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We hear it everyday from small businesses who are calling into our offices. “Can you help me understand my credit score?” It is crucial when applying for small business funding to help businesses. We take pride in doing just this. Demystifying how credit scores work for business is one of the ways we engage with our customers. Here are some insights that we wanted to share with businesses across America:

Insight #1: Many people running their own small business are not aware that all businesses have a credit score developed by the FICO Liquid Credit Small Business Scoring Service. Banks will use this score to determine how a business’s credit ranks and then evaluate how much of a business loan they might qualify for.

The FICO Liquid Credit Small Business Scoring Service score further rates small businesses by their likelihood repayment on a timely basis, as well as the personal and business credit history. If your business is using credit cards to buy goods and services (which all companies do), then payment of these credit cards bills should be prompt and on time. There is often other financial data considered. On a scale of 0 to 300, a small business must score at least 140 to pass the pre-screening process the Small Business Administration sets on its most popular loan – the 7(a) loan.

United Capital Source offers small businesses a range of financing which are alternatives to the SBA 7a loan. You can watch some of our customers speak about their experiences in obtaining business funding.

Insight #2: If a small business with poor credit history, is denied financing, most lenders will not notify the owner of the reason for the rejection. At United Capital Source, we only need 3 months of bank statements to help businesses with bad credit get loan approvals. We also spend time working with clients to help them understand exactly how much they need for a business loan. Communicating with you is the key and we often recommend that you consult your accountant or book keeper and create a cash flow forecast with varying working capital amounts to model optimal loan amounts.

Importantly, we speak to you about cyclical events that can affect your business costs which lower profits, and which reduce the ability to repay a loan. We have seen small restaurants and pizza chain businesses be affected by rising flour and cheese costs and lower operating margins when gas costs rose.

Insight #3: It’s crucial then to strengthen your business creditworthiness and the best way to start on this is to ensure payments made to vendors and suppliers are on time so that your Small Business Scoring Service score improves over time. Ensure you’re current on all payments with vendors and your land lord and or bank mortgage for your business. It’s important you are not behind on payments with vendors as this can decrease your credit worthiness when business lenders are assessing your small business loan application.

Insight #4: A number of business credit bureaus will generate a business credit score, including Dun & Bradstreet, Equifax, Experian and FICO. Anyone can purchase a business credit report from Dun & Bradstreet, Equifax or Experian, but it comes at a cost.

The Importance for your Business

We encourage all our clients and businesses to think about their business credit and plan to improve it over time. This way, when you apply for business funding your business is better positioned to succeed. During September, 2015, 59 small businesses customers who had a small business funding facility with United Capital Source were surveyed and 52% of respondents requested more information on ‘loan amount qualification’ and 28% on ‘cashflow forecasts’ & ‘FICO scores’.

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