Your Business Credit File is a Snapshot of Your Business.
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The Mystery of Business Credit
Big Banks don’t want to tell you how important business credit is because that would give businesses the edge when it came to financing. They feel business is a big lending risk based on statistical data and the amount of businesses that fail within the first five years and the economic affects on businesses that pass that threshold. This statistical data maybe true but the cause is the lack of exposure and the lackluster view of what business credit really is.
The mystery goes even further. Business owners who know the secrets and success of maintaining a proper credit file do not share this information. Even brothers in separate businesses where one utilizes the wealth of business credit will not share his secret with the other brother who is struggling each week to keep his business sustained. This is why their is such a shroud covering the benefits. Even with SBA and government agencies requiring and supporting the values of maintaining a credit file, it is still unrecognized by many in the business owner community.
Another culprit that leads to the mystery reflects back to risk. Many lenders and even vendors would prefer to have you personally sign in order to extend any type of credit. This puts you on the hook, for them to come after your home and other personal items if you were to default for any reason. You may think that this just happens to other people and your right, it happens to others every single day. the 2008 crisis showed it could happen to anyone. Multi-billion dollar businesses were in turmoil because these companies over leveraged and when their was just a slight hiccup in their daily cash flow, they almost came tumbling down, and the government, through the people, had to fund money to save many of them from closing their doors and creating even a bigger economic crisis. Many business owners have lost their houses, and more because they used their personal credit to run their business. So,these credit card companies, vendors and lenders are leery to tell you that they have the credit cards and the loans that you need, where you can qualify based solely on your business credit and EIN number.
Because business credit is related to business, people are more aware of personal credit and have become comfortable living and dealing with it everyday, although business credit has been around a lot longer. Personal credit reporting is much more complex and even more intrusive, than its business counterpart. Your business file is a snapshot of your business, it shows items and payment statistics that your personal credit file would not contain. Remember personal credit is strictly designed for your personal use of credit, it was never designed to handle your business practices. Companies who review your business file are looking to get a picture of your business, they want to make sure that your business is authentic, that you are growing, and what your business is all about. It’s all about the personality of your business, and this helps them decide on whether or not they want to do business with you. So its important that you focus the camera and make sure you get the pose correct so that the picture of your Business Credit file displays the right picture of your business.
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The Mystery Continues
Fortune 500 Companies, Government Agencies , and many companies may require you to have a registered account registered with Dun & Bradstreet before you can do business with them. Even Walmart has this requirement. One of the reasons for this is that they use the Duns Number as way to track your business account. But is there a hidden agenda here? Once you register for a Duns Number, records are searched, based on the information you supplied about your business. If any negative information is found it could easily lead to you being denied the ability to do business with the company or the government agency. And again, you may never no the reason! Completing the registration and setting up your file and reviewing the information on a regular basis would give the ability to dispute any negative information ahead of time.
Automation Controlling Lender Approvals
Banks and Lenders interpret a Business Credit Score of 80 to be equivalent to a person crdit score of 720.
Sometimes finding the requirements for doing business with a vendor or companies like Walmart can be a real process. Finding out that you need to have a Dun Number or business profile with Dun & Bradstreet is usually hidden in the small print on the 15 page application or in the deep recesses of their website.
It’s even more covert with banks and lenders! You will never know unless you can break into their facility, crack the safe and get a copy of their underwriting procedures. It’s almost like getting government clearance where you are sworn to secrecy. It’s a policy that is enforced to the fullest extent each and everyday. The funny thing is that it sounds like a conspiracy theory. You just have to remember how banks work. They make money with your money, and they are in the business to profit. Risk is a very bad word to them and they pay analysts a great sum of money to understand the risk factor as well as the sectors of their business where they make money, with one focus, to keep the Board of directors and the share holders happy.
These Banks and Credit Lenders have taking the information and all their Underwriting Guidelines, and built programs to automate the process for business loans under $100,000. The algorithm automatically searches the viability of the business and other criteria to issue approvals. If the business fails in one area it is either referred to an Underwriter or denied.
The steps followed during the setup of the business credit file, including having a well rounded file with all three agencies and proper maintenance and updating will assure that you fly through the automated approval process.