business plans Archives - Business Credit

Top 10 Credit Reporting Agencies Every Business Owner Should Know

October 21, 2009 By Marco Carbajo

business-credit-report I was excited to write this particular post because there is such a tremendous lack of awareness in the entrepreneur and small business community surrounding the business credit industry.

I have assembled my ‘Top 10 Credit Reporting Agencies Every Business Owner Should Know’ in order to full educate the entrepreneur and small business community on what’s available in the marketplace to grow and maintain their credit files.

While the majority of consumers are fully aware of the three main consumer credit reporting agencies known as Equifax, Transunion, and Experian there are a few that realize that there are six other separate business credit reporting agencies that specifically collect data on businesses.

The tenth reporting agency is extremely important as it has to do with you’re ability to open up a checking account with a financial institution. Banks use a reporting agency known as ChexSystems which is a network comprised of member Financial Institutions that regularly contribute information on mishandled checking and savings accounts to a central location.

Here are a few examples of the difference between a personal credit rating and business credit rating.

A personal credit score is based only on credit history whereas a credit rating for a business takes into consideration other factors like company size as determined by assets and number of employees.

Also a personal credit score is based on financial information provided by credit card companies, retail stores, and financial institutions whereas a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

Here are the Top Business Credit Reporting Agencies Every Entrepreneur Should Know About

Dun and Bradstreet (D&B)

D&B is the primary business credit reporting agency. For years, D&B has offered a variety of ratings tools that can be used to determine whether to engage in business with a particular company and to determine loan terms. For a business to get listed with this agency it needs to first obtain a DUNS Number. The most commonly used business credit score for vendors to determine a businesses’ credit worthiness is based off of D&B’s Paydex score.

Equifax Small Business Enterprise

Equifax, one of the three primary consumer credit rating agencies, also provides business credit evaluations for over 22,000,000 small businesses and corporations. Equifax has developed its own business credit score known as the Small Business Credit Risk Score^TM. This evaluation is based on a combination of reported financial transactions, including banking, leases, trade accounts, public records, as well as the demographics of the business.

The Financial Services Credit Risk Score^TM assigns a score from 101-992 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency.

The Suppliers Credit Risk Score^TM assigns a score from 101-816 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency. These scores also include explanations of why a particular business earned that score based on a series of reason codes provided in the report.

Experian SmartBusinessReports^TM

Experian is another one of the three primary consumer credit rating agencies who provides business credit evaluations. Unlike D&B and Equifax, Experian’s SmartBusinessReports^TM doesn’t assign a business credit score. Given this information, it would be up to the lender to interpret the risk associated with this type of payment history.

Credit.net

Credit.net is a division of InfoUSA® that generates credit reports on approximately 15,000,000 businesses. There are 6,000,000 of the reports in their database that have been completed on small businesses with four employees or less. The credit analysis provided by Credit.net relies on four criteria: years in business, number of employees, public records, and stability within the industry. Its business credit score is a grading system from A through C (70-100) and is awarded as an evaluation of the company’s credit history.

Accurint^TMBusiness

This is a new business that is a combination of forces between The Better Business Bureau (BBB) and LexisNexis, one of the leading providers of business services and information. AccurintRBusiness is like Experian in that they provide public and business profile information, including credit history based on payment patterns of small, medium, and large companies. This company provides a payment history only with no type of unique business credit scoring system.

ClientChecker

This is a credit reporting bureau that started in 2003 and specifically targets small businesses, freelance professionals, and contractors seeking information to help them determine which other businesses they should do business with. Rather than providing a fixed business credit score, ClientChecker compiles information based on feedback from its members.

*Another business credit reporting agency worth mentioning is Paynet

Paynet is the premier provider of risk management tools and market insight to the commercial credit industry, collecting real-time loan information from more than 200 leading U.S. lenders.

The company’s proprietary database is the richest and largest collection of commercial loans and leases, consisting of more than 14 million current and historic contracts worth $645 billion.

These business credit reporting agencies allow a business to establish its own credit profile, scores, and payment history. The challenge for entrepreneurs and small business owners is realizing that a business credit file will not be established unless the file is initially set up and activated by the business owner.

I encourage all entrepreneurs and small business owners to separate your personal credit from your business credit and position your business for unlimited financing potential.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

To Your Success In Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.

8 Steps to Building Business Credit

October 20, 2009 By Marco Carbajo

Small Business Credit Card I felt inspired to write this post after receiving so many questions about business credit and how you go about getting approved for cash credit lines despite the current credit crunch in the economy.

Let me be the first to tell you that businesses are still getting cash credit and business financing today but lenders have adopted new criteria and stricter guidelines that many business owners fail to recognize or adapt to.

It’s more important now than ever to be pro active and informed on what is required to obtain business financing for your business. I don’t recommend anyone to wait until you need financing to start because the business credit building process takes time and doesn’t happen overnight.

Ever heard the phrase ‘Dig your well before you get thirsty?’

I’ll even give you the shovel!

Fair enough?

Great!

It’s important to understand that the biggest benefit to building business credit is not just having access to cash credit. One of the greater benefits is obtaining cash credit that does not report to your personal credit profiles. However, before any business credit building begins you’re business must meet certain corporate conformity guidelines in order to prevent it from getting red flagged by the business credit bureas.

When you start building business credit and progress in the process by establishing trade credit and eventually cash credit it’s important for you to understand that is not the end result that you should be shooting for. After building your business credit foundation the cash credit that you obtain should only be just the beginning!

You can be assured that you will obtain as much cash credit for your current needs when you follow the right steps but whether your business obtains $50,000 or $200,000, if you continue to follow the right step-by-step process you will be able to increase your cash credit lines to double or even triple the initial amount.

‘Eight Steps to Building Ultimate Business Credit’

1. Corporate Conformity

This is where you’re business credit foundation is set up and it’s critical not to take short cuts or side steps because you’re ability to obtain financing can be hampered. At this stage it’s vitally important to structure your business entity properly from both a tax and asset protection standpoint. In additon, both the business credit bureaus and lending institutions will verify certain information about your business that must meet specific lending guidelines. In order to achieve the best business classification ratings make sure you meet all the requirements before moving on to the next step in the business credit building process.

2. Business Plan

This is not a mandatory step, but it’s necessary for your overall business success as well as a door opener for specific lenders.

3. Business Credit Profile

Once you have completed corporate conformity you will be ready to set up your business credit profile with Dun & Bradstreet as well as steps to activate your business credit profile with Corporate Experian and Business Equifax.

4. Tier 1 Trade Accounts

This is the first step where you will be setting up trade accounts for your business that are known to grant small amounts of credit to businesses that have no credit history.

*Please note –

Even if you have been in business for several years doesn’t mean you have business credit history. After setting up your business credit profile there will be no history so you will need to start small and gradually build it to larger amounts over time.

5. Tier 2 Trade Accounts

At this point you set up business trade accounts for your business that are known to grant credit to businesses that have little business credit history. Because most Tier 1 accounts will now be reporting on your business credit profile you can now apply for Tier 2. When Tier 2 vendors pull your business credit report they will see that you have some good history so they will grant additional credit in amounts higher then approved for in Tier 1.

6. Tier 3 Trade Accounts

These companies will grant credit in higher amounts than what was granted from Tier 1 and Tier 2 accounts. Those members with good personal credit history may also be ready for bank financing at this stage. Each tier builds upon the previous tier. Many of my clients who want to apply for bank financing at this stage can but at this stage they will need to use their personal credit scores for approval and will need to be in the 680+ range. If personal credit scores are below the necessary range then I suggest enrolling in a credit restoration program.

7. Tier 4 Cash Credit Accounts

Tier 4 accounts consist of vendors who will grant your business cash credit cards, typically with a Visa or MasterCard logo. Benefits to you include no personal guarantee and affect on your personal credit profiles.

8. Advanced Business Financing

At this stage of the process your business credit file is built, you have history, business scores, rating; access to funding and you can continue to obtain even larger amounts of financing by following my advanced business credit building strategies. There are many different advanced strategies to obtain additional capital with and without a personal guarantee at this stage.

Remember it’s not only about how much cash credit you obtain initially, it’s about setting up yourself for much larger amounts of capital for your business. This is accomplished by following a proven simple step-by-step process to building ‘Ultimate Business Credit!’

Remember – “People only see what they are prepared to see.” ~ Ralph Waldo Emerson

To Your Success!

Marco Carbajo

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of http://www.startbusinesscredit.com . Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below =>

How to Build Bank Credit for Your Business

September 8, 2009 By Marco Carbajo

Recently I shared the benefits of building business credit with each of the business credit agencies. Separation of personal and business credit is a must for small business owners in order to eliminate personal liability and protect the integrity of the corporate veil.

While this strategy creates a Paydex, Small Business Credit Risk Score, and Intelliscore for your business it’s not the only rating you should pay close attention to.

Your business will also need to establish effective ‘Bank Credit’.

Bank credit is totally separate from building business credit and in no way affects your ability to build strong business credit scores.

“Bank Credit” makes your business more credible in the eyes of lenders. In this post, I want to share with you the ‘3 Main Components of Building Bank Credit’ which are:

Business Bank Account & History
Bank Rating Number
Obtaining Your First Business Bank Loan

So let’s get started!

Business Bank Account

The first step in establishing positive bank credit is to make sure that your business name and mailing address, as listed on your business bank account, matches exactly how your business name and address appear on any legal paperwork that’s been filed with the State. It must also match exactly with the name and address that appear on your Federal EIN paperwork. If it doesn’t match you’ll have to correct it immediately!

Business Bank History

Most lenders also determine the age of your business by the date you first opened your business bank account and not the date that appears on your Incorporation, LLC, or EIN paperwork. However, in some instances banks may also require 24 months seasoning from the start date of your business as well.

Your business banking history is vital to your ability of being able to secure larger business loans with banks. Lenders will look to see how long that relationship has been established, so once you get your account set-up don’t change banks!

The longer your business banking history, the better the borrowing potential you have.

Bank Rating Number

Your business bank account reflects how you manage your cash flow. Lenders want to know that your business cash flow is capable of handling the business debt and expenses on a consistent basis. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan applications declined right away.

If a loan amount requires a $1,000 month payments then lenders need to see at least a “Low 5” bank rating. Your “Bank Rating” is based on your average daily minimum balance over the last 3 months.

Bank Rating	Account Balance	Bank Rating	Account Balance
Low 4	$1,000 – $3,999	Low 5	$10,000 – $39,999
Mid 4	$4,000 – $6,999	Mid 5	$40,000 – $69,999
High 4	$7,000 – $9,999	High 5	$70,000 – $99,999

Bank ratings consist of three factors…

1. The first factor is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. $10,000 will rate as “Low 5”, $5,000 rates as “Mid 4”, $999 rates as “High 3”, and so on. You need to maintain a minimum “Low 5” bank rating ($10,000) for at least 3 months. Unfortunately, without at least a “low 5” rating, most lenders will assume your business has little ability to repay.

2. The second factor is the bank rating cycle which is three (3) months. You’ll want to have at least a low 5 for the three months prior to applying for larger loans.

3. The third and final factor has to do with how you manage the account. NSF (bounced) checks destroy bank ratings. From this point forward, NSF checks are something you can’t let happen. I would suggest that you add overdraft protection to your account as soon as possible.

Obtaining Your First Business Bank Loan

Getting your first business loan from a bank can seem like an impossible task. The majority of the business loan applications at banks get declined because banks won’t lend to just anybody … or will they?

This one business bank loan strategy provides a powerful boost to building business credit fast. The business bank loan needs to be in the exact name of your company. It should be under your Federal EIN and report to the business credit agencies, specifically Equifax Small Business and Corporate Experian.*

So how do you accomplish this? Under this Bank Loan Program you will be securing a business loan with a certificate of deposit (CD) at the bank that is extending the business loan. You’ll make a deposit into a CD account at an SBA preferred lending bank. Then, you receive a business loan for 100% of the value of the CD.

This process works very well and works every time as long as you’re personal credit scores are not in the low 500 range. If your scores are in the low 500’s, it’s best to try smaller business banks and talk to an individual banker first.

The Benefits of a Secured Bank Loan

It will appear on your business credit report just like any other loan.
There will be no note in the file, or on credit reports, that show it as “secured”.
It will make your business credit report stand out to other lenders and creditors who obviously know how difficult it is to get a business bank loan.

If you’re personal credit is a large issue and you just can’t find a business bank to do the CD program for you … don’t worry. You can still build your business credit without the bank loan; the bank loan just makes it faster.

*N.E.C. members are provided access to our list of banks who have done the CD-Secured Business Loan program

Remember – The secret of business is to know something that nobody else knows. ~ Aristotle Onassis

To Your Success!

Marco Carbajo

About the Author

How to Business Plan: What you need to know

June 18, 2009 By Marco Carbajo

business-plan I’m sure you’ve heard about ‘business plans’ but do you know the real benefits to having one?

Not every entrepreneur who starts and runs an online or offline business begins with a business plan, but it definitely helps to have one. If you’re seeking funding from a venture capitalist, angel investor or other source of private capital then you will definitely need a comprehensive business plan that is well thought out and shows sound business reasoning.

However, too many entrepreneurs believe that business plans are only needed when you require business capital or financing to launch your business. When it comes to the internet many entrepreneurs can start their business on a shoe string budget so in their minds ‘business plans’ don’t apply to them right?

Nothing can be further from the truth. It’s like building a home without using any plans or blueprint. Imagine believing that because you have all the materials, laborers, and tools needed to build a home you figure why do we need the plans? Let’s just start building away!

A business plan is your blueprint that outlines every necessary component for the success of your business. Now for internet entrepreneurs how can you expect to build your business online without a plan? If you plan to build your business on the internet using social media marketing you’re going to need a plan?

You’ve probably heard me say this ‘A sign of no business plan is a sign of no business’.

Still not convinced?

If you ever decide to approach a banker for a loan for your business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and you are approaching a bank for capital to expand the business, they may not require a business plan, but it will look much more favorably on your application if you do have one.

Here are ’10 Reasons Why You Should Have a Business Plan’

Supports a loan application
To raise equity funding
Define objectives and describe programs to achieve those objectives
Compete in the marketplace (through an analysis of what your competition lacks)
Make money from the start by devising an effective marketing strategy
Provide a revenue estimate (by defining your market — who your customers will be — and the percentage of the market you can expect to reach)
Define agreements between partners
Set a value on a business for sale or legal purposes
Evaluate a new product line, promotion, or expansion
Determine whether your business has a chance of making a good profit

What’s in a business plan?

A business plan should prove that your business will generate enough money to cover your expenses, but a business plan may vary depending upon who your target audience is. If you are writing a plan for your associates and partners, for example, to expand an existing business, then the focus of that plan may be more on the operation side than it will be on the financial side. This plan would show your partners how the expansion will mean more revenues, but they are going to want to know the nuts and bolts of how this new venture is going to be implemented.

If you are writing a business plan for a bank, your bank manager will want to see that your ideas are well thought out, but the most important aspect to him or her will be your financials. Are your projections realistic? And will the cash flow of the business be enough to ensure that you can make the monthly payments for the loan that you have requested? If your business is making $1,000 a month and your payments are $1,200 a month, the bank is likely to reject your application.

When considering an investment opportunity, most venture capitalists will look at the obvious trends and market niches. The most important factor in a decision to invest in a company is the quality of the people. In real estate, the three biggest factors are “location, location and location.” The venture capital factors are “people, people and people.” VCs will ask, how experienced are the people that are going to run this business? Do they have knowledge of the industry? Have they started successful businesses in the past?

I know it’s quite a bit to digest but are you seeing all the benefits to having a business plan?

Excellent!

What makes a successful business plan?

Presents a well thought out idea
Contains clear and concise writing
Has a clear and logical structure
Illustrates management’s ability to make the business a success
Shows profitability

Lets bring it all together…

Your business plan is your business blueprint and like a calling card, it will get you in the door when you’ll have to convince investors and loan officers that you can put your plan into action. You want your calling card to look impressive, so make sure your business plan is printed out on good quality paper, you have checked the spelling and grammar and that your numbers add up. Anyone who sees errors while reading your plan will wonder whether you are going to make similar errors in running your business.

A great business plan accomplishes two main objectives:

1) It provides you a blueprint for building your business including but not limited to product development, target marketing, operations, and revenue projections

2) Show bankers, venture capitalists, and angel investors that you are worthy of financial support.

Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen.

Start your business plan today!

CLICK HERE for 500 sample business plans

Here’s a free course on‘How to Write A Business Plan‘from the SBA