The Small Business Financial Exchange (SBFE) is a non-profit, member-operated organization, consisting of lenders who collect and share information on small businesses to generate detailed credit reports. These reports assist lenders in making credit decisions. The SBFE operates on a “give-to-get” basis, serving as a large, confidential repository of data, including payment histories and other business-related information. This data is vital for lenders to make well-informed lending decisions. The SBFE provides more than just payment history; it supplies comprehensive data to credit monitoring services and LexisNexis. The SBFE stores any information submitted in business loan applications, and discrepancies can result in loan rejections. Accredited Vendors like Equifax, Experian, Dun and Bradstreet, and LexisNexis Risk Solutions collaborate with the SBFE, and lenders using these Certified Providers gain access to their data and the SBFE’s extensive database.

Application rejection often occurs when there is a discrepancy with the legal name registered in state documents. To prevent this, consistently use your exact brand name in all applications. If you have a Doing Business As (DBA) filing, ensure it is used alongside your full company name. All company records, certificates, and bank accounts must share the same name. Using a risky business name can be problematic, especially if your business operates in a high-risk industry with a greater chance of workplace injuries or a higher volume of cash transactions. To enhance your fundability, avoid using a high-risk business name.

A reliable business phone number comes from a dedicated business phone line, especially for physical retail locations, and toll-free numbers are seen positively by lenders. Avoid using personal mobile or home phone numbers for your business website; consider Voice over IP (VoIP) services like Freedom Voice or RingCentral. Getting a fax number early is recommended as it signals reliability to lenders and helps manage documents. Services like Freedom Voice and RingCentral offer fax numbers that match your business phone at a reasonable cost.   A toll-free number can also boost your company’s credibility with lenders and credit issuers while establishing your business phone line.

The most reliable type of business phone number is a physical one obtained from a dedicated business phone line, especially for retail locations. Toll-free or 800 numbers are seen as a positive indicator of a company’s reputation by lenders. For your website, it’s recommended to avoid using personal mobile or home phone numbers and instead opt for Voice over IP (VoIP) services like Freedom Voice or RingCentral. Acquiring a fax number early on is advisable, as lenders view it as a sign of reliability, and it’s essential for handling important documents and credit applications. You can have faxes sent directly to your email address. Additionally, consider getting a toll-free number to enhance your company’s credibility with lenders and credit issuers until you establish your business phone number.

Lenders and credit issuers may reject your business loan and credit card applications if the business uses a home address, PO box, or UPS address. They employ algorithms and tools like Google Street View to identify residential addresses, leading to credit denial. Having a physical business address is ideal to improve your approval chances. If that’s impossible, consider using a virtual address from reputable providers like Coalition or Da Vinci.

Consider staying away from Regus virtual offices.  Regus is known for continuing to bill customers who cancel their service and ignore requests to cancel.  Then they place their customers into collections.

Renting an office or room in a well-established building can also enhance your company’s credibility with lenders, even if it’s not physically based there. Consistency in your address across online and offline business records is crucial, especially with government agencies like the secretary of state.

Lenders view these businesses as particularly risky, and if your company falls into one of these categories, it can lead to immediate rejection. At the very least, you might encounter stricter underwriting, higher insurance premiums, and less favorable terms. Lenders determine the market your company operates in based on various factors, including your company code, which could be an SIC or NAICS code. It’s important to find a way to address this while remaining truthful to avoid automatic rejections based on industry codes or company names. Maintaining integrity is crucial, as it could potentially result in loan denials.

SIC Codes. The Traditional Industrial Classification (SIC) is a four-digit code assigned by the US government to classify a company’s main activities. Shareholders use SIC codes to determine a corporation’s industry. The Securities and Exchange Commission (SEC) developed the SIC code system. The first four digits broadly represent a company’s industry category, with specific subcategories indicated by additional numbers.

NAICS Codes. The North American Industry Classification System (NAICS) is a modern company classification system used to identify businesses and compile statistical data about the US economy. While NAICS is more contemporary, it’s worth noting that SIC codes, which offer greater precision, can be linked to multiple NAICS codes. For instance, the Engineering Services NAICS code 8711 corresponds to over 30 different SIC codes.

Any legal business structure can be utilized to build business credit. However, to truly separate personal and business credit, your company must exist as a legal entity, distinct from sole proprietorships or corporations. While these entities allow you to conduct business, they do not provide the same separation between personal and business credit. The timeline for establishing your business can vary based on the state of incorporation and the methods employed. Typically, online registration is faster, but there may be a waiting period even with online filing. In many cases, the filing of Articles of Incorporation is a requirement, and if you want them prepared accurately and efficiently, it is advisable to engage a business attorney.

To establish business credit, you need a DUNS number from Dun and Bradstreet, which becomes active with three or more recorded payment interactions. You can obtain a free DUNS number that takes around 30 days or opt for a faster option at $229, getting you a DUNS number within five business days or less. This expedited service includes credit reporting through DUNSFile and CreditSignal, specifically for D&B business credit ratings. It offers updates on your credit score changes and provides a comprehensive D&B company credit report.

Starting a business with an established shelf company offers financial benefits through trust, reputation, and stability. This approach provides immediate access to customers who might not have engaged with your business. The company’s age also grants swift access to suppliers, saving time and reducing the effort required to achieve business goals, thereby lowering stress associated with growth. It impresses clients, suppliers, manufacturers, sponsors, and marketers. Collaborating with an established firm can optimize financial opportunities and secure favorable lending terms, enhancing cash flow and prestige. Access to a broader range of bidding opportunities and improved competitive positioning is also possible. The organization promptly fulfills unexpected requests, simplifying sales closure and objection handling. It simplifies lease negotiations and rental agreements, reducing the risk of business losses by improving sales closure, profitability, and contract negotiation abilities.

The PAYDEX score, a dollar-weighted numeric rating provided by D&B, evaluates a company’s payment performance in the previous year. D&B calculates this score by considering trade interactions reported by various vendors. The PAYDEX score ranges from one to one hundred, with higher scores indicating superior payment efficiency. In essence, PAYDEX scores depict a company’s commitment to paying its bills promptly.

The PAYDEX score gives greater importance to larger bills in its calculation. It computes a dollar-weighted average number of days a company takes to pay its bills using data from participants in the D&B Global Trade Exchange. According to D&B, businesses should use this score for assessing risks. D&B gathers payment data from retailers and distributors with whom a company conducts business. Each interaction is distinct and showcases how bills are managed concerning the agreed-upon terms. The PAYDEX score is based on a maximum of 875 payment experiences, with up to 80 representative payment experiences documented in the company’s credit report.

D&B has established risk categories to simplify the interpretation of PAYDEX Scores:

• PAYDEX 80-100: Low risk of late payment
• PAYDEX 50-79: Moderate risk of late payment
• PAYDEX 0-49: High risk of late payment

D&B proactively notifies you of score changes that may move you into a different risk category.

Addressing any issues with your PAYDEX score is beneficial. If your company consistently pays bills late, consider improving organizational and time management practices. Hiring an accountant or implementing strategies like setting bill payment reminders on your computer might be helpful. Since the dollar amount of payments influences PAYDEX Scores, prioritizing larger bills can be more cost-effective. Consistency in adhering to a payment schedule can positively impact your company’s PAYDEX Score.

The most cost-effective report for obtaining a quick overview of a company’s financial health is the Corporate Information Report, currently priced at $139.99. You can also acquire a Customer Details Report for your business or one you are contemplating doing business with. The D&B Market Details Summary offers insights into trade fees, specific trade line details such as dollar amounts and terms, legal matters, company events (usually covering ownership and management changes), and a detailed company hierarchy with ownership details, in addition to your PAYDEX Score. Furthermore, a Business Intelligence Study encompasses a Risk Appraisal Review, presenting an overall credit recommendation, PAYDEX ratings, Delinquency Predictor percentile, Financial Stress percentile, and Supplier Evaluation likelihood in a concise Risk Assessment Summary.

Credit records for businesses may not always be entirely accurate, and verifying them regularly is crucial. While major credit monitoring organizations like D&B aim for consistency, errors can occur. D&B offers CreditMonitor, usually priced at $39 per month, for monitoring your company’s credit reports with them. You can find this service at dnb.com/products/small-business/credit-monitor.html.

Managing business credit across multiple agencies can be costly. Experian offers the cost-effective Enterprise Credit Advantage Membership Package at $189 per year. You can get the Business Credit Advantage Subscription Plan at sbcr.experian.com

Equifax provides Equifax Complete, starting at $19.95 per month after a 30-day $4.95 introductory offer. You can purchase Equifax Complete at equifax.com/equifax-complete/Equifax.

Totaling the annual costs of these plans, it comes to $468 for D&B, $189 for Experian, and $224.40 for Equifax, making it $881.40 in total.

If inaccuracies are negatively impacting your PAYDEX score, rectifying these inaccuracies will lead to an enhancement in your PAYDEX score. To obtain a Business Information Report from D&B, visit: dnb.com/products/small-business/business-information-report-snapshot.html. In case you find any errors or incomplete information after updating the Business Information Report, make the necessary corrections. You can accomplish this at D&B by visiting: dnb.com/duns-number/view-update-company-credit-file.html.

D&B requires verification before adjusting your company credit scores. You will likely need to write a letter addressing inaccuracies in your company credit audit. Include duplicates of all supporting documents, such as receipts and canceled checks. Instead of sending originals, provide copies while retaining the original documents. Correcting errors in your credit report also involves explaining the charges you wish to dispute. Make the dispute as clear and straightforward as possible. When sending your dispute by mail, use certified mail to obtain proof of delivery. Keep a record of the topics discussed in your written communication. D&B advises incorporating payment experiences documented by D&B Customer Service, whose contact number can be found at: dandb.com/glossary/paydex.