Your small business is always changing to improve and adapt. You might want to change the name of your business, but doing that can be challenging. Our content partner Nav explains how a name change affects your business credit and how to protect your good standing.

Your small business is always changing to improve and adapt. You might want to change the name of your business, but doing that can be challenging. Our content partner Nav.com explains how a name change affects your business credit and how to protect your good standing.

 

Changing your business name can be a lot of work, and, quite frankly, a hassle. But can it also put your business’s credit history at risk?

Kimberly Wilson is about to find out. In 2006, she started First Step Therapy, a counseling and training business, and grew it into multiple locations. A few years ago she took a hiatus from that business to earn her doctorate degree, and now she’s ready to relaunch her business. She has chosen a new name that reflects her new vision for the company. It will be called First Step International Consulting & Counseling Services and will offer training for individuals, businesses, and professionals.

However, she’s worried about what will happen to her business credit when her name changes. “I am concerned that if I retain the same federal tax ID but change the name, I will lose my business credit rating,” she wrote in an email. “How do I prevent that from happening?”

Wilson built a positive business credit history in her first business. She established business credit by using trade credit—purchasing things she needed for her business, such as supplies or printing—with payment terms of net 30 or net 60. She paid those bills on time, and as her business credit scores improved, she was able to access even more credit. Eventually, she used business credit to finance computers and other equipment.

Older is Better

Wilson is right to be concerned about keeping her credit history, since age is a factor that often affects business credit scores. Scoring models often evaluate age in a few different ways:

  • Age of the business—How long has the business been open?
  • Time in file—When was the first account opened?
  • Age of accounts—What is the average age of all accounts?

Since small businesses often fail in their first few years, businesses with older credit histories benefit from well-established credit histories.

The good news is that Wilson doesn’t have to sacrifice her business credit history when she changes her business name. But she’s smart to be proactive, because by doing so she is more likely to ensure her complete credit file will follow her business.

Steps to Take

If you find yourself in a similar situation as Kimberly Wilson, here are several steps you can do to help the process move smoothly:

Submit a name change to the Internal Revenue Service if necessary. You’ll find instructions and guidance on the IRS website.

Update your name with state and local agencies as required. If you have registered your business with your state Department of Corporations, for example, and/or you must have a local business license, you may need to update your business name with either or both.

Notify your creditors. Let your creditors know about your name change so when they report your account in the future, it will be reported under your new business name. Hopefully this will also help associate your old credit history with your new business, although that is not guaranteed. Do the same with companies through which you process payments, such as credit card processors, your bank or credit union, etc.

Notify the credit bureaus, as necessary. We asked the major commercial credit agencies to clarify their policies and procedures regarding a business name change, and here are their responses:

  • Dun & Bradstreet does not require business owners to notify them of a name change unless it involves a change of ownership. If it does, visit Dun & Bradstreet’s free company update page here.
  • Experian recommends small business owners visit BusinessCreditFacts.com to update their reports.
  • Equifax does not require a business owner to report a name change. As long as the business uses the same credit accounts and does not use a different tax ID number, the reporting members will report the credit history using the new name. The business credit report will also reflect the previous name (similar to how a former name is reflected on an individual’s credit file).
  • LexisNexis does not require a business owner to report a name change.

“Information on small businesses is in constant flux as they change or add locations, evolve into new entity types (e.g., from sole proprietor to LLC), change leadership, grow their assets, and more,” says Ben Cutler, Senior Director of Small Business Risk with LexisNexis. “It’s even common for a small business to change its DBA and/or its name. But these activities leave ‘footprints’ in the data ecosystem, and LexisNexis Risk Solutions relies on its Big Data technology and sophisticated, statistically based record linkage models to uncover and combine these footprints across billions of data records.”

Check and monitor your business credit reports. Review your business credit reports before your name change to see which accounts report, then continue to monitor them afterward to see whether those accounts are reported under your new name. If not, you can contact your creditors and ask them to make sure your accounts continue to be reported under your new business name.

There are many more steps you need to take to successfully navigate a business name change, but with the right planning, you should be able to keep your credit history intact.

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

The way credit agencies report public records is changing this summer. Our content partner Nav explains what is changing and how it might help your credit score!

The way credit agencies report public records is changing this summer. Our content partner Nav.com explains what is changing and how it might help your credit score!

 

A slew of changes to how credit reporting agencies will handle public records could help millions of Americans improve their credit scores this summer.

For decades, the major credit bureaus — Experian, Equifax and TransUnion — have included public records like parking tickets and fines in consumer credit reports. But, as a result of a settlement with the New York Attorney General in 2015, the bureaus announced plans to update and modify their data collection and dispute processes to improve credit report accuracy.

Changes under the National Consumer Assistance Plan actually began rolling out in September 2015, with another round of changes taking effect September 2016 and the final round occurring on July 1, 2017. This final group of reforms mainly pertains to public records like tax liens and civil judgments. It includes two major policy shifts:

  1. Public records will now be required to list the name, address, Social Security number and/or date of birth of the consumer.
  2. The records will need to be updated every 90 days in order to remain on consumers’ credit reports.

The Consumer Data Industry Association, a trade group representing the major credit bureaus and other data companies, estimates that this change could result in the removal of 96% of civil judgments and 50% of tax liens currently appearing on consumer credit reports due to insufficient personal identifying information (PII) under the new standards. Bankruptcy records will not be impacted by the data standard changes as they already comply with these policies.

This isn’t the only consumer-friendly credit reporting shift that’s happened recently, though. The July 1 shift has been planned for a while, but, as we first reported on Nav, consumers got an additional boost late last year from a handful of major debt collection companies who decided to stop reporting on paid collection accounts after 2 years, or to not report collection accounts that were paid in full or on a payment plan if the consumer started paying within 3 months of the initial collection notice. Though not all collection agencies are following this policy, it’s a major shift for one of the top credit report issues — unpaid collection accounts — and one source told Nav that the decision has already removed more than a million derogatory accounts.

The impact of the CDIA changes in July compounded with the recent debt collection shift means millions of Americans could see a credit score lift in 2017. The impact goes beyond just consumer credit scores as well — while businesses have their own credit scores, nearly half of small business owners use their personal credit scores to secure business financing (many business credit cards, for example, require a personal credit score to get approved). So a major lift to a personal score could make a big impact on small business owners looking to secure business financing in the future as well as under the July changes. (You can check your personal and business credit scores for free on Nav.)

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

Getting a small business loan is more than collecting the right documents and providing financial information to your lender. Our content partner Nav explains five actions you should stop doing that will negatively impact your ability to get a loan.

Getting a small business loan is more than collecting the right documents and providing financial information to your lender. Our content partner Nav.com explains five actions you should stop doing that will negatively impact your ability to get a loan.

 

Lenders are going to looking at a number of factors to determine your eligibility for a loan, including your personal and business credit scores, your business banking information, personal and business tax returns, P&L statement and more.

If this seems overly complicated, never fear. While you can’t make all of these factors perfect overnight, you can exercise control over some, which will greatly improve your chances of getting the financing you need to make your business strong. Let’s take a look at five things you should definitely avoid before applying for a loan.

Missing a Payment

Don’t miss a payment on your personal or business credit cards, vendor accounts or any accounts that report to personal or business credit reporting agencies.

Payment history is the most important factor in both personal and business credit scores. Although it varies by score, payment history accounts for about 35% of your personal credit scores and 50% of your business credit scores. Just one late payment can bring down your scores significantly.

Most lenders are going to look at least one, if not both, credit scores. Most financing types will require you to meet a minimum credit score requirement — the SBA’s most popular loan program — the Advantage loan program, for example, has a minimum FICO SBSS score of 140 or above.

Making Large Purchases on Your Credit Cards

Large purchases can also affect your credit scores if you’re not carefully paying them off. This applies to purchases made on both your personal and business credit cards. Large purchases run up your credit utilization, which is an important factor influencing both personal and business credit scores.

Here’s a tip if you need to make large purchases on your credit cards: find out when your card provider reports to credit reporting agencies, and pay off your balance before that date so your high credit card balance is not reflected on your report. Often, this is the date your statement is issued.

Letting Your Business Bank Account Dip Below $1,000

Lenders like to see that you have enough free cash flow available to meet current debt obligations. A low balance (generally below $1,000) is a sign to lenders that maybe your business isn’t in the best shape financially.

Obviously, negative balances are even more of a red flag. Negative balances tell a lender that your business doesn’t have enough money in the bank to cover loan payments.

Here’s a tip if your business account balance is low: transfer a cushion of cash into your account, or secure a line of credit from your bank so your account doesn’t dip too low during cash-flow emergencies.

Applying For Certain Types of Loans

A Merchant Cash Advance (MCA) has been described as a “payday loan” for small businesses. How it works is an MCA provider pays a one-time lump sum, often instantly or the same day as the application, to a merchant in exchange for a percentage of future credit or debit card sales.

Fast money comes at a price, however, and MCAs usually charge high interest rates of 50% or more. If a business has outstanding MCAs it’s a sign to lenders of financial volatility, similar to the way a personal lender might view you as an individual if you’ve take out multiple payday loans.

Here’s a tip to avoid taking out an MCA: Consider applying for a business credit card before any potential cash emergency so you’re prepared should that time come.

Not Checking Your Business Credit

You’ll want to check your business credit scores and reports before you apply for any business financing so you know where you stand. If your scores are bad, and making a couple of small moves like paying off a credit card or asking for a credit limit increase will improve them, you could score better interest rates and terms. (You can check your personal and business credit scores for free on Nav.com.)

Also, checking your credit report ensures the data is accurate and up to date. Some negative items may still be on your report causing headaches despite the fact they should have dropped off. UCC filings are a good example of this.

When you take on financing that requires collateral, the lender places a legal document called a UCC filing on your business credit file, which signals to other creditors that they have a legal right to your collateral specified in the filing if you fail to pay your bills to the lender.

If you already have a loan that required collateral and are looking for another loan, you’ll find that many lenders are unwilling to lend to your business if they are second in line to the creditor that placed the initial UCC filing. UCC filings can last for 5 years (or more if the lender files a continuation of the UCC).

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

You can have too much of a good thing. Our content partner Nav will help you figure out if you have too many business credit cards and how they could be negatively affecting your business.

You can have too much of a good thing. Our content partner Nav.com will help you figure out if you have too many business credit cards and how they could be negatively affecting your business.

 

A business credit card can be an incredibly powerful financial instrument, and some business owners wonder how they can best leverage these tools. One way to get the most value from your business credit cards is to open several different accounts for a larger line of credit or to receive the rewards and benefits offered by different cards.

But can you have too much of a good thing? And how will having multiple business credit cards affect your credit history and credit score when you apply for a loan?

If you’re wondering if you have too many credit cards for your business, ask yourself the following questions.

Am I having trouble managing my business credit card accounts? When using either business or personal credit cards, the most important consideration is paying your bills on time. When you make late payments, you will incur costly charges at the penalty interest rate, as well as expensive late fees. And if you miss multiple payments, your personal credit history will suffer. If you are unable to manage all of your business credit cards responsibly, then you definitely have too many.

Am I being surprised when I receive the statements? If you receive credit card statements with larger balances than you expected, then you might have too many small business credit cards. Being surprised each month is a symptom of not keeping close tabs on your small business credit card spending, and that of your employees. One way to mitigate this problem is to configure alerts that notify you when your spending reaches a certain level. But even if you configure alerts on all of your accounts, it will be easier to manage your spending with fewer small business cards.

Am I getting value from all the credit card annual fees that I am paying? Even when you are able to manage all of your credit card accounts successfully, you might still have too many cards if you are paying unnecessary annual fees. For example, a premium travel rewards card for small business will typically offer airport business lounge access for a $450 annual fee. But if you haven’t been regularly using the lounge access, then there’s no reason to continue to pay the fee to keep the account open, especially if you have other cards with smaller annual fees. You shouldn’t be paying an annual fee for many small business credit cards unless you are receiving value from each one of them.

Business Credit Cards and Your Credit Score

When you are thinking about how many small business credit cards you need, an important consideration is how your cards will affect your credit history and credit score. Each credit card you have, including both personal and some small business cards, adds to your personal credit history (find out which business credit cards report to personal credit here). As long as you continue to make on-time payments, each account will benefit your credit history and credit score, but with diminishing returns as the number of accounts increases.

Having multiple small business credit cards will also increase the total amount of credit available to you. And as your total credit limit is extended, it will reduce your debt-to-credit ratio for a given amount of debt. Having a lower debt-to-credit ratio is a significant factor in your credit score.

Holding several small business credit cards will offer you a strong credit history and make it easier to have a low debt-to-credit ratio, but there are other things to consider, especially when applying for a home mortgage or another major loan. After applying for a major loan, you will want to abstain from applying for any new lines of credit until the loan closes, including small business credit cards. If you’re considering applying for a major loan in the near future, it can also help your credit score to pay off as many accounts as possible.

There can be advantages to having many business credit card accounts open and in good standing. These include the ability to earn rewards and receive cardholder benefits, while increasing your personal credit history. But when you have trouble managing all of your accounts, or you are paying too much in annual fees, then it’s a good indication that you have too many small business credit cards.

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

As a small business owner, lenders often look at both your personal and business credit scores. Our content partner Nav explains how you can monitor both, why your credit score looks different across different credit bureaus, and why it’s important to keep track of.

As a small business owner, lenders often look at both your personal and business credit scores. Our content partner Nav.com explains how you can monitor both, why your credit score looks different across different credit bureaus, and why it’s important to keep track of.

Did you know: As a small business owner, you can be judged by more than 7 different credit scores!

So when applying for business credit or a loan, you probably won’t know what score—or combination of scores—your lender uses.

And ignoring any one of them could ruin your chances of getting approved.

Credit errors can kill your app

A few years ago, Nav’s founder and CEO, Levi King, experienced this problem first hand.

“In 2005 I got mailed a generic form letter that said my application for business financing was rejected due to information found on my Equifax credit report,” said King. “It didn’t make any sense. I knew my personal credit was spotless.”

It wasn’t until he dug a little deeper that King uncovered the issue.

“After several phone calls, an underwriter clarified that it was my business credit report with Equifax that was a problem, not my consumer credit report (the form letter I received didn’t specify).”

Once he got the report in his hands, King noticed a couple glaring errors. It took him awhile to get it sorted out with Equifax, but he finally got approved for his loan.

Get to know all of your scores

For most small business owners, you can expect lenders to look at both your personal and business credit, especially if you haven’t been in business very long.

To make things even more confusing—because of differences in the law—your business isn’t protected by the FCRA. That means lenders aren’t required to notify you if they denied your application because of issues on your business credit report.

It could be used against you and you may never know! That’s another reason why it’s critical to monitor your business credit.

To help you figure out which scores you should be looking at, here’s a list of the most prominent reporting bureaus and providers:

Personal scores: Experian, Transunion and Equifax.

Business scores: Dun & Bradstreet, Experian, Equifax and FICO SBSS.

Which scores do small business lenders use?

It’s almost impossible to find out exactly how your lender evaluates your financing application. They can use any combination of scores.

In fact, many lenders will draw information from various sources and create their own risk models.

What we do know is that the SBA uses the FICO SBSS score to pre-screen all 7(a) small business loans up to $350,000. And if the SBA is requiring it, you can be sure more banks will follow suit—hundreds already use SBSS.

Why do my credit scores vary?

Each bureau can have different information on file for the same person or business, and wind up producing a different score. That’s why you’ve probably noticed your score vary from bureau to bureau.

Even random things like your industry code can have a major impact on how your business is judged.

To give yourself the best chance to secure funding, you should make sure every detail on all your credit reports is correct before you apply.

Be careful: Some credit monitoring sites allow you to monitor your personal scores for free, but don’t include all three bureaus. Plus, many of these “free” sites wind up selling your personal information to other companies. (It’s how they make money.)

Instead of tracking all seven scores separately, there’s an easier solution.

How to easily monitor all your scores

Nav’s platform gives you access to both your business and personal credit reports from four of the leading bureaus—all in one spot.

That means you can get a comprehensive view of your credit life without having to go from site to site, saving you time and money.

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

Merchant Cash Advances can debilitate your small business and keep you trapped in a debt cycle. NerdWallet explains how this cycle happens, how you can get your small business out of the cycle, and how to find affordable and trustworthy loans.

By Teddy Nykiel, Nerdwallet

Merchant Cash Advances can debilitate your small business and keep you trapped in a debt cycle. NerdWallet explains how this cycle happens, how you can get your small business out of the cycle, and how to find affordable and trustworthy loans.

Jasmine Wolf, owner of the Los Angeles mobile food vendor The Lobos Truck, was in a common predicament for many small-business owners. She couldn’t get a bank loan, but she desperately needed cash to keep up with her growing business, which went from one truck to four in a single year.

She started taking out merchant cash advances, a form of financing in which the lender advances a certain amount of cash in exchange for a percentage of future sales. But the high daily and weekly payments bogged down her business finances.

“It was really difficult for me to ever get enough ahead to be able to do anything fast,” Wolf says.

So she found a middle ground between traditional bank loans and MCAs: online small-business loans. She refinanced several high-interest debts with a six-figure small-business loan and line of credit from online lender Dealstruck. She got a lower interest rate, a longer term and more financing to purchase a new truck and launch a retail line of The Lobos Truck signature hot sauces.

Photo credit to BBQ Bus

The Lobos Truck in Los Angeles serves up angel wings. Owner Jasmine Wolf refinanced a merchant cash advance with funding from Dealstruck.

Small business owners like Wolf are getting rid of MCAs and other expensive loans by refinancing their debt with online small-business loans. Small-business owners with merchant cash advances in particular have a big incentive to refinance because MCAs often have triple-digit annual percentage rates. (Read more about why merchant cash advances can be bad for your business.)

Around one-third of Dealstruck’s borrowers use their loans to refinance business debt, says Candace Klein, the lender’s chief strategy officer. And up to a fourth of Fundation’s loans go toward debt refinancing, a spokesman said in an email. SmartBiz, an online lender offering SBA loans, has noticed more borrowers using loans to refinance business debt, including merchant cash advances, general manager Evan Singer said in an email.

If you have a merchant cash advance, here are some reasons to refinance and tips on how to do it.

Reasons to refinance a merchant cash advance

Lowering your borrowing cost: MCAs are a fast form of financing, but they’re also extremely expensive. The annual percentage rates can range from 60% to 200%, according to a 2014 white paper by the National Community Reinvestment Coalition. Online small-business loans are still more expensive than bank loans, but they’re a lot less expensive than MCAs. APRs for online small-business loans range from 7% to 113%.

Lengthening your term: Merchant cash advances typically have short terms, from three to 24 months. But short-term financing solutions shouldn’t be used for long- or even medium-term business investments, says Caitlin McShane, marketing and communications director at the California nonprofit lender Opportunity Fund. California-based businesses can refinance merchant cash advances through Opportunity Fund’s EasyPay loan program, which offers 36-month terms.

Boosting your business credit: Merchant cash advance companies can’t report to credit bureaus because MCAs aren’t structured as loans, according to an Opportunity Fund article published by the Federal Reserve Bank of San Francisco in 2015. So even if you repay your MCAs on time, your business credit score won’t improve. Some online small-business lenders, but not all, report to business credit bureaus. If you want to build your business credit with small-business loans, work with a lender that reports and make all your payments on time.

How to refinance a merchant cash advance

Although banks offer the lowest-rate small-business loans, it’s unlikely that you’ll be able to get a bank loan to refinance an MCA. After all, if you’ve turned to a merchant cash advance, you probably wouldn’t qualify for a bank loan in the first place. Plus, banks consider the use of MCAs a “red flag” for a business, Klein says.

Online lenders that offer term loans are typically willing to help you refinance even if you’ve had an MCA or two. But having more than three at a time is a possible red flag for Dealstruck, Klein says. Having multiple MCAs can also count as a strike against you when applying for a loan from online small-business lenders Fundation and Lighter Capital.

Once you choose a lender, the process of refinancing is very similar to getting a small-business loan from scratch. The lender will underwrite you based on your creditworthiness and ability to repay the new loan. In most cases, if you’re approved, the lender will use the term loan to pay off your outstanding MCA balance. Dealstruck typically supplements the term loan with a line of credit to give borrowers extra cash to cover the expenses they used the MCA to pay for in the first place.

Photo credit to BBQ Bus

Green dragon “wachos” (waffle fry nachos) are also on offer at The Lobos Truck.

Next March, Wolf will celebrate four years in business with The Lobos Truck. She hopes to get a bank loan someday, and the Dealstruck loans have been a step in that direction. Still, she doesn’t regret taking the MCAs because they gave her money to grow when she needed it.

“We’re where we are today is because we took those risks,” she says. “I don’t like paying [more] for my money, but if I have to, I will.”

Find and compare small-business loans

If you’re looking for business debt refinancing options, NerdWallet has come up with a list of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

Compare business loans

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

 

This article originally appeared on Nerdwallet.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

You already know that good credit is vital for getting the loan your small business needs. Our content partner Nav shares four easy ways to improve your credit score.

You already know that good credit is vital for getting the loan your small business needs. Our content partner Nav.com  shares four easy ways to improve your credit score.

Small business owners have a lot of numbers to think about when managing their finances. But one series of numbers that often gets ignored is their business credit scores. Just as individuals earn a numerical rating to help lenders determine their credit-worthiness, businesses are also given a score based on their credit history, and that score can impact their ability to get financing, government contracts, trade credit accounts and more.

Business credit scores are created by agencies like Dun & Bradstreet, Experian and Equifax, all of which use a score that ranks a business from 0 to 100, with 100 as a perfect score. You should aim to keep your business credit scores above 75.

In addition to these bureaus, FICO also has a score that rates small businesses: the FICO SBSS score. It ranges from 0 to 300, the higher the score, the better. The SBA uses FICO’s SBSS model to pre-screen it’s most popular loan applications. If your score falls below 140 then you likely won’t qualify for these attractive (loan interest rate) loans. And banks usually require your FICO SBSS score be even higher, in the 160 range.

With all the different bureaus and types of scores, it can be confusing. The good news is that following a few simple steps can ensure your business has a strong credit profile regardless of the bureau or model being used to judge it.

Establish Credit

Many small business owners might not see a need to establish business credit when they are starting out. Often, when working on a small scale, you can bankroll the company on your personal credit. But even if you don’t see an immediate need for business credit, one might arise down the road as the business grows and expands. It’s better to dig your well before you’re thirsty, right? Not establishing a business credit profile might disqualify you from financing when it’s needed.

Since business credit scores are strongly based on history, you should open a few credit accounts, like business credit cards, to start to build a credit history. Even if the business does not need this financing, it will pay off to use it minimally and show your business is responsible managing credit.

Pay Early

You might think that paying all of your bills on time is enough to earn you perfect business credit reports. With your personal credit score, this might be true. But with your business credit score, on time is not enough. The Dun & Bradstreet Paydex score, for example, is completely based on the timeliness of your business’ payments to its vendors, suppliers and creditors. Paying on time will earn you a Paydex score of 80. The only way to earn a perfect 100 is to make your payments 30 days before they are due.

Keep Debt Low

A big factor impacting your business credit score is your debt-to-equity ratio. This measures your business’ financial leverage in relation to the amount it is currently using. Credit utilization is another important metric, which looks at your available credit in relation to your debt. A high ratio will result in a low credit score. Small business owners should aim to keep credit utilization below 30 percent. A good tip to help manage this is to make several small payments during a billing period rather than waiting until the end to pay off the debt in full.

Check For Mistakes

Mistakes are more common on business credit reports than on personal reports. A Wall Street Journal survey showed that 25 percent of people who checked found business credit report errors that lowered their score. The main reason errors are more common is because business credit data is much more fragmented, so it’s easier for information to get crossed up.

This is another reason why it’s important for you to regularly monitor your reports to ensure there are no mistakes.

Nav offers truly free business credit reports and monitoring on our website. We also have a free tool (CreditSweeper) that helps you spot and dispute any mistakes.

By doing these simple things, you should be able to maintain a healthy business credit score and ensure your business is poised to take advantage of any growth opportunity.

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $60M in loans to help more than 2,200 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at http://opportunityfundloan.org and follow us on Facebook and Twitter

Business credit means everything in managing your small business. Those with less than stellar credit often face obstacles to getting the financing they need to expand their business. If you fall into that category, this post from our content partner Nav can help you get your credit back on track.

Business credit means everything in managing your small business. Those with less than stellar credit often face obstacles to getting the financing they need to expand their business. If you fall into that category, this post from our content partner Nav.com can help you get your credit back on track.

Even though credit is an important factor in both personal and business finances, the true magnitude of its importance is not always realized until it’s needed.  If you’re a business owner with a less than desirable credit score, one of your first questions may be “How can I improve my credit quickly?”

The is truth is, there is no magic solution. You can’t improve your credit overnight; in fact, it often takes months or years to reach the level of business credit that banks require to begin working with you. However, there are a few things you can start doing today to help give your credit a boost as quickly as possible.

Register Your Company

You can’t build business credit until your business is officially recognized as such. If you haven’t done so already, you need to register your company with the IRS and obtain a tax ID number (EIN).  You’ll also want to obtain a D&B D-U-N-S number which you can obtain straight from your Nav account.

Check For Mistakes and Fix Them

Monitor your personal and business credit reports to make sure they are accurate. If information in your one of your reports is wrong, any credit scores calculated from that information will also be wrong. If you find mistakes, dispute them.  The Credit Sweeper tool in your Nav account can help.

Decrease Debt Utilization

If you already have a business credit card or trade lines established, check your report to see what your total credit utilization is like. Your credit utilization ratio is an indicator for creditors that shows how well your business manages your available credit, and you should aim to keep your business credit utilization under 50%.

If you don’t yet have a payment account attached to your business, starting one now can be a step towards establishing your business credit history.

Ask Suppliers to Report Your Payments

Do you have a good relationship with your key suppliers? If so, it’d be in your best interest to start  utilizing your regular payments to build your business credit. Similar to making regular payments on a loan, showing creditors that you can maintain regular payments to your suppliers also signifies that you are a responsible and trustworthy business.

In order to do this, you’ll need to verify that your suppliers do and will report payments to the credit bureaus. If you’re just starting to shop around for the best suppliers, inquire about whether or not they report to business credit bureaus, and try to form a working relationship with a supplier who does. You can also find a list of companies that report to business credit reporting agencies in the Business Launcher tool of your Nav account.

Build a Solid Relationship with A Financial Institution

Building a positive relationship with your bank or credit union is important for a couple of reasons. If you apply for a loan or other types of financing, you may have to provide financial information, including account statements. You’ll want to be able to demonstrate a record of solid cash flow in a business account.

One way to build credit and prove your company as trustworthy is to obtain a business credit card or line of credit and pay it back early. These payments will be reported to the credit bureaus, you will start building a solid payment history, and it will prove that, as a business, you’re likely to pay back larger loans in the future. If your business is too young to qualify for a loan, ask your financial institution whether a secured loan is a possibility.

Take Care of Your Personal Credit

For small business owners, personal credit can have a huge impact on your business credit.  In fact, the FICO SBSS Score, which is the business credit score that the SBA uses to prequalify many of their loan applicants, uses personal credit as a major factor in its scoring model.

It’s easy to focus all your time and energy on your business, but don’t let your personal credit suffer. Maintaining good personal credit will help you build or maintain good business credit. Read about the main personal credit scoring factors here.

Establish an Emergency Fund Before You Need It

One of the most frustrating situations a business owner can encounter is one where you need funds quickly but can’t access them. Thus, it’s always best to apply for things like credit cards and credit lines before you need them.  Having access to emergency cash can help you avoid the stress that comes when you need it the most.

Check your SIC and NAICS Codes

Did you know that your industry’s risk is a factor influencing your business credit score? And TONS of businesses have the wrong SIC or NAICS code associated with their business. If your business is falsely listed under a riskier industry, now would be a great time to correct that code.

“I’ve done all that, now what?”  

First of all, congratulations on taking the most important steps in building good business credit.  If you’ve managed to check off every item on the list and still find that your business credit scores aren’t rising  as fast as you’d like, don’t give up.

Building credit is process that takes time, and while there are things you can do to expedite some aspects of it, others will just take time.

Building a credit rating takes time, but tools like Nav can make the process easier and more effective. And while it may seem like it takes forever, if you are proactive, you can make significant process in as little as a year or two.

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. Last year, we made $37M in loans to help more than 1,800 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online and follow us on Facebook and Twitter

Starting a business and building business credit is different in the U.S. than other countries. Our partner Nav explains the differences, difficulties, and tips about building credit as an immigrant.

While business credit is not required to start a business in the U.S., it is important to know how and when to start building it for your business’ financial security. Find out here  – read this post from our partner Nav.com.

During a conversation with a business woman at a recent small business conference, I realized that starting a business in the U.S. is significantly different than starting one in other countries.

The business woman who I spoke with was from Canada and was asking for information on how to open a U.S. location for a business she was already operating in Canada. She was concerned about building business credit because she believed she had to have business credit to start a business in the U.S.

Fortunately, business credit is not a requirement to start a business and anyone who has legal status to work in the U.S. can start one. That said, business credit is important to build and monitor for any business owner because it can help you get better funding, lower your costs and protect your personal credit. There’s no better time to start building your business credit than the time you start your business.

Starting a business for a new U.S. immigrant includes the same steps for any U.S. citizen, however, building business and personal credit is a little different.

Personal Credit Plays a Big Role

To build business credit, personal credit is required. This may be very different for a U.S. immigrant who may be used to a system where personal and business credit are completely separate. Just like the business woman I spoke to from Canada, an immigrant may be under the false assumption that personal credit has nothing to do with business credit. But, in order to start building business credit, you’ll need to use your personal credit.

Unfortunately, as an immigrant, it is highly likely that a person has a significant disadvantage when it comes to personal credit in the U.S. Here’s why:

  1. It is likely that the credit bureaus do not have a credit profile on a new immigrant. Typically, a social security number is required to start a credit profile and new immigrants generally receive a social security number as part of their immigration application process, or shortly after they arrive in the U.S. What this means is that a new immigrant will have trouble building personal credit in the U.S. before they arrive in the country.
  2. It is more difficult to build credit when you’re first starting out. As a new immigrant with a new social security number, creditors may be wary of extending credit to you. It may take several applications for small credit cards/lines before you may be approved. Once approved for at least one account, the account has to be active for a period up to 6 months, depending on the credit bureau and scoring model, before a score can be calculated. It’s also important to remember that the account must be a positive account. After time, it will be easier to be approved for additional credit accounts. It also might be easier to start building credit by financing a vehicle. It is generally recommended to have at least one auto loan and a few credit cards on your credit profile to establish a strong credit foundation. This process can take several months.

Building Business Credit

As you build your personal credit, you’ll need to focus on a few steps to set up your business and business credit.

Business credit is not necessary to start a business in the U.S. as it is in some countries. A person simply needs to file the required legal papers with the Secretary of State in the state where the business resides, apply for a local business license and get a U.S. employer identification number or EIN.

Business credit bureaus comb through public records, including secretary of state filings, for new business records. Eventually, the bureaus will find the filing for the new entity and a profile will be created for the business. This is helpful, but not the only thing that needs to be done.

Once a profile exists with the bureaus, it is important to make sure that the information the bureau has on your business is correct. Focus on business identification information such as address and type of business as well as making sure the number of employees and annual revenues are reported correctly.

Once you have a business credit profile, you can start working towards building your business credit and obtaining a business credit score. Start building your business credit by applying for business credit cards. There are three basic ways to do this:

  1. Open a gas card account under your business name.
  2. Obtain one of the basic business credit cards provided by major credit card issuers such as American Express or Capital One.
  3. Open business accounts with vendors such as Home Depot or Lowe’s.

As you continue to open accounts under your business name, they will begin to report to your business and your profile will become scoreable.

Building business credit as a new U.S. immigrant is not that much different than building business credit as a U.S. citizen. The real difference is with personal credit and making sure you take the right steps as soon as possible to start building your personal credit.

 

This article originally appeared on Nav.com and was re-purposed with their permission.

For information about Opportunity Fund’s small business loans, please contact us at 866-299-8173 or loans@opportunityfund.org.  For questions about your existing loan or other customer service questions, please contact us at 866-299-8173 or sbhelp@opportunityfund.org.


Opportunity Fund is California’s largest and fastest-growing nonprofit lender to small businesses. In FY16, we made $37M in loans to help more than 1,800 small business owners invest in their businesses.  Opportunity Fund invests in small business owners who do not have access to traditional financing. As a founding member and signatory to the Borrower’s Bill of Rights, we believe in the important role small businesses play in our community and the economy, and we aim to help owners financially succeed.

Visit us online at opportunityfundloan.org and follow us on Facebook and Twitter

Opportunity Fund. Working Capital for Working People. opportunityfund.org