Wednesday, April 30, 2008

Small Business Credit Cards

Often small business owners mistakenly believe they would not be approved for business credit cards. What you may not know is that the majority of credit cards are awarded to small business owners with no employees! In fact, 75% of all small businesses have no employees, so if this describes your business, you might be pleasantly surprised at the availability of your credit card options.Before you go around applying to every credit card on the market, however, you'll want to take a little time to find one that will most benefit your own needs for business credit.Do you carry a balance from one month to the next or do you plan to pay off all purchases made with a card every month? Do you tend to shop the same store regularly? Do you travel frequently, particularly by airplane - or are you a road warrior, conducting business from your car and traveling from one location to another constantly? Considering how you currently conduct your business will help you select business cards that best match your needs. If you rarely have reason to buy airline tickets, it doesn't make sense that you apply for a card with airline miles; and if you are shopping for office supplies in the same store each month- you'll want to look at cards that give you bonuses or cash back on those regular purchases.For example, let's say you regularly purchase printer ink, paper, pens and staples in order to operate your business. They are necessary expenses and you should consider applying for business credit cards that allow you to earn cash back on those exact purchases! When you get 5% back on office supply purchases you make on a credit card, it just makes sense to use your card for those purchases and start accumulating your rewards. Discover, American Express, Citibank and GM all offer business credit cards with cash back on office supply purchases, ranging from 1% to 5%; and also some rewards programs offer points that are later redeemable towards merchandise.Other credit cards offer different types of rewards, and could include any combination of the following, typical rewards:Bonus points (redeemable for merchandise, cash back, or airline miles) Unlimited free companion tickets for flights Access to personal business assistant Travel accident insurance coverage Cash Back on specific purchases or on all purchases made with your business credit card Rewards towards the purchase, lease, or maintenance of a vehicle In addition to the rewards that are offered from spending with your credit cards, they also offer assistance keeping track of your business expenses. If you were to use a credit card each month to pay for all of your business expenses, you would have no problem knowing where your money has gone each month!You can view both your mailed statements as well as your online statements (available with the majority of credit cards) to see details on what was paid for that month, and how much. Instead of writing numerous checks and mailing each one individually; you could write one check at the end of each month to pay off your business credit card account. Not only do you save time writing checks, but you'll also have an easier time balancing your checking account. Plus, if you have employees, issuing them a card linked to your account means you'll see their expenses on your monthly statement as well- making it easy to keep track of everything in one, convenient place.Small business credit cards are available to business owners- even if you do not have other employees! They can make your record keeping easier and you can gain numerous benefits just by paying for your regular business expenses with a credit card.This article is courtesy of, where you can compare business credit cards and apply for credit cards online.Article Source:

Tuesday, April 29, 2008

Business Credit Scoring: Is It a Killer Application or Application Killer?

In his 1968 seminal novel, 2001: A Space Odyssey, Arthur Clarke introduced HAL, a spaceship computer with artificial intelligence. Mission engineers designed HAL to carry out an array of technical orders to safeguard the ship’s mission. HAL operated flawlessly until it reported the failed operation of a ship system that was operating perfectly. Rather than correct the mistake, HAL’s logic dictated that it would be more efficient to kill the ship’s crew. Ever the polite computer, HAL killed quickly and quietly until it was unplugged by the sole remaining crewmember, Dave Bowman.

Many small business owners believe that HAL’s progeny are carrying out HAL’s murderous mission in the small business credit arena. Computers now make important credit decisions for major banks and financing companies. Each day in the U.S., computers with fancy algorithms score thousands of small business credit transactions. Though credit-scoring models work well for most small companies, many believe these systems, like HAL, have run amuck. Routinely, transactions with low scores are turned down and applicants are notified of the decision by computer-generated rejection letters.

By gaining a better understanding of the credit scoring process, you may be able to help your firm maneuver in the new world of credit scoring. Here are some key points about business credit scoring worth noting:

1. Credit scoring automates the credit evaluation process. Credit providers use these systems to speed up loan processing, to cut processing costs, to quickly adjust rates and terms to match credit risks, and to add a high degree of objectivity to credit decisions.

2. Credit scoring is a predictive system based on statistical modeling. Scoring systems are designed to forecast whether borrowers will be successful in repaying loans. Many systems use up to 20 factors to evaluate credit worthiness.

3. Many lenders and leasing companies use credit scoring for business transactions under $100,000. Over 90% of major credit providers use credit-scoring systems on transactions below $ 50,000.

4. A pioneer and leading credit scoring service, Fair Isaac and Company, researched statistical credit modeling in the 1980s. They determined that the personal credit behavior of a company’s key principals/owners is a strong predictor of their business credit behavior. Simply stated, a business owner who pays personal bills on time generally will cause his/her company to pay bills on time.

5. The Fair Isaac scoring model produces business credit scores ranging from 50 to 350. Credit providers usually consider a business credit score above 220 to be a good risk. They consider a score of less than 175 to be a high risk.

6. The overriding factor in business credit scoring is the credit history of the business owners or the key principals. In addition, there are other factors related to the owners’/principals’ personal credit profiles used to score small business transactions

7. Business-related credit factors scored include: the company’s time in business; company size; industry; form of company organization; history of paying bills on time; business net worth; average bank balances; ratio of debt service to cash flow; and recent judgments, bankruptcies or agency collections.

8. Many large lenders, such as Well Fargo Bank and Bank of America, have developed their own predictive business credit models. Several have even fine-tuned the Fair Isaac model to better meet their needs and preferences.

9. If your firm is rejected for credit based on a scoring model, ask the lender to explain the rejection. Some lenders will reconsider if requested, but may require additional credit information.

10. Some lenders have special pools for higher risk credits. They usually charge higher rates and offer terms that are less advantageous than for high-scoring transactions. Others may ask for credit enhancements to grant approval, such as additional collateral or outside guarantees.

11. Here are ten ways to improve business credit scores:
* Improve the credit habits and profiles of the key principals or business owners
* Pay all back taxes* Settle outstanding liens and judgments
* Pay bills on time and be consistent with payments
* Eliminate supplier disputes by settling with any suppliers or former employees
* Sell or factor accounts receivable to improve cash flow
* Establish your firm’s credit record by registering with the Secretary of State where your business is incorporated
* Try to improve individual and company credit for at least twelve months
* Buy from vendors who report activity to the major credit bureaus
* Set up automatic account debiting with creditors to help eliminate the possibility of paying slow

Credit scoring is not designed to predict individual loan performance with certainty. Rather, these systems do a great job of quantifying risks for groups of borrowers with similar characteristics. A disadvantage of credit scoring systems is that they are easy to misapply. If the lender’s customers don’t share characteristics and behavior patterns with the model’s underlying base group of credits, then reminiscent of HAL, many transactions with great potential may be eliminated.If your firm doesn’t score well under a scoring model used by a major lender, you may face an uphill battle for credit approval. Some smaller credit providers try to differentiate themselves by not using scoring models. Instead, they actually listen to borrowers, sort out unusual circumstances and use old-fashion human judgment to make credit decisions. One of these lenders might make sense for your firm.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (“LTI”). He is responsible for overseeing the company's marketing and financing efforts. One of the co-founders of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at Source: