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This program is the foundation to advanced level of business credit building. The Business Credit Builder will help you establish your business credit and set it up so you can obtain lines of credit from the bank. This foundation will consist of helping you to establishing trade or vendor credit, building the Paydex (from Dunn and Bradstreet) to 80 and then applying for business credit cards that are based on the TAX ID ONLY and not your social security number! You will have a personal business credit coach to guide you through the entire process.

Many business owners that start the Business Credit Builder do not have good personal credit. The Business Credit Builder will set the business foundation for obtaining lines of credit with We Really Work banking contacts. In order to obtain lines of credit at any bank the business owner must have a combination of good business credit and good personal credit, in other words a 680 or above.

Many of our clients use the credit cards that the Business Credit Builder Program obtains to help them pay for the personal credit repair process. Once the business owner’s scores are adequate we can obtain a combination of trade credit, credit cards and bank lines of credit.

The entire purpose of the Business Credit Builder Program is to build the foundational level of business credit and to give you some cash to repair your personal credit if needed. Once your personal credit is above 680, the foundational level of your business is already in place and we can move onto the next steps in the Business Credit Builder Program and we can obtain a combination of trade credit, credit cards and bank lines of credit

Business Credit Builder Estimated Amounts

Trade Credit – $40,000 (Based on Business score only)
Credit Cards (tax id only!) – $25,000 (Based on Business score only)
Equipment Lease – $100,000 (When qualified)
Small Business Loan – $25,000 (When qualified )
Unsecured Business Loan – $25,000 (When qualified)
Business Credit Cards – $30,000 (When qualified)
Bank lines of Credit – $40,000 – $100,000 (When qualified)

Estimated Total – $150,000 – $250,000

Business Credit Ratings

Similar to your personal credit profile, businesses and corporations also have a credit rating system that potential lenders use to determine their credit worthiness. While there are several smaller companies that offer credit rating services for businesses, Dun and Bradstreet (D&B) is the primary business credit bureau (see http://smallbusiness.dnb.com). For years, D&B has offered a variety of ratings tools that can be used to determine whether to engage in business with a particular company and to determine loan terms.
Unlike personal credit rating, there is no designated standard for determining the credit worthiness of businesses. However, the predominant tool used to determine and establish business credit ratings is D&B’s PAYDEX system. Where a personal FICO score is based only on credit history that includes information on how much a person borrows and how well he or she repays their loans, a credit rating for a business takes into consideration company size as determined by assets and number of employees. Where a personal credit rating is based on financial information provided by credit card companies, retail establishments, and financial institutions, a business credit report and rating is determined by information supplied by the business owner and gathered from your vendors, suppliers, and other trade accounts. For this reason, potential lenders may differ from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

The Business Credit Report and Its Terminology

Like most industries, there is a specialized language involved with business credit reports and ratings. The following is a list of some of the most common concepts and terms as well as their definitions:

D&B Ratings

For many years, Dun & Bradstreet has been the foremost business credit rating service available. Initially, D&B only provided credit analysis and background information on large corporations who did business with other large corporations. In order to prepare a credit profile, D&B relied on information reported to them by these large corporations.

However, today D&B has expanded its services to include credit analysis and reporting for small and mid-sized businesses. These services are offered because D&B understands how important it is for smaller businesses to be able to establish business credit separate from the owners’ personal credit in order to be successful.

Interpreting D&B’s Ratings

All D&B business credit reports include an analysis of a company’s financial strength. This is determined by computing a business’s equity or net worth. As shown in the following tables, these ratings can range from HH to small corporations to 5A for large corporations. The ratings are a combination of financial statements provided by the business and credit analysis. There are only three D&B business credit scores: “1″ indicates a high score, “2″ is a good score, and “3″ is a fair score. While a company’s financial strength is calculated exclusively by the size of the company, a company’s credit analysis is determined by its credit performance. For instance, a company with a net worth of $700,000 will be ranked 1A, but its credit score can be 1, 2, or 3.

FINANCIAL STRENGTH CREDIT ANALYSIS
Score Total Assets High Good Fair
5A More than $50,000,000 1 2 3
4A $10,000,000 to $49,999,999 1 2 3
3A $1,000,000 to $9,999,999 1 2 3
2A $750,000 to $999,999 1 2 3
1A $500,000 to $749,999 1 2 3
BA $300,000 to $499,999 1 2 3
BB $200,000 to $299,999 1 2 3
CB $125,000 to $199,999 1 2 3
CC $75,000 to $$124,999 1 2 3
DC $50,000 to $74,999 1 2 3
DD $35,000 to $49,999 1 2 3
EE $20,000 to $34,999 1 2 3
FF $10,000 to $19,999 1 2 3
GG $5,000 to $9,999 1 2 3
HH Less than $5,000 1 2 3

The rating classification score has only two categories that are determined by the number of employees a company has. A score of 1R is assigned to companies with 10 employees and up, and a score of 2R is assigned to companies with 1 to 9 employees. Like the analysis of a company’s financial strength, a credit score of High, Good, or Fair can be assigned in addition to the rating classification score of 1R or 2R.
The following table summarizes the possible alternative employee range scores that can be assigned:

Score Number of Employees
ER 1 1000 +
ER 2 500-999
ER 3 100-499
ER 4 50-99
ER 5 20-49
ER 6 10-19
ER 7 5-9
ER 8 1-4
ER N N/A

D&B PAYDEX Score

D&B’s PAYDEX system is one of the most accurate predictors of a company’s payment performance. By analyzing information about a company’s payment experiences, the PAYDEX scale provides a range of scores that reflects a company’s overall credit risk. A company that is good at making payments on time is a lower credit risk, so it receives a higher credit score. A perfect PAYDEX score of 80 for a business is equivalent to a FICO score of 750 for an individual. A majority of lenders will consider financing companies with a PAYDEX score of 70 or better.

A company’s PAYDEX score is calculated based on reported information to D&B about a company’s account histories. When undergoing a PAYDEX credit analysis, a company is asked to provide a minimum of five trade accounts so that D&B can solicit the necessary information to develop a PAYDEX score for that business. The PAYDEX score can reflect a 12-month or 3-month timeframe. With this information, it is possible to evaluate a company’s performance within a specific period of time.

When calculating a company’s PAYDEX score, D&B creates a weighted average by assigning greater importance to the trade accounts with higher dollar amounts. For example, if five accounts for $50 each report that the company often pays its bills 60 days late, but one account for $50,000 reports that the company pays on time every month, the PAYDEX score for that company will still be relatively high because the payment history with the $50,000 account is weighed more heavily than the $50 accounts with the late payments. The same logic is applied when the larger account is late but the smaller accounts are paid on time; in this case, the company’s PAYDEX score will be lower because the late payments on the larger account are weighed more heavily than the smaller accounts that are paid on time.

A high PAYDEX score that reflects a low credit risk is required in order to qualify for the most favorable financing terms from potential lenders. A company that makes its payments either on time or before they are 30 days late is considered to have a low risk of late payment. A company that makes its payments between 30 and 59 days late is considered to have a medium risk of late payment. And a company that makes its payments over 60 days past the agreed date is considered to have a high risk of late payment. The following chart illustrates how a company’s PAYDEX score is determined by the timeframe in which it pays its obligations:

PAYDEX SCORE PAYMENT HISTORY
100 30 days early
99 29 days early
98 28 days early
97 27 days early
96 26 days early
95 25 days early
94 24 days early
93 23 days early
92 22 days early
91 21 days early
90 20 days early
89 18 days early
88 16 days early
87 14 days early
86 12 days early
85 10 days early
84 8 days early
83 6 days early
82 4 days early
81 2 days early
80 On time
79 2 days late
78 3 days late
77 5 days late
76 6 days late
75 8 days late
74 9 days late
73 11 days late
72 12 days late
71 14 days late
70 15 days late
69 16 days late
68 17 days late
67 18 days late
66 19 days late
65 19 days late
64 19 days late
63 20 days late
62 21 days late
61 22 days late
60 22 days late
59 23 days late
58 24 days late
57 25 days late
56 26 days late
55 26 days late
54 27 days late
53 28 days late
52 29 days late
51 29 days late
50 30 days late
49 33 days late
48 36 days late
47 39 days late
46 42 days late
45 45 days late
44 48 days late
43 51 days late
42 54 days late
41 57 days late
40 60 days late
39 63 days late
38 66 days late
37 69 days late
36 72 days late
35 75 days late
34 78 days late
33 81 days late
32 84 days late
31 87 days late
30 90 days late
29 93 days late
28 96 days late
27 99 days late
26 102 days late
25 105 days late
24 108 days late
23 111 days late
22 114 days late
21 117 days late
20 120 days late
1-19 Over 120 days late

Financial Stress Score

A company’s Financial Stress score is an evaluation of the likelihood that a company will go out of business and stop paying its creditors in the next twelve months. The scores assigned to Financial Stress can range from 1 to 5.

Financial Stress Score Class Range of Financial Stress Scores Overall % of Financial Stress Predicted Financial Stress
1 1377-1875 21-100 0.49%
2 1353-1376 11-20 1.37%
3 1303-1352 5-10 3.73%
4 1225-1302 2-4 8.30%
5 1001-1224 1 35.80%

In the United States, the national average for all businesses in Dun & Bradstreet’s database is 1.4%. Typically, businesses in the lowest Financial Stress class have been evaluated to be less likely to go out of business whereas businesses in the highest Financial Stress class have been evaluated to be more likely to go out of business. For example, a company with a Financial Stress score of 4 is predicted to experience moderate to high Financial Stress in the next year. A company that has gone out of business or filed bankruptcy is assigned a Financial Stress score of “0.”

Because D&B has such an extensive database of the businesses it has evaluated, it can also provide the average Financial Stress scores within a particular region for businesses in similar industries, with similar years doing business, and similar numbers of employees. This can be very helpful because it can reveal trends of success or failure for similar businesses located in the same region within a particular industry.

Commercial Credit Score

This evaluation is another predictor of the likelihood that a company will make a payment 90 days or more in the next twelve months. A company’s Commercial Credit score can range from 101 to 670 with each 40 point decrease or increase halving or doubling the risk of a 90-day delinquency. For instance, a business with a Commercial Credit score of 360 has twice the risk of 90-day delinquency as a company with a Commercial Credit score of 400.

Ranging from 1 to 5, the higher the Commercial Credit score class, the more likely it is that a company will be 90-days delinquent. For example, a company with a score of 5 is considered a very poor risk due to the increased prediction of 90-day delinquency. A company that has gone out of business or filed bankruptcy is assigned a Commercial Credit score of “0.”

Commercial Credit Score Class Range of Commercial Credit Scores Overall % of Commercial Credit Predicted 90-Day Delinquency
1 536-670 91-100 2.5%
2 493-535 71-90 4.8%
3 423-492 31-70 12.9%
4 376-422 11-30 24.2%
5 101-375 1-10 58.8%

D&B can also use the Incidence of Delinquent Payment Assignment Table to assign a score to a business. In the United States, the average Delinquent Payment score ranges from 36-45 or 17.3%.

Minimum Delinquency Score Maximum Delinquency Score Predicted % of Delinquency
96 100 2.1%
91 95 2.9%
86 90 3.6%
81 85 4.4%
76 70 5.2%
71 75 6.1%
66 70 7.3%
61 65 8.7%
56 60 10.5%
51 55 12.2%
46 50 13.9%
41 45 15.5%
36 40 17.2%
31 35 18.4%
26 30 20.2%
21 25 22.5%
16 20 24.6%
11 15 29.6%
6 10 44.9%
1 5 72.7%

Other Ratings

While Dun & Bradstreet has been the primary company used to evaluate business credit for many years, there are several other companies that have begun to provide similar credit evaluation services to small businesses based on their independent databases: