An interesting article featured in Broker News today, for those interested in small business lending criteria, and small business credit files.
It is harder than ever for small businesses to borrow. The story, titled ‘Lenders blasted for small business risk sums’ features Credit Reporting Agency, Dun & Bradstreet criticising lending criteria when it comes to small business.
D & B says up to 400,000 small businesses who should qualify for finance are missing out due to the inability of credit providers to adequately assess and price their risk.
Here is an excerpt from that story:
Dun & Bradstreet has said that up to 400,000 businesses would immediately qualify for finance with a risk profile ranging from minimal to low, out of more than one million unincorporated businesses.
CEO Gareth Jones said lenders have historically been hesitant about extending credit to small businesses as many are unincorporated entities with little or no commercial credit history.
“Previously, it has been nearly impossible to appropriately assess small business risk as small businesses are often indistinguishable from their owner – the commercial and consumer entity are the same,” he said.
“A holistic picture of small business risk can only be obtained by acquiring an understanding of an entity’s commercial and consumer profile,” Jones said.
The comments came as Dun & Bradstreet launched a ‘Small Business Risk Score’ that brings together information from its database on both a commercial enterprise and its owner to enable risk assessments.
The score predicts the likelihood of a small business entering bankruptcy over a 12 month period, based on factors including business to business payments, time since the last consumer default, and the volume of credit enquiries.
The lines between personal and small business credit files do blur quite frequently. Often one credit file affects the other when creditors are looking at suitability for finance.
To give people the best chance at small business credit, they should remove bad credit history like defaults and even excess credit enquiries from either or both credit files prior to applying for small business credit.
It may be that credit file errors and inconsistencies are holding small businesses back from expansion – in which case there is a good chance they can be removed.
For more information on bad credit history, contact MyCRA Credit Rating Repairs tollfree 1300 667 218 or visit the main website www.mycra.com.au.
By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repairs, and www.fixmybadcredit.com.au.