Since 1993, SBA underwriters have used a Small Business Scoring Service (SBSS) developed by FICO (formerly Fair, Isaac and Company), in San Jose, CA., to assess business borrowers, much like credit card companies use consumer credit scores. Understanding your SBSS score is critical to getting financing. You need at least a 140 to qualify for a U.S. Small Business Administration (SBA) loan under $350,000. But even beyond that, the score by itself is highly predictive of a borrower’s credit worthiness and is very important to all lenders, even if they do not handle SBA loans. You can access your SBSS score at www. bQual.com – the report will also include your FICO Consumer Credit Score, an Equifax consumer credit report, and a full fundability assessment. (Generating your bQual report will not hurt your credit.)
Not all small business owners are great accountants, and they can many times be unaware of the necessity of actively managing their SBSS business credit score. The following are 5 ways to manage your SBSS score.
Find Out if You Already Have a Credit File for Your Business
The first step is to find out if Dun and Bradstreet, Inc. (D&B) is keeping a credit file on your business. You can find out by calling their Customer Service line or visiting their website. If you discover that they have never heard of your business, then it’s time to apply for a D-U-N-S number. Every small business needs a unique identification number. It’s important to get one as soon as you start your enterprise so that Dun and Bradstreet can start the process of creating your business credit file.
If you discover when you call or visit the D&B site that you already have a credit file, be sure to review it carefully and make sure you understand everything it contains. Modify or add information as needed to make sure that everyone looking at your small business credit score is able to make decisions based on accurate and complete information.
Establish a History
When just starting out, it can be tempting to use your personal credit to get your business going. It can be easier that way, but in the end, it’s best to start establishing your business credit score right away by putting expenses such as utilities, rent, or credit cards in the business name and by using a commercial bank account to make payments.
Understand the Factors that Influence Your SBSS Business Credit Score
Make bill payments on time. That is the most important thing you can do to build a great SBSS score. Use any line of credit you receive carefully. Don’t overextend yourself, and never use all of your credit at once. There are many other factors, 150 in fact, which D&B uses to determine your credit rating. Learn them, and use that knowledge to your advantage.
Keep your Business Credit file up to Date
Once your file is established, it can be tempting to move on to other tasks and ignore this aspect of your finances. Don’t fall into that trap! Check it periodically and make sure it is up to date and accurate.
Carefully Watch your Customers’ and Vendors’ Credit
Make sure that you are making smart, informed decisions about the credit you extend to your vendors and customers. Don’t put your business in jeopardy by overextending unsecured financing.
Now that you know the best ways to keep your business financially healthy, take action and start researching your SBSS with bQual today!