, the more it will plummet.

Short sales can remain on your credit report for as long as seven years. But it isn’t as bad as a foreclosure or a bankruptcy.

Settled debt

Settled debt is a plus for fundability.

Foreclosures and late payments

So just like a bankruptcy, foreclosures hurt your fundability. And the larger and later your late payments are, the worst it is. And the more of them there are, the more they harm fundability.

Opened accounts

With fewer than five, your file may be seen as “thin” and it will negatively impact your fundability.

Financing facilities reported and history length

In general, major retailers and banks on a report correlate with a longer and more favorable personal credit history. But a shorter credit history is generally not seen as favorably as a longer one.

Inquiries

More than two recent inquiries will be seen as proof of credit shopping.

Utilization per credit card/line

Credit Utilization Rate is credit in use, divided by total available credit. Keep this ratio at about 30% or less. Experian checks utilization rate both overall and per credit card.

Bankruptcy

This is a court proceeding where a judge and a court trustee check your assets and liabilities. Personal bankruptcy tends to be conflated with a lack of personal financial responsibility.

So will an explanation to a credit provider or lender help with fundability? It’s worth the effort.

Even the Application Process Has to Do With Recession Fundability

So even the process of applying can have an impact on your fundability.

Application Submission

So how are you submitting your application? What does your lender or credit provider prefer?

Timing Can Impact Recession Fundability

Your most recent three months’ worth of bank account management loom large. This is due to a number which banks keep but don’t publicize, the bank rating.

A bank rating measures the average minimum balance as kept in a business bank account over a three-month period. Therefore a $10,000 balance ranks as a Low-5, a $5,000 balance rates as a Mid-4, etc.

A small business’s chief goal should always be to keep a minimum Low-5 bank score for at least three months. So this means an average $10,000 balance. Without a minimum of a Low-5 score, most banks assume one thing about the business. It’s that the business has little to no ability to pay back loans or business lines of credit.

Lender negotiations and online, paper or in personal application

In particular, an application presented in person allows for a dialogue and negotiations. This is seen as the most serious and generally the most fundable.

Lending product selected

Are you trying for a very large loan the first time around? So you probably won’t get it. By proving your financial responsibility, lenders will be more likely to loan to you. And they will want to loan you more.

Lender

Many lending institutions prefer working with certain industries. If the bank is more comfortable with your industry, then it will help your fundability cause.

Business ownership, name, and address verifiable

Ownership documents will prove your business ownership, name, and address and bolster your fundability.

Recession Fundability Means What, on Balance?

Keep all records consistent to ensure fundability. Set up your business legitimately, with a domain, phone numbers, an address, and more. So get all ID numbers and register with the IRS. And set up your business bank account for fundability. Keep all business financials organized. And have them prepared by a competent professional. Get your personal credit ‘house’ in order.

Recession fundability means your business can get financing from a credit provider or lender.

The post How to Determine the Recession Fundability of Your Business appeared first on Credit Suite.

SBSS Score and Fundability: When Two Worlds Collide

You already know your credit scores, both personal and business, affect fundability.  But did you know that there is one business credit score that uses not only both business and personal credit history, but other information as well.  It gives lenders a much broader picture when it comes to fundability. You need to understand how your SBSS score can affect the fundability of your business. 

How your SBSS Score Fits into Fundability

There are many factors to consider when it comes to small business financing. You need your credit in order, you have to have complete financial statements, and beyond that there are many other things that affect the fundability of your business.

The business credit score is what often causes issues. Sometimes the business credit score is bad, but just as often it is nonexistent. No credit score is pretty much the same as a bad credit score. That isn’t the end of the story for most borrowers however.  This is why the FICO SBSS has become so popular.  

Keep your business protected with our professional business credit monitoring

SBSS Score: What Is It? 

The FICO SBSS is the business version of your personal FICO credit score. It is becoming more common for lenders to use this score, rather than the Experian business credit score or even the D&B PAYDEX. It stands for FICO Liquid Credit Small Business Scoring Service.

Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better. But most lenders demand a score of at least 160. 

SBSS Score: How Is It Calculated 

The scoring model for this score is very different than other business credit scoring models. Honestly, it actually gives a better picture of overall fundability in some ways.  This is because it uses your business and personal credit scores.  Also, financial information like business assets and revenue come into play. The point of the SBSS sore is to give a picture of total fundability in one score. 

Business owners cannot access this score themselves. The formula for calculations is proprietary and well-guarded by FICO. They do not make the information public. When you go to a lender, you go in blind about what your score may be. In contrast, with the other credit agencies you can actually get a copy of your credit report and know where you stand. 

The reason this does not work the same way is surprising to many.  The truth is, you could have a different score from lender to lender.  This is because of how lenders request your score. 

SBSS Score: How Lenders Get Your Score

The process starts when you turn in your application.  It will include all the financial information the lender requires.  Then the lender will process the information and send it to FICO with a request for your SBSS score. At this point, the lender can ask for certain factors in the score to carry more weight than others.  For example, they can put more weight on your personal credit than your business credit.  They could choose to weigh annual revenue as more important than payment history. It is their choice. This is why your FICO business score could vary between lenders.

SBSS Score: What Does FICO Do with the Request? SBSS Reports and Scoring Credit Suite

First, they get the request from the lender. They then search business credit information from business CRAs. These include D&B, Experian, and Equifax.  If they cannot pull enough scoring information from one, they move onto the next. If there is not enough data from any of them, then it uses personal credit and business financials only. 

With the lender’s weighting preferences, personal credit, business credit, and business financial data, they calculate the score. The information is specific to that lender.

Who Uses the SBSS Score?  

These days, the SBSS score is becoming more and more popular among lenders that lend to businesses. It is more comprehensive and complete than the other scoring models. This is because it considers more than past payment information from the business. 

Lenders know that there is more to fundability than credit score alone. With SBSS, FICO does the work of piecing together the whole picture for them. This isn’t always a bad thing, unless you are counting on your bad personal credit not being an issue when applying for a business loan. In fact, it can actually help you if you have no business credit. Other than the fact that the highest score possible with no business credit is 140. That is far below the 160 most lenders require.

For now, you need to know that many lenders use this score, and the number is growing. In addition, the Small Business Administration uses it as a pre-screener for its popular 7 (a) loans. The SBA does not itself lend money, but rather it backs certain loans through select lenders. It sets a minimum SBSS score of 140 to be eligible for a 7(a) loan. 

That means if you want this type of loan, you must have a minimum SBSS of 140 before you are even eligible to apply. It is possible to get this type of loan with a score above 140 but lower than the typically required 160. The backing of the SBA reduces the lender’s risk.  

FICO SBSS and Overall Fundability 

While this score gives a more complete picture of overall fundability than other business credit scores, it still doesn’t necessarily tell the whole story.  Here is how each element of fundability comes into play for your SBSS score. 

Business Credit Reports

These are the credit reports, much like your consumer credit report, that detail the credit history of your business.  It is a tool to help lenders determine how credit worthy your business is.  

These come from a number of agencies, but the main three are Dun & Bradstreet, Experian, Equifax.  FICO searches business credit information from these agencies when compiling your score for SBSS. That means, you need to ensure your information with these companies is as complete and accurate as possible.  Business credit monitoring is essential. Another key point here is to ensure your business is set up to be fundable in the first place.  If not, there won’t be a lot for FICO to get from these agencies anyway.

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Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data these agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Since these agencies indirectly affect reports that FICO uses when calculating your SBSS score, they make a difference. 

Identification Numbers 

In addition to the EIN, there are identifying numbers that go along with your business credit reports.  You need to be aware that these numbers exist.  Some of them are simply assigned by the agency, like the Experian BIN.  One, however, you have to apply to get. It is absolutely necessary that you do this. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  To get a D-U-N-S number, you have to apply for one through the D&B website. If you don’t have a score with D&B, you might as well not have a business credit score. As already mentioned, FICO uses D&B information as well as information from other business credit agencies.  

Business Credit History

Your credit history is the crux of what makes up your business credit score, and your business credit score is a big part of your score from FICO SBSS, though how much it matters depends on how the lender requests it be weighted.  

Your credit history consists of a number of things including: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it.  However, when you start changing things up like adding a business phone number and address or incorporating, you may find that some things slip through the cracks. 

This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up.  Maybe your business licenses have your personal address but now you have a business address.  You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?  Monitoring is key for this factor as well. 

This is one of those elements of fundability that lenders may use in conjunction with a credit score.  It doesn’t necessarily affect the score itself, but if can definitely affect whether or not you get approval.

Financial Statements

While the FICO formula is proprietary, many sources state that, if available, information from financial statements is used in the calculation of your SBSS score.  This encompasses a broad spectrum of things.  First, there is the obvious. Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal.  

Regardless of whether they are used in the calculation of the score however, the information on these statements definitely affects your fundability. 

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about.  The data these bureaus hold affects fundability. 

Take  ChexSystems for example.  In the simplest terms, they keep up with bad check activity that affects your bank score.  If you have too many bad checks, you will not be able to open a bank account.  That will cause serious fundability issues. 

For this point, everything comes into play.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? All of this can and will play into the fundability of your business. 

While these factors are unlikely to figure into your FICO SBSS directly, they do, along with your credit score, affect fundability. 

Keep your business protected with our professional business credit monitoring

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion definitely directly affect your SBSS score. If there is a problem somewhere, get to work on it.  The number one way to get a strong personal credit score or improve a weak one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported. 

The Application Process

The loan application process itself can affect fundability also.  First, consider the timing of the application.  Is there any part of overall fundability you need to work on before you apply? Next, ensure that your business name, business address, and ownership status are all verifiable.  Lenders will check this.  Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  If you are applying for a product that won’t serve your purpose, it doesn’t matter if you get it or not.

SBSS Score: It’s a Mystery

The fact is, you do not and cannot know what your score from FICO SBSS will be.  There are too many variables in play. What you can do though, is get a good overall idea of your fundability based on what you know about the factors that affect it.  Once you have this, you can be sure your score from FICO SBSS will reflect it accurately.  

The post SBSS Score and Fundability: When Two Worlds Collide appeared first on Credit Suite.

Fundability and How it Helps During Recession 2020

Get through recession 2020 even though loan risk factors abound. But you can fix a lot of them with assuring fundability. The easiest way to do this is via building business credit. but first, let’s look at what a bank is going to want to know. they want to assess what sorts of small business loan risk factors you bring to the table.

Get By Recession 2020 and Answer Lender Questions and Address Small Business Loan Risk Factors With Fundability

Fundability – or, not just the ability to become funded but how desirable a company is for funding – means different things to banks, venture capitalists, angel investors, and informal investors. That being said, they all agree on a few fundamental principles.

1. Do You Have Positive Cash Flow?

Lenders aren’t in the business of giving you gifts. Instead, they would like to see a profit on their investment. For that reason, if you are bleeding funds, they are not going to want to pay for a piece of what, to their minds, is an unsatisfactory financial commitment.

How do you turn it around? Do some economic triage. Perhaps your firm will not need to have an alternative site. Perhaps you don’t need to have a full-time assistant when part-time will do. Maybe you should be leaning harder on your customers with pending invoices. This is one of the biggest small business loan risk factors.

Start-ups will get a different question – see # 2.

2. Do You Have a Great Product or Service?

For startup companies, the concern is more like: do you have a fantastic product or service? A concept in itself is not going to be sufficient, so you also will want to have a comprehensive business system in place. Investors are going to want to see what you can do with your amazing idea, and how it can be successfully monetized. 

For a brand-new company this is the biggest of all loan risk factors. Otherwise, why bother making a company at all? Particularly during Recession 2020.

3. What Will You Use the Cash For?

If your reply is an unclear, “general fund”, investors are not going to be showing an interest. First of all, they want you to demonstrate you will be responsible with their money. In addition, they also want to know that your business is organized. You can be the most innovative and the very least business-oriented man or woman out there, so long as anyone in your organization is dealing with the financial heavy lifting. Somebody must make sure that the taxes are paid and the invoices go out to your clients.

Investors don’t actually want to see you using the funds for daily operations. If your business is functioning profitably (see # 1), then investors will expect that you can manage those expenses. Rather, they want to see if you are going to employ their funding for something new and different. In general, this implies you must be using their funds for improvement – a new piece of essential machinery; a new shop; a second facility; a new product line – these are just a few plans which would fit the bill for progress. 

See # 4 for the similar question for startups. This is another one of the bigger loan risk factors. Lenders want to know their money isn’t being thrown away. After all, they make a lot more money if you pay your loan off and pay interest. Getting their money back through collections is a lot less profitable for them. And they are going to be looking to maximize their returns during Recession 2020.

4. How Much Funding Do You Need to Reach Positive Cash Flow?

For startups, a similar question is: just how much funding will you need to get to positive cash flow and profitability? In this case, your use for the money is still a distinct one – it’s to bring your new business to profitability.

5. How Much Revenue Yearly Can Your Business Generate After Three Years?

This question is the same whether you are presently in business or you are aiming to get a startup business funded. This will separate the lifestyle businesses (designed to make their owners glad but not develop into bigger players) from the scalable businesses. A lifestyle business normally won’t get this sort of funding. Instead, it will be funded by virtue of secured debt or bootstrapping or secured debt.

A scalable business can still be modest and not expect explosive growth, but still be fundable. Your new widget warehouse might begin small. Investors would expect it to have more moderate funding needs.

6. What Number of Your Existing Clients, Channels, and Partners Will Support Your New Business Growth and Volume?

Introducing new markets (or going for new customers or trying to market new products) will be viewed as riskier, unless you have an established history of financial success via pioneering. See # 7 for the semi-comparable question for startup ventures.

7. How Do You Know That Anybody Will Buy Your Product or Service?

If you do not know your market, then you will not know how to target to those customers. If your clients are middle-aged women, they will most likely respond to different techniques than if your customers are teen boys. Merely making a product and flinging it out to the ether, praying someone will buy it, is not going to sit well with investors. Instead, they want you to have scouted out your prospective clientele prior to you coming knocking and asking for funding.

The rest of the questions are only for startups.

8. How Much Funding Can You Get From Friends and Family to Launch Your Business?

Oftentimes these are your most important investors, or they might be your only investors. Treat them well. This goes double in Recession 2020.

9. How Much Funding Can You Personally Add?

Investors would like to know this amount because it indicates a commitment to the startup. If you want to keep your life savings, you’ll be a lot more careful with funds than if you’re just playing around with other people’s money. Of course you should be even more careful during Recession 2020.

10. Who Comprises Your Team?

Your team does not have to be employees of your business. It can also be consultants and mentors. Contact your school. There might be an educator interested in your new business, even if you never took a class with that person. Not a college alum? Try your nearby community college just the same. A professor might even want to use your company experience and story in a lecture.

Recession 2020 Credit Suite

Learn more here and get started with building business credit with your company’s EIN and not your SSN. Get money even in Recession 2020!

But How Do You Best Address These Risk Factors During Recession 2020? Build Business Credit!

Small business credit is credit in a business’s name. It doesn’t connect to an entrepreneur’s consumer credit, not even if the owner is a sole proprietor and the only employee of the business. 

Because of this, a business owner’s business and personal credit scores can be very different.

Consumer credit scores depend upon payments but also other elements like credit usage percentages. 

But for small business credit, the scores truly only hinge on whether a business pays its debts promptly.

The Process

Building company credit is a process. It does not occur automatically. A company has to proactively work to develop small business credit. 

Having said that, it can be done readily and quickly, and it is much quicker than building personal credit scores. 

Vendors are a big component of this process.

Doing the steps out of order leads to repetitive denials. Nobody can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Company Fundability

A business needs to be fundable to credit issuers and vendors. This is the best way to address any small business loan risk factors.

Hence, a business needs a professional-looking website and e-mail address. And it needs to have site hosting bought from a vendor like GoDaddy. 

Additionally, company telephone and fax numbers need to have a listing on 411. You can do that here: http://www.listyourself.net.  

In addition, the business phone number should be toll-free (800 exchange or similar).

A business also needs a bank account dedicated solely to it, and it has to have all of the licenses essential for running. 

Licenses

These licenses all must be in the perfect, accurate name of the company. And they need to have the same small business address and phone numbers. 

So note, that this means not just state licenses, but possibly also city licenses.

Recession 2020 Credit Suite

Learn more here and get started with building business credit with your company’s EIN and not your SSN. Get money even in Recession 2020!

Working with the Internal Revenue Service

Visit the IRS web site and get an EIN for the business. They’re totally free. Choose a business entity like corporation, LLC, etc. 

A company can start off as a sole proprietor. But they more than likely want to change to a variety of corporation or an LLC. 

This is to decrease risk. And it will make best use of tax benefits.

A business entity matters when it pertains to taxes and liability in case of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and taxes. Nobody else is responsible.

Incorporating is a great way to address small business loan risk factors.

Kicking Off the Business Credit Reporting Process

Begin at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process. 

In this manner, Experian and Equifax have something to report on.

Starter Vendor Credit

First you ought to build trade lines that report. This is also called starter vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score. 

And with an established business credit profile and score you can begin to get credit at even more establishments.

These kinds of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But to start with, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are commonly Net 30, rather than revolving. 

Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. Compared to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of. 

To start your business credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then make use of the credit. 

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

You want at least 3, preferably 5 to 8 of these to move onto the next step, retail credit. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/ 

Note: it can often be possible to apply for starter vendor credit without your Social Security number. Try it by leaving that section blank, or applying over the phone.

Retail Credit

Once there are at least 3 vendor trade accounts reporting to at least one of the CRAs, then move onto retail credit. These are stores, and they can be either net accounts or revolving.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications – if you can.

Fleet Credit

Are there something like 8 to 10 accounts reporting? Then move onto fleet credit. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and take care of vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN. But that is only if that’s possible. It isn’t always possible. So, this is because federal law requires SSNs on anything to do with banks. If a card ultimately comes from a bank, then a Social Security number is necessary, no matter what.

Recession 2020 Credit Suite

Learn more here and get started with building business credit with your company’s EIN and not your SSN. Get money even in Recession 2020!

More Universal Credit

Have you been sensibly managing the credit you’ve up to this point? Then move onto service providers like Visa and MasterCard. Only use your Social Security Number and date of birth on these applications for verification purposes. This is a federal law requirement. For credit checks and guarantees, see if you can use your EIN instead.

These are commonly MasterCard credit cards. If you have 14 trade accounts reporting, then these are more likely to be attainable.

Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and address any mistakes as soon as possible. Get in the practice of checking credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: www.creditsuite.com/monitoring

At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. That will cost about $19.99.

Update Your Information

Update the details if there are inaccuracies or the details is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.

Disputes

Disputing credit report inaccuracies typically means you send a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always mail copies and retain the original copies.

Fixing credit report inaccuracies also means you specifically spell out any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail to have proof that you sent in your dispute.

Taking the initiative and handling any errors as fast as possible will also help address any small business loan risk factors.

A Word about Building Business Credit

Always use credit sensibly! Don’t borrow beyond what you can pay back. Track balances and deadlines for payments. Paying off promptly and completely does more to boost business credit scores than just about anything else. And beyond that, responsible account management will counter any small business loan risk factors.

Establishing company credit pays. Great business credit scores help a small business get loans. Your loan provider knows the business can pay its debts. They know the business is for real. 

The company’s EIN links to high scores and lending institutions won’t feel the need to call for a personal guarantee.

Getting Through Recession 2020: Takeaways

Business credit is an asset which can help your business in years to come. Learn more here and get started toward establishing company credit. And stop worrying about Recession 2020!

The post Fundability and How it Helps During Recession 2020 appeared first on Credit Suite.

What is Fundability in Reference to Business Credit

As a business owner, you may be beginning to hear the word fundability a lot.  It may come from lenders, various media platforms, or your own current creditors.  What is fundability? What does fundability really mean in relation to business credit?  Fundability in reference to business credit is how lenders see your business when considering whether or not to lend money. 

What Affects Fundability in Reference to Business Credit

It is one this to know what fundability is.  Understanding what is means when it comes to business credit is another thing altogether.  What does fundability look like practically when trying to get business funding? 

When discussing fundability in reference to business credit, we are looking more at what credit issuers and loan providers want to see. 

Find out why so many companies use our proven methods to get business loans.

Why Does Fundability in Reference to Business Credit Even Matter?fundable for corporate credit Credit Suite

All businesses need funding. However, there is more than one way to get it.   

(1) Grants

(2) Selling assets such as land, vehicles, equipment, or office space in buildings 

(3) Crowdfunding

(4) Angel investing or venture capital payments, or

(5) Loans

When we talk about fundability in reference to business credit, we are talking about loans and other forms of debt. I mean, lenders are not going to hand out money to just anyone.  Instead, they want to see if a business is a good credit risk. They need to know they will make money.

What Makes a Business Fundable in Reference to Business Credit? 

There are way more factors that contribute to fundability in reference to business credit than most realize.  You see, it is a complicated web that intertwines your personal life with your business in ways you may never truly understand.  We try to break it down here. 

Fundability in Reference to Business Credit: It Starts at the Beginning

Fundability, in reference to business credit, truly starts with how your business is set up. If your business is not already set up in the following way, it isn’t as fundable as it could be. 

Contact Information

The first step to setting up a fundable business is to ensure your business has its own business phone number, fax number, and business address.   That doesn’t mean you have to get a separate phone line, or even a separate location.  You can still run your business from your home or on your computer. 

EIN

The next thing you need to do is get an EIN for your business.  This is an identifying number for your business that works in a way similar to how your SSN works for you personally.  You can get one for free from the IRS.

Incorporate

Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It lends credence to your business as one that is legitimate. It also offers some protection from liability. 

Time in business affects fundability also, and that starts at the point of incorporation.

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will make keeping personal and business expenses separate for tax purposes much easier.  Next, it will help provide separation between the business and you as the owner for business credit building. There are many other reasons as well. 

Licenses

Business licenses are necessary for a business to be legitimate.  If it doesn’t, red flags are going to fly up all over the place.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

I am sure you are wondering how a business website can affect your ability to get funding.  Here’s the thing.  These days, you do not exist if you do not have a website. However, having a poorly put together website can be even worse.  It is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders. 

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service.  Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.

Find out why so many companies use our proven methods to get business loans.

Fundability in Reference to Business Credit: After the Set Up

How your business is set up is just the beginning of fundability when considered in reference to business credit. Here are the other things that affect the fundability of your business. 

Business Credit Reports

Your fundability in reference to business credit hinges largely on the information in your business credit report.  That is the credit report, much like your consumer credit report, that details the credit history of your business.  It is a tool to help lenders determine how credit worthy your business is.  

Where do business credit reports come from?  There are a lot of different places.  However, the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Make sure your reports are updated and accurate.  You have no clue which ones your lender will choose to use.  

Other Business Data Agencies 

Some business credit reporting agencies directly calculate and issue credit reports.  There are other business data agencies that affect those reports indirectly.  Two examples are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data the agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, there are identifying numbers that go along with your business credit reports.  When considering what is fundability, you need to be aware that these numbers exists.  Some of them are simply assigned by the agency, like the Experian BIN.  One, however, you have to apply to get. It is absolutely necessary that you do this. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  To get a D-U-N-S number, you have to apply for one through the D&B website

Business Credit History

This is where you really get to the heart of things when it comes to business credit reports.  Your credit history has everything to do with all things related to your credit score.  Of course, your business credit score is a huge factor in the fundability of your business.  

Credit history consists of a number of things including: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Consistency in Business Information

On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it.  However, when you start changing things up, some things slip through the cracks.  When adding a business phone number and address or incorporating, you can forget to make updates.

This is a problem because of fraud concerns.  Per a 2009 Experian report, fraud-related costs for U. S. businesses are more than $50 billion annually. This could actually understate the extent of the problem, since some estimate up to 30 percent of all bad-debt commercial losses are due to ‘soft’ fraud.  This is usually from material misrepresentation on an application. 

When you consider this, along with the fact that business fraud is estimated to be three to 10 times more profitable than consumer fraud, you can see why it’s a problem. 

Keep your information updated and consistent.  In doing so, you’ll reduce the number for fraud signs sent up by your business. 

Financial Statements

All financial statements count when discussing fundability in relation to business credit.  First, there is the obvious. Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal.  

Business Financials

Honestly, it is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends credence to the legitimacy of your business. If you cannot afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are at the ready whenever you need to apply for a loan. 

Personal Financials

Sometimes, tax returns for the previous three years will suffice.  Get a tax professional to prepare them.   This is the bare minimum you will need.  Other information lenders may ask for include check stubs and bank statements, among other things. 

Bureaus

Surprisingly, there are several other agencies that hold information related to your personal finances that you need to know about.  Everyone knows about FICO.  Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit. 

In addition to FICO reporting personal credit, you have ChexSystems.  In the simplest terms, this keeps up with bad check activity and makes a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account.  That will cause serious fundability issues. 

Likewise, everything comes into play for this point.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? All of this can and will play into the fundability of your business. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion all make a difference.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  Furthermore, if it isn’t great right now, get to work on it.  The number one way to get a strong personal credit score or improve a week one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported. 

Find out why so many companies use our proven methods to get business loans.

The Application Process

Truly, so much plays into this that you may not even think about. For example, consider the timing of the application.  Is your business currently fundable?  If not, do some work first to increase fundability. Next, ensure that your business name, business address, and ownership status are all verifiable.  Lenders will check into it.  Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choosing the right product to apply for can make all the difference. 

Fundability is Reference to Business Credit is a Whole New Ballgame for Some 

The concept of fundability in reference to business credit is a new one for some business owners to grasp.  Since business credit and personal credit are totally separate, it is hard to comprehend how one can truly affect the other in terms of fundability. The truth is, while one does not affect the other directly, the indirect effects of all of the above are far reaching.  

Remember, to keep things moving smoothly, it is important to keep an eye on both your personal and business credit report.  You can get a free copy of your personal credit report each year. In addition, there are a number of options for continuous personal credit monitoring for free. 

Now, Business credit monitoring isn’t free.  There are lower cost options for business however, if you know where to look. 

The post What is Fundability in Reference to Business Credit appeared first on Credit Suite.

A Working Fundability Definition

The definition of fundability is often misunderstood.  It’s hard to get a grip on a fundability definition. The term is thrown around a lot, but few understand what it really means.

Getting a Grasp on a Fundability Definition

Fundability Definition: Foundation

You cannot talk about a working fundability definition without talking about the foundation of fundability.  This is how your business is set up.  It has to appear to be a fundable entity separate from you, the owner.  Like any foundation, it is best to start at the beginning.  It will be faster and easier if you do.  If your business is already up and running however, you may not have that option.  It’s never too late to start, but start now. The longer you wait the harder it will be, for several reasons. 

Contact Information

The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address.   Of course, that doesn’t mean you have to get a separate phone line, or even a separate location.  You can still run your business from your home or on your computer. You do not even have to have a fax machine.  

In fact, you can easily get a business phone number and fax number will work over the internet instead of phone lines.  In addition, the phone number will forward to any phone you want it too so you can just use your personal cell phone or landline if you want.  Whenever someone calls your business number it will ring straight to you. 

You can use a virtual office for a business address. What is that, and how do you get one? It’s not what you may think.  There are businesses that offer a physical address for a fee, and sometimes they even offer mail service and live receptionist services.  In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person. 

EIN

The next thing you need to do is get an EIN for your business.  This is an identifying number for your business that works in a way similar to how your SSN works for you personally.  Some business owners used their SSN for their business. This is what a lot of sole proprietorships and partnerships do.  However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up.  When you are looking to increase fundability, you need to apply for and use an EIN.  You can get one for free from the IRS.

Incorporate

This is the most important step in fundability thus far.  Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It lends credence to your business as one that is legitimate. It also offers some protection from liability. 

Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.    When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated as well. 

This is why you have to incorporate as soon as possible.  It is necessary for an appropriate time in business. The longer you have been in business the more fundable you appear to be.  That starts on the date of incorporation, regardless of when you actually started doing business. 

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

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Keep your business protected with our professional business credit monitoring

There’s more to it however.  There are several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance.  In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments.  Studies show consumers usually spend more when paying by credit card is an option.

Licenses

 For a business to be legitimate it has to have all of the necessary licenses it needs to run.  If it doesn’t, it is a huge warning to lenders.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

I am sure you are wondering how a business website can affect you ability to get funding.  Think about it.  These days, you do not exist if you do not have a website. Still, having a poorly put together website can be even worse than not having one at all.  It is the first impression you make on many, and if it appears to be unprofessional, it won’t look good to potential customers or lenders. 

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service.  Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.

Fundability Definition: Business Credit Reports

This is the credit report, much like your consumer credit report, that details the credit history of your business.  It is a tool to help lenders determine how credit worthy your business is.  

Where do business credit reports come from?  There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from different sources, including public records.  This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data these agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help distract attention from negative information. 

Identification Numbers 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  To get a D-U-N-S number, you have to apply for one through the D&B website. You have to have this number to have a file with D&B, and you have to have a file with D&B to build business credit. 

Business Credit History

Your credit history has everything to do with everything related to your credit score, which is a huge factor in the fundability of your business.  

Your credit history consists of a number of things including: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

On the surface, it seems obvious that all of your business information should be the same across the board.  However, when you start changing things up, like adding a business phone number and address or incorporating, you may find that some things slip through the cracks. 

This is a problem because of those fraud concerns lenders have.  When business information doesn’t match up, it sets off alarms.  Maybe your business licenses have your personal address but now you have a business address.  You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the same information?  

The key to this piece of the business fundability is to monitor your reports frequently.   When it comes to business credit reports, you can monitor through the reporting agencies directly, or save money by going here

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Keep your business protected with our professional business credit monitoring

Fundability Definition:  Financial Statements

Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal.  

It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends to the legitimacy of your business. If you cannot afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are at the ready whenever you need to apply for a loan. 

Often tax returns for the previous three years will suffice for personal financials.  Get a tax professional to prepare them.   This is the bare minimum you will need. Lenders may also ask to see check stubs and bank statements. 

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about.  For example, many business owners do not realize that their ChexSystems report can affect fundability.  In the simplest terms, this details any bad check activity.  It makes a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account.  That will seriously affect fundability. 

Everything can come back to bite you.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? All of this can and will affect the fundability of your business. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion all matter.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  If it isn’t great right now, get to work on it.  The number one way to get a strong personal credit score or improve a weak one is to make payments on time, consistently. 

Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported. 

Fundability Definition: The Application Process

First, consider the timing of the application.  Is your business fundable right now?  If not, do some work to increase fundability. Next, make sure that your business name, business address, and ownership status are all verifiable.  Lenders will check.  Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choosing the right product to apply for can make all the difference. 

To Understand How to Become Fundable, You Need a Working Fundability Definition

You need your business to be fundable. To make it happen, you have to have a working definition of fundability.  That isn’t really enough however. You also need to understand exactly what affects the fundability of your business, and how to mitigate anything that is holding it back.  Then, you can get to work making sure your business is as fundable as possible. It may take some time however, depending on where your current fundability stands.

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The Fundability Meaning Game: What are the Rules and How do You Play?

When it comes to the fundability meaning game, most business owners don’t even know they are playing. Even if they do know, they have no clue what the rules are.  You can’t play if you don’t know the rules. You especially can’t play if you don’t even know you are in the middle of a game. In order to improve your fundability, you have to understand what fundability means.  

5 Rules to Play the Fundability Meaning Game

It can help to first understand what fundability is and how you got in the game to begin with.  In short, fundability is your ability to get funding for your business. Specifically, it is the ability to get loans and credit cards for your business.  

In the fundability meaning game, being fundable means that lenders view your business as a low credit risk with the potential for a good return on investment.  You see, lenders are not just handing out money out of the goodness of their hearts. They are in it to make money. If you want it, you have to play the game. More than that, you have to play to win.  Without further ado, here are five rules to play the fundability meaning game. 

Fundability Meaning Game Rule 1: It Starts Now

The truth is, you are playing the game before you even know it. While not fair, it is simply the way the game works.  Since you are already playing passively before you even know the game exists, you have to start playing actively as soon as you are in the know.  For many of you, that is right now. You are officially in the game.  

Keep your business protected with our professional business credit monitoring.

So how do you start?  You need to ensure your business has a fundable foundation.  Setting up your business to be fundable is vital. Take a look at the elements of a fundable foundation and make any adjustments necessary to ensure you get the best start possible now that you know you are playing. 

Elements of a Fundable Foundation 

You cannot follow rule number one if you don’t know the elements of a fundable foundation. Take a close look at your business and make sure you are all set in this department. 

Separate Contact Information

The first step in setting up a fundable foundation is to make certain your business has its own phone number, fax number, and address.  Some are surprised to find out that doesn’t mean you have to get a separate phone line, or even a separate location. You can still run your business from your home or on your computer. There’s not even a need for a fax machine.  

In fact, you can easily get a business phone number and fax number that works over the internet instead of phone lines.  In fact, the phone number will forward to any phone you want it too.  That means, you can just use your personal cell phone or landline. 

Faxes can be sent to an online fax service, if anyone really does fax you.  It may seem outdated, but it does lend to the legitimacy of your business. 

You can use a virtual office for a business address. How do you get a virtual office?  It’s not what you may think.  There are businesses that offer a physical address for a fee, and sometimes they even offer mail service and live receptionist services.  In addition, some of them offer meeting spaces for times you may need to meet a client or customer in person. 

EINfundable definition Credit Suite2

Next, you have to get an EIN.  This is an identifying number for your business that is similar to your SSN.  Some business owners use their SSN for business transactions. This is what a lot of sole proprietorships and partnerships do.  However, it really doesn’t look professional.  Also, it can cause your personal and business credit to get all mixed up.  When you are looking to increase fundability, you need to apply for and use an EIN. You can get one for free from the IRS.

Incorporate

Incorporating your business as an LLC, S-corp, or corporation is necessary for a fundable foundation.  It helps solidify your business as one that is legitimate and offers separation from the owner for building business credit. It also offers some protection from liability. 

Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.  When you incorporate, your time in business starts over. You’ll also lose any positive payment history you may have accumulated. 

This is why you have to incorporate as soon as possible.  Not only is it necessary for fundability and for building business credit, but so is time in business.  The longer you have been in business the more fundable you appear to be.  That starts on the date of incorporation, regardless of when you actually started doing business. 

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it helps you keep track of business finances.  It will also help you keep them separate from personal finances.  This is important for tax purposes. 

In addition, there are several types of funding you can’t get without a business bank account.  Many business credit cards and lenders want to see a minimum average balance in a business bank account.   Also, you can’t get a merchant account without a business account at a bank. As a result, you cannot take credit cards payments without a separate business bank account.  Studies show consumers often spend more when they can pay by credit card.

Licenses

For a business to be legitimate, it has to have all of the necessary licenses it needs to run.  If it doesn’t, red flags are going to fly up all over the place.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

Today, you do not exist if you do not have a website.  However, having one that is poorly put together can be even worse than not having one at all. 

Your website is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders. 

Spend the time and money necessary to make your website the best it can be.  Pay for hosting also. Don’t use a free hosting service.  Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website.  

Keep your business protected with our professional business credit monitoring.

Fundability Meaning Game Rule 2: You Can’t Rely on Business Credit Alone

While business credit is a huge piece of business fundability, you cannot rely on business credit alone to make your business fundable.  Find out more about business credit here.

If business credit isn’t all there is to it, you have to know what else is happening to play effectively.  

Financial Statements

Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal.  

Business Financials

It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements helps your business look more credible and legitimate. If you cannot afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are at the ready whenever you need to apply for a loan. 

Personal Financials

Often tax returns for the previous three years will suffice.  Get a tax professional to prepare them.   This is the bare minimum you will need.  Other information lenders may ask for include check stubs and bank statements, among other things. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion all make a difference.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  If it isn’t great right now, get to work on it.  The number one way to get a strong personal credit score or improve a weak one is to make payments consistently on time. 

Fundability Meaning Game Rule 3: You Have to Apply Strategically

Having a clear application strategy can make all the difference.  Timing is important because, if you begin applying for business loans or credit cards before your fundability is sufficient, you will absolutely not get approval.  However, you have to make sure you apply to the right type of lender and for the right type of product also. 

For example, if you apply to a traditional lender for a business line-of-credit before your fundability will support that, you will run into problems.  However, if you have some aspects of fundability and are working on others, you could qualify for a business line-of-credit from a private lender. Making these choices is all part of the game.  Find more about what options are out there and which ones might work best for you here

Fundability Meaning Game Rule 4: You Have to Monitor Your Credit Yourself

No one else is going to do it for you.  You need to know where you stand with both business and personal credit to play the game well. That means checking each regularly to ensure all information is complete and accurate. You can get a free copy of your personal credit reports annually.  For business credit, it isn’t quite so simple. You can monitor directly with D&B, Experian, and Equifax. However, it is quite costly. You can monitor your business credit with D&B and Experian for a fraction of the cost here.

Fundability Meaning Game Rule 5: Your Past Will Haunt You, But You Can Overcome It

You know how I said you are actually playing the fundability meaning game before you even know it?  Here’s how. There are things in your past that can indirectly, or directly, affect your fundability that you may not even realize.  

Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexis and The Small Business Finance Exchange. These agencies gather data from a variety of sources, including public records.  As a result, they could even have access to information relating to automobile accidents, liens, and other things you never dreamed could affect fundability. While you may not be able to access or change the data these agencies have on your business, you can make sure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past.

Keep your business protected with our professional business credit monitoring.

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about.  For example, personal FICO score needs to be as strong as possible. It really can affect business fundability.  In fact, almost all traditional lenders will look at personal credit in addition to business credit. 

Also,  you have ChexSystems.  Simply put, they keep up with bad check activity.  This makes a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account.  As a result, you could run into fundability problems. 

For this point, everything comes into play.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  What about liens or UCC filings? Everything can and will play into the fundability of your business. 

Play the Fundability Meaning Game and Finish Well

Truly, the meaning of fundability is like a game with many rules.  The problem is, the rules are not widely published. If you don’t even know everything the term really encompasses, you can’t know how to build it.  Hopefully, these rules to the fundability meaning game can help you understand exactly what the meaning of fundability is. Then, you can make sure your business is as fundable as possible. 

The post The Fundability Meaning Game: What are the Rules and How do You Play? appeared first on Credit Suite.

How Do Lenders Measure Business Fundability?

Have you ever wondered what exactly it is that lenders are looking for when it comes to approving a loan? Is it just your credit score, or is there more that comes into play? Why do you keep getting denied despite a strong, successful business with plenty of profit? How do they measure business fundability?

The answers to these questions can vary from lender to lender. 

What are Lenders Looking at to Determine Business Fundability? 

Honestly there is really no way to know for sure what exact information a lender is going to choose to use in their decision making.  What you can do, however, is learn everything you can about business fundability and what affects it. By doing that, you can begin to make changes where possible in an effort to ensure anything a lender sees is as positive as possible. 

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What is Business Fundability?

To do this, you first have to know exactly what business fundability is.  The easiest way to explain it is to say it is how worthy of credit your business is.  If a lender considers your business to be fundable, it means they see your business as a low credit risk. However, everything that goes into being fundable is much more complicated.  

It is easiest to start at the beginning. Believe it or not, business fundability actually starts with how your business is set up. 

Business Fundability: The Set Up

These are the things that lenders consider, either directly or indirectly, in relation to how your business is set up.  They all work together to build the credibility and legitimacy of your business. 

Contact Information

The first step in setting up a foundation on which to build business fundability is to get your business its own phone number, fax number, and address.   What is surprising to some, is that this doesn’t mean you have to get a separate phone line, or even a separate location. You can run your business from your home or on your computer, and you do not even have to have a fax machine.  Find out more about how this here and here

EIN

Your business needs and EIN.  This is an identifying number for your business that works the same way your SSN works for you personally.  It looks more credible to use this number rather than your SSN for business loan applications. Having an EIN is also important for building business credit, as it separates your business accounts from your personal accounts. You can get one for free from the IRS.

Incorporate

This is the most important step in fundability thus far.  Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It lends credence to your business as one that is legitimate. In addition, it also offers some protection from liability. 

Which option you choose has more to do with your budget and how much liability protection you need than it does for fundability.  The best thing to do is discuss the issue with your attorney or a tax professional.  

Incorporation has to happen as soon as possible.  Time in business counts toward fundability and for business credit.  This starts over at incorporation, regardless of how long your business has been in operation before incorporation.  Not only that, but any positive business credit history you have up until the point of incorporation will be lost as well.

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this. First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

In addition, there are several types of funding you cannot get without a business bank account.  Some lenders and credit cards want to see one. Also, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments.  Consumers tend to spend more when they can pay by credit card.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit

Licenses

For a business to be legitimate it has to have all of the necessary licenses it needs to run legally.  If it doesn’t, red flags are going to fly up all over the place. Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

How does a business website affect fundability?  Here’s how. In today’s world, we all run to the internet first for virtually everything.  For most businesses, the website is the first impression you make on anyone, including lenders.  If it appears to be unprofessional, it will cause problems.

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service. Also, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.

Business Fundability: Business Credit Reports

This is what most business owners think about when it comes to business fundability. That is the credit report, much like your consumer credit report, that details the credit history of your business.  It is a tool to help lenders determine how credit worthy your business is.  

Where do business credit reports come from?  There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate. 

Not only that, but you need to be sure you actually have business credit. It does not build passively as a result of credit transactions in the same way consumer credit does.  That set-up for fundability? It is necessary to begin building business credit as well. After you have that, you have to get accounts reporting, which is a whole other process.  Find out more about that here

Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue your credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexus and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could have access to information relating to automobile accidents, liens, and more. While you may not be able to access or change the data the agencies have, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, there are other identifying numbers related to business credit reports.  You need to be aware that these numbers exist. Some of them are simply assigned by the agency. One, however, you have to apply for.  It is pertinent that you do this. 

That number is a D-U-N-S number from Dun & Bradstreet.  D&B is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you have to apply for one through the D&B website

Business Credit History

Your credit history has everything to do with everything related to your credit score, which is a huge factor in the fundability of your business.  

Your credit history consists of a number of things including: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it.  However, when you start changing things up like adding a business phone number and address and incorporating, you may find that some things slip through the cracks. 

This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up.  Maybe your business licenses have your personal address but now you have a business address. Fix it. Do some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application? Make sure your insurances all have the correct information, too.  

The key to this piece of the business fundability is to monitor your reports frequently.   When it comes to business credit reports, you can monitor through the reporting agencies directly, or save money by going here

Financial Statements

This covers a broad spectrum.  First, there is the obvious. Both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, both business and personal. But wait, there’s more.  

Business Financials

It is best to have an accounting professional prepare regular financial statements. Having an accountant’s name on financial statements lends to the legitimacy of your business. If you cannot afford them monthly or quarterly, at least have professional statements prepared annually. This way, they will be ready whenever you need them. 

Personal Financials

Often this is simply tax returns for the previous three years.  That is the bare minimum you will need. Other information lenders may ask for include check stubs and bank statements. 

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about as well.  One example is ChexSystems. It keeps up with bad check activity and makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a bank account.  That will cause serious fundability issues. 

For this point, everything comes into play.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? All of this can and will play into business fundability. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion all matter.  You have to have your personal credit in order because it will definitely affect business fundability.  If it isn’t the best, get to work on it now. The number one way to get a strong personal credit score or improve a weak one is to make payments regularly on-time.

Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported. You can get one free copy of your personal credit report annually.

Business Fundability: Application Process

So much plays into this that you may not even think about. First, consider the timing of the application.  Is your business currently fundable? If not, do some work to change that. Next, make sure that your business name, business address, and ownership status are all verifiable.  Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choosing the right product to apply for can make all the difference. 

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit

Do Lenders Really Look at All of These Things for Business Fundability? biz funding Credit Suite2

Maybe not directly.  For traditional lenders, your personal credit and finances are going to directly affect your ability to get a business loan for sure.  Your business credit may be able to help you get a better rate, or push you over the approval line if personal credit isn’t as great as it needs to be.  Private lenders may lean more toward business credit.  

Neither is likely to pull, or to even be able to pull, a report directly from another agency however.  Furthermore, most will not seek out public records. However, those things can show up on and affect your credit reports.  Not only that, but if in the process a lender sees a discrepancy in name or address, it will throw up red flags.  

Even something minor like a poorly put together website, when coupled with a few other seemingly minor issues, can be enough to put you out of the running for a business loan all together.  It’s best to have a thorough understanding of what business fundability is and what affects it, so you can keep any issues, either minor or major, from causing problems. 

Business Fundability: How it All Ties Together

Truly, few business owners understand how important business fundability really is.  Even if they do, they are not sure what to do about it. However, if you set up things right, pay attention to what’s out there, and ensure all the information is as correct as possible, you have a good start.  The only way to do this is to consistently monitor credit reports. If your business credit isn’t the best, or if you do not yet have business credit, find out how to start and build strong business credit here.   

The post How Do Lenders Measure Business Fundability? appeared first on Credit Suite.

What is Business Credit and How Does it Affect Fundability?

There is a lot of talk out there about what is business credit.  That’s an important question, but it cannot be answered without another question coming up.  That is, how does it affect fundability? Then of course, the question can be asked, what exactly is fundability? All of these questions build on each other.

What is Business Credit?  It’s the Cornerstone of Fundability

The truth is, business credit is a huge piece of overall fundability.  It isn’t everything, but I’d venture to say if how you set up your business is the foundation of fundability, business credit is the cornerstone.  Consider how a building is made of thousands of stones, but one crack in the foundation or chink in the cornerstone can bring it all crashing down.  The same is true of business credit. You can lose a stone here or there and, while it will definitely cause trouble, as long as the foundation and cornerstone are solid you have something to work with. 

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit

First, what is Fundability? 

Before I can answer what biz credit is, I need to address fundability.  In short, fundability is how a lender views a borrower in terms of credit risk.  Most borrowers believe this has mainly to do with credit history. In part, this is true.  It does have a lot to do with credit history. However, there is way more to it than that. 

Pieces of the Fundability Puzzlewhat is business credit Credit Suite

There are many things that affect fundability.  Since it all connects to form a bigger picture, I like to think of it as a puzzle.  The pieces of the puzzle can be named however, and it is easier to put them together if you work on them in order.  If you work in order, the other pieces will usually fall into place pretty easily. You can still complete the puzzle if you work it differently, but it will be harder and take longer. 

In the case of fundability, you should start with the foundation.  Think of this as the corners and the edges of the puzzle. Everyone knows the puzzle goes faster if you start with those pieces, right? 

Foundation of Fundability

There are many pieces that help a business form a fundable foundation.  They are related to how your business is set up. It includes, among other things, being certain you incorporate your business.  This is vital. Find out more about how to build a foundation of fundability, as well more about fundability in general, go here

Next Comes Business Credit

After the foundation, business credit is one of the largest pieces of the puzzle.  If you can get it into place, you will be able to start to see the bigger picture. It can take a while to build this piece however.  It’s almost a smaller puzzle all on its own. More on business credit and how to build it later. For now, here are a few things that can affect your business credit that you might not realize.

Other Business Data Agencies 

In addition to the business CRAs that directly calculate and issue your credit reports, there are other business data agencies that affect those reports indirectly.  Two examples of this are LexisNexus and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records.  This means they could have access to information relating to automobile accidents and liens. While you may not be able to access or change the data the agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, which is part of a fundable foundation, there are identifying numbers that go along with your business credit reports.  You need to be aware that these numbers exists. Some of them are assigned by the agency. However, one of them you have to apply to get. It is important that you do this. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number. You have to apply for it. You can do so on the D&B website

Business Credit History

Your credit history has to do with everything related to your credit score, which is a huge factor in the fundability of your business.  Many things affect your business credit history, but the more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

On the surface, it seems obvious that all of your business information should be consistent across the board.  However, when you start changing things up you may find that some things get missed. This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply of things not matching up.  

Maybe your business licenses have your personal address but now you have a business address.  You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?  

The key to avoiding this problem  is to monitor your reports frequently.   

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Business and Personal Financial Statements

This encompasses a broad spectrum of things.  First, both your personal and business tax returns need to be in order.  Of course, you also need to be paying both your business and personal taxes.  

Beyond that, it is best to have an accounting professional prepare regular financial statements. Having an accountant’s name on financial statements lends to the legitimacy of your business. If you cannot afford this monthly or quarterly, then at least have professional statements prepared annually. Then, they will be available whenever you need to apply for a loan. 

Bureaus

There are several other agencies that hold information related to your personal finances. Everyone knows about FICO.  Your personal FICO score needs to be as strong as possible. Almost all traditional lenders will look at personal credit in addition to business credit. 

In addition to FICO reporting personal credit, there is ChexSystems.  This keeps up with bad check activity. It can make a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account. That will cause serious fundability issues. 

For this point, everything comes into play.  Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record?  How about liens or UCC filings? 

Personal Credit Does Affect Business Fundability

Your personal credit score from Experian, Equifax, and Transunion all make a difference.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  If it isn’t great right now, get to work on it. The number one way to get a strong personal credit score or improve a week one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to ensure to stay ahead of mistakes.

Application Process

So much plays into this that you may not even think about. First, consider the timing of the application.  Is your business currently fundable? If not, do some work first to increase fundability. Next, make sure that your business name, business address, and ownership status are all verifiable.   Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs?  Choose the right product to apply for can make all the difference. 

But What is Business Credit? 

Now that you see how business credit is just a piece of the bigger picture of fundability, it is easier to put it into context.  There is still the all-important question of what is business credit left to answer however. At its core, business credit is to your business what your personal credit score is to your personal finances.  Lenders use it to help determine whether you are a good credit risk, or not. 

Here’s the thing.  Business credit does not build passively like you personal credit does. You have to actively work to build it.  The first step in this process has to do with how you set up your business. It is exactly the same as setting up your business with a foundation of fundability.  You cannot build business credit without a fundable foundation. 

Why Do You Need It?

As noted above, business credit is just a piece of what makes a business fundable.  Another piece is the personal credit of the owner. That being the case, along with the fact that business credit simply builds as a result of your personal payment history, why do you even need business credit? 

Here’s why.  Having separate business credit can free up your personal credit from business transactions.  If you have a ton of business debt on your personal credit report, it could make it hard for you to get a loan for things such as a home or a car.  

What is Business Credit and How Do You Get It? 

Now that we’ve answered the question of what is business credit, you need to know how to get it. There is a process for building business credit, and if you follow it, you will be successful.  The first step is that foundation. The next step is getting accounts to report your on-time payments to your business credit rather than your personal credit. 

This is trickier than you may realize at first.  Similar to personal credit, it is hard to get business credit without already having business credit.  We know how to get around this however. 

Vendor Credit Tier

First you need to establish trade lines that report your payments to the business CRAs.  This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll begin building a business credit score. With an established business credit profile and score you can begin to get credit in the retail and cash credit tiers.

These kinds of accounts are usually for the things bought all the time, like marketing materials, shipping boxes, outdoor workwear, ink and toner, and office furniture.

What is trade credit? These trade lines come from credit issuers who will extend credit in the form of net 30, 60, or 90-day invoices without checking your credit.  This is not revolving credit, but since they report to the business CRAs, it serves the purpose anyway. 

Of course, not all vendors will do this. You need merchants that grant an approval with very little effort. You also need them to be reporting to one or more of the big three CRAs.  These are Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. Go here for more about the vendor credit tier and a list of a few starter vendors to get you going in the right direction.

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Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are businesses like Office Depot and Staples that issue credit cards for use at their stores only.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These include service providers like BP and Conoco. You can only use this credit to purchase fuel, and to fix, and take care of vehicles. 

Cash Credit Tier

This is the top tier.  If you have been using your credit in the other tiers responsibly, you should have a well-established credit score and be able to apply for credit in this tier.  These are general Visa, Discover, and Mastercard options that are not limited by location or type of purchase. They also generally have better rates and rewards. 

What is Business Credit?  Vitally Important!

Business credit is hugely important to the success of your business.  It can open opportunities to funding that you would not have otherwise.  It does take some time and some work to build it, but your business will be better off for it.   

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