Ever wonder what lenders look at when determining whether or not to lend to you?
If you’re asking yourself that question, it means you’re smart.
Because your Business’s FICO SBSS Score matters….
The FICO LiquidCredit Small Business Scoring Service or FICO SBSS Score is one of the 3 main business credit scores that lenders will look at when reviewing your company profile for a loan.
When it comes to business credit, many business owners have become familiar with Dun & Bradstreet due to its importance in obtaining corporate credit and vendor terms.
If you have ever filled out an application for business credit, its guaranteed you have been asked for your DUNS number.
Another business score is called The Experian Intelliscore Plus.
This is the other major business credit bureau that is widely used in issuing credit or loans due to the fact it assesses risk based on your commercial credit history and your consumer credit history.
This gives the lender or creditor the ability to understand your global financial situation, as opposed to Dun & Bradstreet who focuses mainly on commercial credit.
What is the FICO SBSS Score?
The FICO SBSS score is one of the newer scores, but just because it’s newer doesn’t mean it lacks in importance.
Until now it’s been hard to get your hands on it.
Coming out in 2014, the SBSS Score allows lenders to make faster, more accurate lending decisions. This means the decision whether or not to approve you for a business loan can be made in a couple hours, rather than a few days.
How does the FICO SBSS work?
Most everyone knows what a consumer credit score is.
The FICO SBSS score works much like a consumer FICO score, except instead of the score ranging from 300-800, the FICO SBSS range is 0-300.
The range is a method banks are using to determine the attractiveness of the lending risk.
It’s simple, banks use the score to determine whether or not the loan they give you will be paid back.
The higher the score, the less likelihood of default.
In fact, most banks require a FICO Liquid Score Small Business Score Service number to be above 160 to qualify for any type of financing.
It’s really a pre screen for approval. No bank wants to put you through the application process of qualifying for a SBA loan if your score is below the 160 range.
It saves lenders time and money by using it, so being above the 160 score mark is imperative to get passed the starting point of loan qualification.
How is the SBSS score calculated?
Again, the FICO SBSS ranges from 0-300, with 0 being the worst score possible and 300 the best.
Business owners need to have a score north of 160 for approval.
Here’s what’s taken into consideration:
- Personal and business credit history
- Vendor payments
- Age of the business
- Number of employees
- Financial data like revenue, tax returns, and assets
What can hurt your SBSS score?
Limited time in business and derogatory credit history.
If you have derogatory or no credit history this will be a problem.
It can take years of positive credit activity to move your SBSS score to a higher level.
It’s vital to build your credit and ensure it’s healthy before you need it
Who uses the FICO SBSS score?
It’s simple, banks.
Traditional banks use this score more than anyone because they typically have the best rate and term.
Unlike merchant cash advances, factoring, or purchase order financing, S.B.A. loans issued through banks allows business owners to access capital for lower interest rates and better terms.
But, they dig into every part of your business and personal life to allow access to these rates in term.
Specifically, SBSS scores can be used for term loans and lines of credit for amounts up to $1 million.
More than 7,500 lenders and banks nationwide use this scoring module. including : KeyBank, Huntington National Bank, PNC, RBC, USBank, Zions Bank, HSBC, Santander Bank.
Starting at the beginning of 2014, all SBA 7(a) loan applications up to $350,000 are required to go through a business credit score pre-screen.
How do I improve my FICO SBSS Score?
The first priority is to understand how credit and scores work.
Paying on time is definitely a must, and paying bills early can actually help improve a business score/index.
Updating multiple vendors and creditors on a business credit report can show that a firm is a better risk depending on credit history, the amount of debt, and whether the creditor reports to the business credit bureaus.
A profile with poor payment histories, collection accounts, or judgments may make the process more complicated and it can get very confusing.
Most firms hire professionals to provide credit repair/education and the necessary support to help them reach their credit goals.
As a business owner, it is important to review your Dun & Bradstreet and Experian Intelliscore Plus credit scores along with your personal FICO Credit Score initially to make sure the information being reported is correct.
If any of your business scores and indexes are below excellent, you may need to build more credit or improve your existing credit.
Like personal credit, business credit is a great asset that should be monitored consistently.
Make sure you check your business credit scores at least once a year.
You can go to Dun & Bradstreet to monitor your company’s credit and make sure all your business records are accurate.
You can pull your Experian Intelliscore here to review your report and make sure your records are accurate.
As a business owner, its important you keep your personal revolving credit used as low as possible against your high credit limits to ensure your SBSS score, as well as your personal credit score, is at its maximum.
Maintaining the rest of your installment and real estate credit is also important to maximize your personal credit and the SBSS score.
The last thing that ties into business credit and is important for every business owner to know is that keeping accurate and up to date business and personal information is extremely important to your business being compliant and looking great on paper.
Having great business credit can bring a wealth of opportunity to any business owner but you must also be compliant by having a foundation of data in place.
Questions? Call Joe Schuck: VP of Sales