Business Credit Reports Are Vital to Getting a Business Loan According to Latest Small Business Administration Study

Summary - In what can aptly be described as crucial news for savvy small business owners, a new survey reveals the importance of business credit reports and scores to banks who issue business loans.

Full Story - In what can aptly be described as crucial news for savvy small business owners, a new survey reveals the importance of business credit reports and scores to banks who issue business loans. The Small Business Administration (SBA) Office of Advocacy developed this report entitled, “A Survey Based Assessment of Financial Institution Use of Credit Scoring for Small Business Lending.”

The use of business credit scoring for small business loans is a relatively recent phenomenon, but the potential benefit to small business owners is growing. As a result of this research the SBA came to the conclusion, “… there are indications that (business) credit scoring may be providing more borrowing opportunities to small business. … The survey confirms that banks implement the use of credit scoring for small business loans in a number of different ways – while a majority of banks depend on the credit score of the owner as the key credit metric, other banks utilize the business score, and still others use both. ”

Based on these results, it is more vital than ever for small businesses to build a business credit profile and score to increase their likelihood of obtaining business loans in the future. This step will enhance and establish business cash sources, as more banks add business credit scoring to their list of qualifications for a small business loan.

86% of small business owners were unaware there is a credit report for their business in addition to their individual report, according to a recent survey conducted by Business Credit Services. Business owners have a unique opportunity to create a healthy business credit profile and score in addition to their personal credit. They can accomplish this by working with a company such as Business Credit Services to keep their company in compliance with the lending market, build a profile with the major credit bureaus and obtain credit strictly under the name of the business. Keeping your business in compliance will help keep you out of a high-risk or “no credit” category with credit bureaus and lending markets.

There are several steps involved in establishing a separate credit profile. The first step is to incorporate the company using S Corporation, C Corporation, or LLC (Limited Liability Company) profiles. The next step is to have all licenses and permits required to operate the business. The third step is to register the company with Directory Assistance. These first three steps are critical, but they are not the only steps. According to Dun and Bradstreet D&B (NYSE:DNB), over 2,000 automated and manual compliance checks are done to determine the credit worthiness of a company.

Outside of banking institutions, the use of business credit has been around for years. Dun and Bradstreet is the oldest business credit reporting agency, established in 1842, and now has over 100 million records. D&B collects data on businesses worldwide. D&B sells this information to companies making their own decisions to issue credit to other businesses. D&B also develops marketing lists from this data for companies to purchase for marketing campaign development.

D&B is falling behind many new up-and-coming business credit reporting agencies, according to David Gass, founder of Business Credit Services, Inc. Mr. Gass believes newcomers will surpass D&B as the most recognized business credit reporting agencies. “Consumers who have not started their own business know who Equifax and Experian are, but they don’t know D&B. D&B is known to a small group of business owners. The names that Experian (Experian Business - parent company Experian Group, listed on the London Stock Exchange EXPN.L) and Equifax (Equifax NYSE:EFX) have built the last several years will start to spill over into the business credit field as well,” said Mr. Gass.

“Consumers will see these two credit reporting agencies as the leaders in the industry. I am already seeing a growing number of companies who grant credit shift from D&B to Experian for their purchase of credit reports and reporting of their client’s payment history.” Mr. Gass predicts. Business Credit Services, Inc. has developed a list of over 3,000 companies nationwide that grant credit to small businesses, and according to Mr. Gass, the number of companies switching to Experian for their reporting and purchasing of business credit reports is increasing every year.

Unlike personal credit, there are no laws protecting a business owner from information that will show up on their business credit report.

Mr. Gass indicates that several companies have asked for his assistance in removing incorrect information from their business credit report. Mr. Gass replies that there are only two ways to remove it, if the bureau itself is unwilling to do so: “Rely on cash purchases and companies that don’t buy credit reports for extending credit (very limited), or sue the bureau.” Unfortunately, a small company filing a lawsuit against a multi-billion dollar credit bureau doesn’t have a fighting chance.” There are several obstacles that can cause a small business to fail. One of these is not having enough access to capital when you need it. Business credit is one way to enhance that access and allow small businesses to thrive.

In 1999, David Gass, founder of Business Credit Services, Inc, began research on business credit in preparation for his book, “Building Business Credit for Business Owners,” which was released in February 2001. As a result of that research, Mr. Gass has developed a new system for small businesses to develop business credit and scores separate from their personal credit. Because of the unique way by which this system speeds the acquisition of credit for small businesses, he filed a patent with the United States Federal Patent and Trademark Office. Since 2001, over 10,000 small businesses have gone through Mr. Gass’ program and developed credit solely under their business name. His latest books, “Success Steps to Business Credit” and, “Success Steps to Business Financing” are scheduled for release in early 2007.

For more information on building business credit, please contact:

Spencer Matthews
http://www.bcscredit.com
866-254-6076 ext. 128
702-341-0063 ext. 128

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