I recently had the opportunity to discuss these issues with Levi King cofounder of Lendio, and more recently, the co-founder of Creditera. Lendio is a company that small business owners agree with lenders. The goal of his new company, Creditera, to qualify more companies to finance and obtain better terms if they qualify to do is.
Levi estimated that only 5% of respondents get funding Lendio for a first-class qualified to find loans as an SBA 7a loan. A further 35% of small business owners for credit for a subprime loan qualifies looking. The rest does not have to win the interest in traditional or alternative lenders.
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The following questions and answers are based on my notes of a telephone conversation with Levi King
How , Business Credit Scores Work
How does the consumer credit bureaus differ from the business bureaus
Levi King: There are three major credit bureaus to the consumer side: TransUnion, Equifax and Experian. But they all draw on [very similar data sets] the same record of a person's credit score to be calculated. While the scores vary some based on a credit bureau to another on their proprietary algorithms, a person may by a look at a credit report have a very good sense of their personal credit. Therefore credit Karma a great product can with only one offering an office score, report and warnings solution.
This is not true with respect to business bureaus. Dun & Bradstreet (D & B), Experian, Equifax, Paynet and others, all draw on very different data sets and can have very different credit assessment of a company.
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Have the various bureaus serve different purposes
Levi King: Yes. Dun & Bradstreet is the 800-pound gorilla in the field of trade credit [and government contracting]. Banks and credit units tend Experian and Equifax at an incidence greater than D & B to use of our experience. Paynet has significant data with regard to lease
What is a good credit score with the business bureaus
Levi King:.? By Dun & Bradstreet Paydex credit score has a maximum score of 100, 80 is a good result. Every business credit bureau has a different scoring system. However Experian has on a zero to one hundred rating system that one 70 is a good result. Unlike on the consumer side, there is little agreement with the meaning of a score from a credit rating agency to another.
Are there any other differences between between businesses and consumers reporting agency?
Levi King: there is a big difference when it come to disputes. Unlike a consumer credit report for the burden of proof no mistakes on a business credit score correction is to the business. The FCRA does not extend its protection for operators to their credit business together.
When and how personal credit scores play a role in getting small business loan business?
Levi King: In most cases, the lender will look at both the company and the creditworthiness of the entrepreneur. Often the lender is not as concerned with the Business score, as are the contents of the report, make sure it is free of overdue receivables. There are few exceptions, such as equipment financing, where it is possible that an equipment lease missing credit gets approved personal. With bank or credit union loans, the lender is going to leave, always, the business can not pay a personal guarantee to secure the loan in the case. The perceived value of the personal guarantee as security, is highly dependent on the owner of the credit history.
In other types of such trade credit, the lender will first look at the credit history of the company. If the business does not have a strong, long credit history, the lender will ask to see permission of the owners of personal credit history and score.
Many alternative finance companies say they do not look at personal credit scores decisions to make this true
Levi King :? While many alternative finance companies say that they use for their products, do not qualify the credit score entrepreneurs, they will in fact see the credit history entrepreneurs for events of receiving funding to disqualify a company. Events in the past, the entrepreneur, as a recent bankruptcy, liens, and legal judgments are often used in deciding not to offer credit. What they really mean is that they do not use any personal loan as primary underwriting record, but as a secondary data set.
What is the FICO liquid credit KSS, also known as Small Business Scoring Service
Levi King: The FICO Small Business Scoring Service (KSS) is used by many banks [banks, credit unions, and non-bank SBA lenders] used SBA million dollars rate business loans under, and to obtain as a filter faster loan guarantees, where the loan amount is $ 350,000 or less. The FICO KSS goes from 0 - 300. To a SBA loan guarantee the minimum number of 140, but to make the most of banks will not lend, even SBA guarantees those company offers with a value below 0
FICO KSS a evaluate solutions company with limited credit history, he adds data from the business and the credit history entrepreneur. The personal credit history can for 50 Account - 0% of the score, the credit score companies up to 40%, and its financials the Company up to 10% of the score. It is up to the bank or lender to choose which credit bureaus are in the calculation of the score, but a minimum of a personal credit report and score is not required.
haveWhere will you company for credit rejected seen if they are admitted, should
Levi King:. Lenders often different risk models have on what industry a company be placed in erroneously by a lender in the wrong business based, which is not unusual, may have a major impact on credit reception. For example, a company that signs for real estate companies making could be placed in the real estate brokerage category instead be categorized as a sign manufacturer. As a real estate broker at higher risk are considered as the producer, the company could loan declined as a result. Companies should ensure that they have the proper standard identification code on their credit reports.
Interested to improve your business and personal credit scores? Try Creditera
Levi King, founder and CEO of Creditera
Levi King is the CEO of Creditera, the first online platform in the industry, the above genuine small companies access to valuable insights from both their personal and business credit can -time monitoring, reports, results, and the current warnings. With nearly 20 years of entrepreneurial and financial technology experience Levi successful company has begun spaces in the manufacturing, hospitality, retail financial services and franchising. Before founding Creditera he began Lendio, a dating service that connects commercial lenders and small business owners.
Need some money for your business? Click here to get our free guide.
How to get a Small Business Loan
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