Tag: business credit

Strong business credit can help you secure better equipment leases with faster approvals, lower rates, and flexible terms.

Discover what SBFE (Small Business Financial Exchange) is and why it's crucial for small business owners. Learn how it impacts credit and lending decisions.

Separating business and personal finances is not just an option, it's a vital step towards safeguarding your assets, building a strong credit foundation, and gaining control over your business's financial health.

Starting a small business can be very hard. Building strong credit for the business takes discipline and a certain amount of intention. In this post, we are going to start by describing two imaginary business owners working hard down on Main Street. Harry runs “Harry’s Hardware & Mercantile”, a busy hardware store.  He has been trading with local do-it-yourselfers and contractors since 1973.  Over the course of the business lifecycle, he established trade credit (Tradelines) with dozens of companies. Mildred just opened “Millie’s Fabric” next door to Harry’s on a shoestring after she got laid off from her job. She founded Millie’s by borrowing money from friends and family, charging most of her startup costs to her personal credit card. And that is where the paths of these two somewhat different businesses diverge.  Harry discovered the benefits of establishing tradelines with his suppliers in the early stages of his business and now runs a resilient profitable business.  Mildred is embarking on the difficult challenge of establishing her business and will need to manage her cash flow wisely. Like Harry, she will discover how beneficial tradelines will be to her success as she starts to form relationships with trading partners. What are tradelines and how can they benefit my business credit report? Tradelines or trade information comprises the financial payment obligations that a business has to its creditors, suppliers, and service providers that involve payment terms like Net 15, Net 30, 60 or 90. It means your business has that much time to pay back the balance of what you borrow. So, for example, if your business buys $300 worth of products at Net 30 terms, you have 30 days to pay it back. A business will start to add tradelines over the course of its lifecycle and establishing tradelines early in the life of the business can be very beneficial. Experian gets a lot of questions about how tradelines impact a business credit score, so in this post, we explain how that all works. Things to consider before applying for tradelines Establish a legal entity. In order for any business to establish trade terms with your company, take the steps to establish the business as a legal entity (ie; forming an LLC, or S Corporation), sole proprietors should make sure the business is registered with your Secretary of State. Establish separate bank accounts. Separate bank accounts will help keep finances separate and help your business track accounts payables. Business email and contact information. Your vendor will look for signs of credibility when assessing whether or not your business is legitimate. Having a business email address in the name of the company helps in that effort. Avoid using free email services like Yahoo or Gmail. Establishing a presence for your business on social media such as Facebook, Twitter, Instagram, LinkedIn or YouTube, depending where your customers spend time online. Bootstrapping a business in start-up is becoming more common, but the mistake that many business owners will make is leveraging their personal credit for company expenses.  Doing this can hurt the owner’s personal credit, and it will not help to build strong credit for the business. It is much more beneficial to establish the business and start applying for credit in the name of the company. Trade supplier types When your business orders raw materials for your business, or purchases office supplies, you would sign for the goods and receive an invoice, and be provided a period of weeks to pay the balance. If your vendor is reporting to Experian, your payment history good or bad will be reported and be a contributing factor in your business credit score. Experian classifies these tradelines as trade supplier types and groups them into the following categories. Financial loan, line, lease, credit card Supply raw materials, building supply, office Services accounting, marketing, financial services Utilities telecommunications, gas, water, electricity Transportation ground, air transport If you are familiar with consumer credit reports, you should be familiar with financial trades, as they are on our consumer credit reports too.  These tradelines include loans, lines of credit, leases, and credit cards. Commercial credit reports also include trades from other supplier types as well.  Basically, any business that has a commercial accounts receivable portfolio can provide their information to Experian and can establish a tradeline for their business accounts. To contribute data to Experian,  you must be able to export into TXT, CSV or XLS (Excel - saved as comma delimited) and also adhere to encryption guidelines. Data contributors are also required to submit monthly updates.  If you are interested in becoming a business data contributor you can find more information about reporting to Experian here.   How tradelines are classified and updated The first time Experian gets a trade from a specific data supplier for business, that is considered a new trade. On the next update of that trade, it is reclassified as a regular trade. If there are no updates to a regular trade within 3 months, it becomes an aged trade. A trade falls off the business credit report without an update in 36 months. It doesn’t end there; however, if an update comes in for an existing trade, even for a trade that fell off the business credit report, it becomes a regular trade again. Tradeline credit attributes Experian provides information on the total balance outstanding, total credit and utilization, payment delinquencies as of today, and payment trends over time. With this type of grouping, it’s easy to quickly identify newly added trades, regularly updated trades, and trades that are becoming stale. The tradeline disparity between male-owned and woman-owned small businesses Experian studied 3.1 million small business credit profiles between 2016 and 2018 and found variances in the number of tradelines in male-owned businesses compared to woman-owned businesses as the chart below describes. When we look at trade count and the amount of commercial debt or outstanding balances, we saw a different picture between the two cohorts. On average woman business owners have less than 1 tradeline ( avg. .6 trades) vs male business owners, who average roughly 1.4 commercial tradelines. When you compare the average balances, male business owners carry about $40,000 in commercial credit while women business owners carry about $25,000, a $15,000 difference. This difference in the number of tradelines puts women-owned businesses at a competitive disadvantage. To be competitive small businesses should strongly consider establishing tradelines and making on-time payments to these lines. How can tradelines help small businesses gain access to capital? Tradelines can help your business develop the credibility that matters to banks and other capital lenders. A business credit report that includes multiple, positive lines of trade credit in your company’s name shows that your business pays its creditors in a timely manner. Commercial Lenders review this business credit history of tradelines to determine whether to fund a loan or capital, as well as the interest rates and repayment terms if capital is extended. Businesses with good trade credit often qualify for loans with lower interest rates and better payment terms than those with poor or limited trade credit history. For more information about establishing business tradelines check out our post Building Strong Tradelines For Your Small Business.  

For many of us, 2020 has been the hardest year of our lives. As a society we are all going through this together, we know the pandemic will eventually end, and we all look forward to better days. Since the pandemic started the small business community has suffered greatly. We hear many stories about business owners struggling to survive. About business owners having to lay off staff and close permanently. But we draw inspiration from many of the innovation stories making headlines, stories about businesses who made a pivot to join the fight, and support healthcare professionals on the frontlines of the virus by converting factories to make PPE. We hear how small businesses navigated applying for the first round of PPP loans, and hope meaningful relief for small business comes soon.  We draw inspiration from small business progress, and we stand strong with the people who went after their dreams. The pandemic will end, but dreams will not. It’s been said so many times that small businesses are the engine of our economy, and they truly are. Our commitment to helping small businesses with their financial health will continue to be unwavering.   Supporting small businesses, helping them to create a better tomorrow   Find out more about how Experian is supporting small businesses. https://www.experian.com/small-business/mybusinessfuture #smallbusiness #mybusinessfuture #businesscredit

Experian and BBVA will be discussing how small businesses can build strong credit to gain access to capital in an upcoming webinar.

Experian is partnering with the Federal Reserve to conduct its annual Small Business Credit Survey for both pre-start and existing businesses, and we’d like you to participate. This short survey will take approximately 10 minutes and will ask about business conditions, financing needs, and credit experiences. Summary results will be shared with you in the Spring, and all responses are confidential. The survey highlights the experiences of small businesses nationwide and provides critical information that service providers, policymakers, and lenders use to improve programs for small business owners. Please click the button below to complete the survey. Thank you for participating.  

Experian Business Information Services was delighted to participate in a #CreditChat tweet chat recently. For the chat, we compiled some answers to frequently asked questions about business credit. Why should you separate business credit from personal credit? How do you establish business credit? Is it possible to build business credit with poor credit How do you get a business credit report? How are business credit scores determined How do you correct or dispute information on your business credit report? How do you get higher limits for your business credit? Five tips for establishing, building and monitoring business credit.   Why should you separate business credit from personal credit If your business ever becomes at risk your personal credit score becomes at risk as well. And so maintaining separation can protect your personal credit profile should a financial mishap occur in the company or vice versa. Building separation between the two can also help your business develop the credibility that matters the bank's, lenders, suppliers and partners. How do you establish business credit? One of the first things you can do to establish small business credit is to file your business with your State by forming a corporation or LLC to operate your business under and obtain a FIN or EIN number from the IRS. Of course, comply with the business credit market requirements by obtaining proper licenses state and federal requirements for your business. Also,  act as a business by establishing accounts (telephone utilities, leases, loans) all under the business name, not your personal name. Even if you operate as a sole proprietor or as a home-based office,  prepare financial statements and a professional business plan. Be visible. Find companies willing to grant credit to your business without a personal guarantee. This is typically referred to as Trade Credit. Ensure that your good payment behavior is reported to Experian. Ask suppliers and other businesses that extend your business credit or payment terms to consistently report your payment history to Experian. Also, borrow and then pay on time.  Manage your debt, stay current to your terms by making on-time payments and don't rely just on small business credit cards. Secure terms from suppliers or take out a commercial loan. And lastly, monitor your business credit report regularly check and correct outdated information. Be alert to important credit changes in your company's name. Is it possible to build business credit with poor credit? If you have poor credit, you know, it's never too early to enable healthy management behaviors of separating personal from business credit risk and building business credit. But in the early startup stages, you may need to personally guarantee payments. But, the more you act like a business by establishing accounts in your business name, the more likely it is that you'll be able to negotiate and secure good credit terms without personal guarantees. How do you get a business credit report? Experian offers instant online access to business credit reports at the following websites: Experian.com/mybusinesscredit SmartBusiness Reports.com These sites easily help you monitor your own report or access a report on other businesses you can purchase a single report as needed or save with a subscription to a plan. How are business credit scores determined Experian collects business credit data from a wide range of sources such information is used to create a score that illustrates how your businesses historically met its financial obligations. This helps creditors to decide whether to extend credit to your company. Some of those sources include State Filing Offices, Public Records,  Credit Card Companies,  Collection Agencies, Corporate Financial Information, and Marketing Databases. If you are curious about the behaviors that impact your credit score you can always access our Score Planner Tool. This is a free tool that Experian offers. You can get in there and do what-if scenarios, modeling your current credit behavior and how that impacts your business credit score. It is a very useful tool and helps you build smart business credit. How do you correct or dispute information on your business credit report? First, you must have a copy of your business credit report. You can download that instantly at Experian.com/mybusinesscredit or SmartBusinessReports.com. Of course, review the details circling any incorrect information and you would submit that to BusinessDisputes@experian.com for investigation. That will open a ticket for your case and return to our self-service Web sites for future access and alerts on the case. How do you get higher limits for your business credit? You should monitor your business credit report and manage the factors that drive a good business credit score. And doing so can help you boost your credit score and improve your credit terms. Five tips for establishing, building and monitoring business credit. Act as a business by maintaining a distinctly separate business credit profile from your personal credit. Avoid surprises. Be proactive in monitoring your business credit score. Stay current on payments to creditors. It seems simple but it is great advice that just pay those bills on time. Don't let them go delinquent Ensure that your good payment history is reported to the credit bureau. Establish some good strong trade credit lines and make sure you're doing business with partners who are reporting to the credit bureau. Use business credit reports to limit your risk of doing business with others such as your business customers suppliers and vendors and partners. We hope these business credit answers have been helpful!

What is good business credit? See how a good business credit score can help strengthen and protect your business.