Business Credit Building

Reasons to start the Business Credit Building Program TODAY!

• There Are 4 Legs To The Bankable Table

For a business to become bankable there are four (4) legs to the table that must be completed. Loan approvals are done by computers using AI algorithms scanning your business to see if it has four table legs or not. Those four legs are:

Leg 1. Having all items of lender compliance completed. Lenders can scan for these in seconds via data APIs. You either pass or you don’t.
Leg 2. Having a bank rating of at least a Low 5. Here too any lender can check your business bank rating in seconds. Below L5 you’re declined.
Leg 3. Having comparable credit. Does your business have a reporting credit tradeline that is close to the amount you are now asking for.
Leg 4. Having FICO SBSS business credit score of 160 or higher and then 70 or higher scores with all four business credit reporting agencies.

Pulling credit reports cost lenders money. Without spending any money, a business lender’s computers can scan about 150 data points on your business in seconds. This will instantly let them see if your business has the four legs of being bankable. If not, while you may still get approved, the amount will be much lower, the term will be much shorter, and the rate will be much higher. Remain “unbankable” and that will never change.

• Business Credit Score Only Approvals

The reality is that “cash” business lenders do not use business credit scores or even business credit reports as a standalone factor for approvals. This means that just having great business credit scores will not get your business approved for a working capital cash type loan. Business cash lenders, such as; banks, credit unions, the SBA, and large fintech lenders will use business credit to decline your business and they will also use your business credit to determine the amount, rate and term of your funding offer, but they will not approve based solely on business credit. This will change if your business is more than three years old and exceeds one million in gross annual revenue but that is not your typical small business. There are thousands of business to business credit providers for every product and service imaginable on net 30, 60 or 90 day credit extended payment terms with many of them making approvals based solely on business credit, but this is not working capital cash. There are also many store and fleet cards that will approve your business based solely on business credit, but there too you cannot pull cash off your Home Depot card.

• FICO SBSS (Small Business Scoring Service)

Just like FICO scores have become the standard for all things consumer lending, FICO SBSS scores have become the standard for all things business cash lending. Banks, Credit Unions, The SBA and large fintech lenders are now using FICO SBSS in their approval process. The FICO SBSS score is not used as the standalone approval gauge as are FICO scores for personal lending but rather it is used as a method of declining applications along with factoring into the offer of amount, rate and term. Generally if your FICO SBSS is below a 160 you are declined. The range of FICO SBSS is 0 to 300 with any score of 160 and above being considered good. The issue with FICO SBSS is that every lender has the ability to design and weight their own. What this means is that for their FICO SBSS scoring method lenders have a list of items they can select from and assign weight to such as: the personal credit of up to five owners that could make up as much as 30% of the score, the time in business, bank rating, web presence, industry, gross annual revenue, net income,gross margins, debt to income, and more. This means that your business FICO SBSS score might be different at Wells Fargo than it is at BofA.

• The Myth of No Personal Guarantee

You hear so much misinformation on the internet and the biggest myth is not of non personal guaranteed business funding. While it certainly does exist for business to business credit lines and for store and fleet type business credit credits, when it come to working capital cash type funding from a bank, credit union, the SBA, cash access business credit cards (Visa, MC, Amex types), then anyone owning 20% or more of the business will be expected to sign a personal guarantee. This requirement does not tend to go away until your business is more than three years old and if it exceeds one million a year in gross annual revenue. There are other factors here such as a high bank rating, having comparable credit and having FICO SBSS scores in the 200 and up range. Until that happens don’t believe what youtube scammers tell you about non-personal guaranteed “cash” loans.

• The Business Credit Cards That Aren’t Business Credit Cards

What small business owners do not understand is that if your business is less than three years old with less than a million dollars in gross annual revenue then there is no such thing as a “cash” type business credit card. The issuers of Visa, MC, Amex, Discover etc typically do not even check your business credit scores and approve your “business” credit card solely based off your personal credit and personal income. The card is basically a personal credit card with your business name on it and while most do not report on your personal credit (unless you default and then they do), they also do not report on your business credit as they are not actually tied legally to your business. They are still excellent sources of working capital but be clear about what they are. This does not apply to store or fleet business credit cards as many of those can be approved on business credit alone and can have no personal guarantee, but those cards cannot be used the same as cash.

• Non Bankable Financing Programs (aka Band Aid Funding)

Every year there is over 100 billion dollars loaned out to non-bankable small businesses. Lots and lots of available capital that tends to be very high interest. Let’s explore that. Factor your receivables is 3% a month which is 36% a year. Business credit cards are 29,99% if you are even one day late. There is no 30 day late safety net in business lending, late means one day. Then there are revenue based loans that will quote a “factor” of say 1.35 which means you borrow $10,000 and pay back $13,500. Then they might only give you 9 months to pay it back so now your effective interest rate is 50%. This 25% and up interest rate is fairly standard for almost all the available non-bankable funding programs. However, if your business invests time and money in becoming bankable which normally takes four to six months to accomplish, the funding program for small businesses go up to five million dollars with repayment terms out to 15 years and interest rates at or below half of non-bankable funding programs.

• Lenders Sell Your Loan In The Secondary Market

When a lender makes a loan to your business they do not hold onto that loan, they sell it in the secondary market. This means that if they make you a $10 loan they sell it in the secondary market for $12, take their $2 profit, and go make another $10 loan. They do that over and over again. However, if your loan does not “conform” then they cannot sell it and therefore you are declined. There are about 20 of these “conforming items” that make up what is called “Lender Compliance”. When you run our free business success scan we display with a Red X or Green Check which items of Lender Compliance you have completed and which ones you have not.

• Lenders Check The Small Business Financial Exchange

Your business does not have the same privacy rights as you do personally. There is something called the “Small Business Financial Exchange” where lenders can access your business banking information. They can see how much money has gone through your business bank account over the last 90 days and how much of that money stuck to you. They cannot see what you spent the money on but they can quickly determine your business‘s ability to debt service based on what they can see. Inside our system we show you how to know what lenders want to see as a minimum for loan approvals when they look at your business banking information.

• There Might Be a UCC-1 Filed on Your Business

Before applying for any business financing you should always check to see if there are any UCC-1 filings on your business. UCC stands for Uniform Commercial Code. It is a nationwide filing system to record liens and debt obligations that your business has either entered into willingly or that have been filed against it. If you have any type of SBA loan then what is called a “Blanket Lien” has been filed on you personally and on your business. A Blanket Lien is just like it sounds. It encumbers all past, present, and future assets that both you personally and that your business owns. A Blanket Lien can block many other types of business lending from taking place until that blanket lien is paid off. In our system we will show you if there are any UCC-1 filings currently on your business.

• Viewed As 10 to 20 Times More Likely to Default

Business lenders have approval algorithms that their computers run on your business to determine if it is a high or a low risk of defaulting on a loan. There are a series of historical items they are checking from borrowers who have already defaulted to determine common themes about those borrowers. What they have found is that if you operate your business from a cell phone, or from a residence, or from a free email provider, or as a sole proprietor then any one of those items has already shown you to be 10 to 20 times more likely to default on their loan. Inside our system we show you all these High Risk category items and how to position your business to be viewed as a low risk of default and therefore increase your opportunities for more approvals, higher amounts, and better terms.

• Business Lenders Are Concerned About Loan Stacking

When you take out a personal loan it will show up on your credit reports whether you use it or not. That is not true in business lending. Business loans and business lines of credit will only show up on your business credit reports after you use them. This allows for a practice called loan stacking in which a business will get multiple loans from multiple lenders and not use those loans until they are finished stacking. What this leads to is business lenders being very concerned about your number of recent credit inquiries. If you have more than 3 inquiries in the last 90 days then even lenders who would have otherwise approved you will now decline you for the next 6 months to see what stacked loans may appear.

• Business to Business Credit

There are over 500,000 companies in the United States extending business to business net 30 or net 60 day credit payment terms. That equates to over 90% of all business credit extended in this country. This business to business credit vastly exceeds all business loans being made by banks, the SBA, credit cards, leasing companies and all other forms of business credit. Even though there are over 500,000 businesses extending credit to other businesses, there are less than 5,000 of these businesses that currently report payment histories to the business credit reporting agencies. Inside our system we give you access to over 3,000 of them.

• Importance of a Bank Rating

Unlike personal credit, your business has a bank rating that lenders will use to determine your ability to debt service. Your bank rating is the average daily balance of your general ledger account over the last 90 days. If your business has a “Low 3” that means there was only $100,$200, or $300 in your business bank account for the last 90 days to service debt at any given time. If you are asking a lender for a loan where the payment is $1,500 a month, what do you think will happen? Lenders see that you do not have the ability to pay, and so you will be declined. A Low 5 rating or above is optimal when trying to acquire business loans or leases.

• Viewed as a High Risk of Default

Just like in personal lending, business lenders develop methods to determine which businesses are a high risk of default. They do this based on defaults from their own portfolios and from the portfolios of other lenders who share data. Businesses that operate as sole proprietors, operate from home, use free email accounts, have a cell phone as their primary business line, do not have a website, or have two or less stars on the most common review platforms all have a higher rate of default in the eyes of the lender. Lenders use whatever trend data is available to try and lower their risk of loan defaults so that their portfolios have a higher value on the secondary market. Our system shows you how to be viewed as a low risk of default.

• About Corp Only Financing

When trying to secure corporation only financing, that is not of the business-to-business vendor type, lenders will look at comparable credit, business credit scores, reporting tradelines, bank rating, revenue, time in business, debt to income, balance to limit ratios, industry type, debt acceleration and more. They want to see if anyone has already loaned a comparable amount, business FICO scores of 160 or above, at least 10 reporting tradelines, minimum of a Low 5 bank rating, one million or higher annual revenue, 3 years in business, less than 45% debt-to-income, and less than 45% balance-to-limit.

• Business Credit in Contracts

If a business is seeking to do contract work, be it government or commercial, likely their business credit will be checked during the award process. Those contractors with no credit history or poor history will be viewed as not having the ability or resources to complete the job. On the other hand, companies with excellent business credit history will be seen as much more professional, likely to complete the job on time, and be much higher on the award list

• Valuable Comparable Credit

If your business has already received a loan in the amount equal to or greater than the amount you are requesting from another lender then you have comparable credit. If you want to borrow$50,000, has your business ever had a $50,000 loan before, and if so how did you pay on it? That is comparable credit. Once your business has a reporting comparable credit tradeline, other lenders will notice and start extending similar amounts. A great way to get your first comparable credit reporting tradeline is to open a CD at a business lending bank and use it to secure a dollar for dollar reporting business line of credit. If it is $10,000 or higher it puts you on other lender‘s radar and offers will start coming.

• Have You Heard That Business Credit is a Myth?

Over 90% of the business lending in the United States is done business-to-business and not bank-to-business. Businesses that extend credit lines for their products and services to other businesses exclusively use business credit scores to determine the approval, amount, and term. For business-to-business, having at least 10 currently reporting business credit tradelines and business credit scores of 75 or above makes the difference of having to personally guarantee each of these credit lines or not. There are over 500,000 companies in the United States extending credit to other businesses.

• Lender Compliance Items

There are 20 items of compliance which lenders use to quickly determine if a business is a high risk of default. This is similar to personal lender redlining practices. Business lenders use known default data analytics to profile groups of businesses with a history of higher default rates. These are sole proprietors, home based businesses, certain industries, businesses operating from cell phones, businesses with only free email accounts, and fifteen more items. Lender compliance is easy to get checked off if you know what to do. If you have these items completed at least your business is not immediately viewed as a high risk of default.

• Owner’s Personal Credit

We hear a lot of talk about how business credit can replace personal credit when it comes to business loans. It is true that business credit is required for business-to-business lending and that can be done without the personal credit of the owners. The owner‘s personal credit is vital for any type of bank business lending such as term loans, credit lines, and credit cards. For bank lending, the owners should maintain 720 or higher fico scores, less than 45%debt-to-income, and less than 45% balance-to-limit on all revolving credit accounts. Personal guarantee does not mean personal reporting when it comes to business loans.

• Approvals, Amounts, Rates, & Terms

Most business owners do not realize that when they apply for a business loan, lease, or credit card that many lenders are checking their business credit to help determine their risk of default. This risk analysis can lead to either an approval or decline. In the case of most commercial lending business credit plays a factor in the amount approved, interest rate charged and length of the repayment term offered. Not having excellent business credit profiles can lead to not getting contract awards, having to personally guarantee equipment and office leases, having to personally sign for utilities, security systems, vendor supplies, and more. Having business credit scores of 75 or higher with at least 10 reporting tradelines can eliminate personal guarantees, increase approval amounts, lower interest rates, and provide more favorable repayment terms.

• Importance of Debt to Income

Business lenders will be looking at the businesses debt-to-income to be no more than 45% with verifying primarily being the last three months of bank statements. If the business is a startup then business lenders will be looking at the same 45% debt-to-income for the business owners with a business owner being anyone owning 20% or more of the business.

• Critical Balance to Limit

Business lenders care most about how the owners of a business have been using their personal unsecured revolving debt. These lenders want to see that business owners have had a good history of revolving debt usage of preferably three or more years with account amounts of 5 to 10 thousand dollars or higher and that balance-to-limits have been maintained at 45% or lower. At the time of business loan applications if even one personal revolving account has a higher than 45% balance-to-limit it can get the deal declined or significantly lower the amount of the approval. Lenders will also care about debt acceleration. That is where they see $10,000 in revolving debt a few months ago versus $50,000 in revolving debt now. The fast acceleration of debt will raise a red flag and may signal a much higher risk of new loan default.

• Credit Cards on Your Own

We often hear, “I can apply for credit cards on my own, I don‘t need you to do that for me”. Well of course you can, but let‘s look at why you shouldn‘t. There are hundreds of personal and business credit cards where applying for the wrong one or applying in the wrong order will get you declined for other cards or get you approved for far less amounts with others. There are different types of business credit card providers. Some are prime providers that offer credit cards as a service for the customers but credit cards are not their main source of income. These prime providers normally have only a few cards to select from. Others are sub-prime providers, which generally means credit cards are their main source of income and they typically have twenty to thirty cards to select from. Applying with subprime card providers before you apply with prime providers will be damaging.

• Importance of Having Personal Cards

Many business owners will say “I don‘t want or need any personal credit cards”. What they don‘t realize is that most credit card providers want to have a personal relationship with their card holders. This means that while they will approve your business for a credit card, the amount approved may be much lower if there is no personal relationship in place. In some cases applying first for personal credit cards and then business cards, business owners can achieve business credit approval amounts of two to three times higher. It is also true that these card providers may approve two or more personal cards in addition to the singular approval for the business credit card.

• Three New Inquiries in the Last 90 Days and You‘re Done

Unlike personal credit, applying for business credit on your own can be extremely damaging. The reason is that once you have 3 credit inquiries for business credit, normally other business lenders will then decline you. The reason is that these business lenders will assume that you are credit or loan stacking and they will wait about 6 months to see if these other inquiries were approved. Let‘s say you are applying for a $50,000 loan and that lender sees 3 other recent inquiries in front of them. They will assume that you applied for $50,000 from those other 3 lenders and that you are stacking your business loans. This means they may be part of a $200,000 loan and not simply a $50,000 loan, making you a much higher risk of default.

• Business Credit Only Reports When You Use It

Most business owners do not realize that business credit only reports when it is used, unlike personal credit where all your trade lines will report each month whether you have used them that month or not. That is why you can get a business line of credit and not use it for 3 or 4 months and it will not show up until a reporting cycle after you have used it, creating gaps in your reporting. When your business receives credit lines from Net 30 account vendors it is very important to use those credit lines every month so that there will be no gaps in your business credit reporting.

• Lenders Computers Are Doing The Checking

Business owners believe that they are qualifying for business loans when that is actually not the case. The business lender‘s computers are actually checking to see if your “loan paper” will be able to be sold. This means can they get their money back, plus their profit, by selling your loan? Each loan they make must meet a number of preset criteria so that loan can be grouped with other loans and sold as a package. Business owners seeking business loans must know a lender‘s preset criteria in order to get approved and there are just too many for you to guess and get it wrong. Our system takes the guesswork out of it.

• Being Found On The Internet

In the age of the internet having your business be found on what is called NAP validation can be critical to getting approved for business loans and lines of credit. NAP validation simply means “Name, Address, Phone” and is the measure of whether or not the lender‘s computer business validation system can find your business when they look up its Name, Address, and Phone number. If they can‘t find the business name, or if the address comes back as residential, or the phone comes back as mobile then most likely your business will be declined. Knowing how to check your NAP validation before you apply will be critical for getting approved.

• Business Credit Is Not Like Personal Credit

With your personal credit you can pay every debt you have 29 days late with absolutely no impact on your credit ratings or scores. Of course you will incur late fees, but no creditor will report you as even being one day late. This is not the case in business credit reporting. Business credit reports to the day. This means if you pay 5 days early or 15 days late that is exactly how it gets reported. This has a huge impact on your business credit scores. Business credit scores of 70 indicate your business pays all its creditors on time as agreed. Paying 10 days early will result in scores in the 80 range while paying an average of 10 days late will land your business scores in the 60 range. To optimize your business loan opportunities you want to be in the 75 or higher range which is equivalent to 750 personal scores.

• What Can Happen If You Trademark Infringe

When you file for a business name with any secretary of state they only do a name availability search in that state alone. This means there may be many other potential businesses nationally with that same name or very similar names that are close enough to cause confusion or even trademark infringement. You could be two or more years into building a successful business with very strong business credit scores only to one day receive a cease and desist letter in the mail for trademark infringement that you had no clue existed. Now all your hard work in building success under that name is for nothing and you are forced to do a name change and start over. All this when a simple business finance pre-qualification audit would have discovered this and much more before you potentially wasted a large amount of time, effort, and money. Business lenders can easily check to see if your business name may be trademark infringing. Your risk of defaulting on their loan would be very high if there was a potential for a cease and desist letter.

• Loan Stacking on Your Own

With non-bankable business funding programs there are billions of dollars available to be loaned every year. The issue with these funding programs is that they are high interest (typically 25% and up), short term (usually 12 months and less) and smaller amounts (hard to get more than $250,000). This loan programs can be stacked to maximize the amount of this initial type funding programs but that can be very difficult if done in the wrong order. For example let’s say you applied for and were approved for $75,000 in business credit cards and now you apply for an SBA, you are declined as being a high risk of default due to the potential high interest credit cards. In the reverse if you apply for and get approved for a business SBA loan you are most looked at as a lower risk of default for business credit approvals. This cart before horse scenario plays out in almost all the over twenty different non-bankable funding programs where one wrong order move might cancel four or five other funding programs that were available to you and could have stacked if done in the right order.

• Out of 10,000 Operating LLCs Only 62 Passed

We scanned ten thousand (10,000) small businesses to see how many were already bankable, had their lender compliance items completed and had at least three (3) reporting business credit tradelines. The filter criteria we used was that they already:

Filter #1. Were an LLC entity and in good standing with their Secretary of State where filed.
Filter #2. Had been operating, in business, for at least a full year. Not just an LLC in the files.
Filter #3. Had nineteen (19) or less employees. So that they were a typical small business.
Filter #4. Had a business location (not residence or mailstop) as listed in the USPS database.

Using these four small business filters and then scanning to see how many of these 10,000 businesses had just completed all items of Lender Compliance and had at least three reporting business credit tradelines, only sixty-two (62) successfully passed. 62 out of 10,000 small businesses. That is less than one percent (<1%)!  This is why over ninety percent (90+%) of small business loan applications are declined. Small business owners simply do not know what it takes to become bankable or how to get it done.

• What Happens When Your Business Is In The 1%

What happens to your personal mail box if in your personal credit world when lenders, retailers, credit card providers and many others know that you have 720 and higher FICO scores plus they know your annual income is above $150,000? Dumb question, your personal mailbox is jammed everyday with offer after offer after offer, correct? Well, what do you think happens to your business mailbox when all the tens of thousands of business credit providers know that your business has become one of the less than 1% that are bankable and they know that your business FICO SCSS scores are above the 160 mark? Another dumb question. You need to get a bigger business mailbox as the postal service cannot fit all the offers.

• In A Survey of 1,000 USA Small Business Owners

From the 10,000 small business LLCs that were scanned a sample of 1,000 business owners were contacted and asked some basic business bankable questions that every business owner should know and be optimizing. The survey results were:

86% percent did not know their business bank rating.
82% percent did not know what made up business scores.
79% percent had business credit scores of 60 or below.
72% percent did not know their business credit scores.
39% percent had personal credit FICO scores below 600.
4% percent pre-qualified an SBA small business loan.
3% percent had 3 or more reporting business tradelines.
<1% percent had businesses that were already bankable.