I split my time between the East Coast and West Coast. Last month, I guess the rain in the northeast was getting to me.  Seemed like between the August rain and all the bad economic news in the media, it was hard to find a lot to smile about.  But I did manage to find something, and it had to do with the fact that commercial scores were actually starting to tick higher. 

Well, it’s a new month, new quarter, and while the weather in the Northeast may not be any better, I am back in lovely North San Diego County, and the weather couldn’t be any better.  PLUS, it looks like the hammerlock the “gloomy Gus’s” had on the media is lessening as well.  So, while the news isn’t necessarily great, it isn’t awful either.  The National Federation of Independent Business just released their latest survey, and small business optimism actually ticked up ever so slightly in September.  But, the key thing is, that for the first time in 6 months, it didn’t decline.  What was also interesting was that “credit problems” were the number one issue for only 4% of the respondents.

We can couple that with Experian’s latest benchmark report, which shows that average commercial risk scores held firm for the third quarter.  And bankruptcy filings have also leveled off, at least through mid-year which is the latest data I’ve seen.

We are not out of the woods yet, and far be it from me to make any kind of prediction.  Maybe it’s because the sun is shining here, but I’m thinking things might be on the cusp of getting better…again.  I will be interested to see what the economic world looks like one year from today.  It seems like the sun may be shining a little brighter by then too.

I’m tired of all the bad news.  Seriously.  Every day it seems like it’s something different.  We get a brief ray of sunshine, and we feel good for a few minutes, then its right back to feeling bad again.  Like today… for those of us who are in the Northeast (New Jersey specifically), the constant rain that is causing all kinds of severe problems.

Do you recall the good old days?  Seemed like everyone was employed, everyone was making money, the market was going gangbusters.  Remember?  They tell us we won’t see that again for quite some time.  I think it’s been labeled “the new normal”…or something like that.

Anyway, back to looking for bright spots.  I think I may have found one that provides a little glimmer of hope.  It’s that overall risk score performance of U.S. businesses is getting better!  That is, at least when you compare average risk in Q1 2011 with Q2 2011.

 Our latest quarterly business benchmark report shows that the average risk score was 57.4.  That represents a 5.1% improvement over Q1!  For Q1, the average risk score was 54.6.  Granted, the Q2 average score is down 1.4% over Q2 2010, but it looks like we are “headed higher.”  Progress!

So, on a day when it’s raining (as it has almost non-stop for the last 3 ½ days), I’m going with this as my “silver lining,” and look forward to seeing more.

You’ve got a great idea, the capital and the know-how to make it happen. Yet entrepreneurial success also depends on something else many small business owners don’t pay enough attention to: your business credit profile.

Here’s a tip! Just as your personal credit rating has a big impact on your financial health, your business credit rating can help you get competitive business loan rates and terms. Having complete, up-to-date information on your business credit profile can help improve your credit rating…and maintaining a good credit rating is the best way to obtain favorable financial terms.

To obtain a recent copy of your business credit profile online, and to make sure it’s updated with accurate information on your business, visit BusinessCreditFacts.com. Click on the orange button that reads “Update my report”.

Ah, thought I was heading towards a bad joke?  Well, while it may be tempting to follow that through, I was really talking about trade payments needed to make a credit decision.  When I started in the data business all those years ago, my primary responsibility was to review credit reports all day.  I was taught to circle all the delinquent experiences, those beyond 30 days anyway, and then look at all the circled experiences to decide what type of rating to put on the business.

Usually after the first 20 or so (often less), you got a pretty good feel for how a particular business was going to pay.  You could have put 50 or 500 more experiences on that report, and my opinion, it wouldn’t have changed.  Given the amount of times I had to do that every day, I got very good at spotting trouble from just a handful of payment experiences.

A little while later I graduated to the world of credit scoring.  At that point, I began to realize that just focusing on how many trades were in the report wasn’t even the crucial issue.  The real value of credit scoring is the model development process that looks at hundreds of data elements, and observes thousands and thousands of businesses, to arrive at the most efficient set of data.  That is more powerful than just looking at the payment record, or worrying about how many payments there are in a credit report.

So, a suggestion?  Rather than thinking about the depth of trade you see on a credit report, think instead about what the score is telling you about the likelihood the business will pay severely slowly.  I believe you will end up in a better place.

Credit reporting companies require a minimum amount of information on your small business before they can generate a credit rating for your business. The process of scoring your business can include more than 200 factors into its model. To build a business credit history and rating, encourage your suppliers or vendors to report your company’s payment history to Experian’s business database. You can download an easy-to-use letter template located here, and send your request to your current suppliers.

In my last post we discussed how the best predictive performance comes from using the consumer data on the business owner and blending it with the commercial data on the business.  But how does the scoring model work using both sets of data?  Unfortunately it is not as simple as half of the score is driven by the consumer data and half by the business data.  Advanced statistically processes are used to identify the relationship between data elements and the best prediction of future performance.  Thus we have often seen very high consumer scores on the business owner and yet the blended business score is low because of significant derogatory commercial data.  The use of both sets of data always means a better identification of risk.