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How to Check and Manage Your Business Credit File

For years now small business owners have said one of, if not, the biggest challenge they face has been obtaining sufficient credit to manage growth. No doubt that will not change in the near term. However what is changing rapidly is how finance providers determine if and how much credit they are prepared to extend to an applicant. Their decision on whether to lend or not, may be affected by the outcome of a credit file check. A negative outcome may mean that you need to undertake some form of credit file repair.  Two key factors relating to your credit file that you need to be aware of are firstly the recent changes in legislation permitting credit reporting agencies to shift from a negative reporting approach to a so called “positive reporting system” which is better described as “comprehensive approach” to credit scoring. Another significant factor is the trend to automated credit assessment whether via a direct online interface or internal process at the credit provider.  Given the above, it is now more important than ever SME’s actively manage their credit profile.  Every business’s finance requirements and situation are different so there is no definitive answer as to how to go about seeking and obtaining funding. The credit assessment process can be quite complex and will vary for each finance provider, for the purpose of this article we will try and provide a basic overview how finance providers use external credit information to asses your business.    The three main factors which can impact the outcome of a credit decision are: 1.    Enquiry Pattern 2.    Director Information 3.    Company Registration The enquiry pattern is a history log of when, to whom, and how much credit was requested this includes a broad range of credit providers including but not limited to:  1.    General Business & trade accounts  2.    Core Lending (Bank Loans overdraft)  3.    Equipment Rent or Lease  4.    Debtor Finance  5.    Mortgage backed loans  6.    Short Term (credit cards) The type and frequency of credit enquiries can impact risk. Typically, companies that are higher risk request various types of credit from different sources more often. Business owner should be aware that each time they authorize a credit provider to obtain credit information on them or the company, be it in writing, online or verbally it may result in a an enquiry (“footprint”) being logged onto their credit history, which therefore has the potential to impact your credit file negatively. Having to initiate a credit file repair activity is something that most individuals and businesses alike have neither the time nor inclination to undertake if not absolutely necessary. Director information is a combination of the combined consumer and commercial credit history of the directors. This may include but not limited to: 1.    Employment & Address  history, 2.    Personnel mortgage, credit card, car loan enquiries,  3.    Previous Directorships 4.    Commercial Credit enquires as above including all companies associated as a director 5.    Any court judgments, writs  or defaults  In the case of director information the applicants details (such as age employment and address details), the type of credit being sought and the type or lack of credit sought in the past, and the number and duration of commercial addresses, can impact on the credit assessment. Company Registration Information may include but not limited to; 1.    Business premises and registered office address’s 2.     Director History durations  and dates 3.    Shareholder information 4.    PPSR registrations 5.    ASIC  document records The time since a company made or changed its registration details can impact on a risk assessment. Additionally the PPSR registrations can be an indication of which credit inquires proceeded to a finance facility.  Under new comprehensive credit initiatives payment histories sourced from credit providers are now part of the credit profile to what extent payment performance is impacting on the credit assessment process is unclear however it is a development business owners should be aware of. Typically credit providers source your company credit information from one of three credit reporting agents: 1.    www.veda.com.au 2.    www.dnd.com.au 3.    www.experian.com.au One of the largest credit reporting agencies within Australia is the Veda Group. They are notable in part because in certain instances they can offer a free credit report. In order to obtain a copy of your credit file, you will need to provide them with certain information to validate your identity and to assist with the credit file check. To learn more about this, head over to their website MyCreditFile.com.au where full details and requirements are listed. The information in the above agent’s data base was put in by the credit providers themselves either via manual entry or automated data transfer from their systems. And as mentioned above, this should not be done without consent of the entity of individual in question.  

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SME Banking: The 5-Feature Credit Card Checklist

If you're like many other small business owners, chances are you've used a credit card to help fund your business and ease cash flow. Whilst it’s true that there are a wide range of SME solutions currently available in the Australian market, the question remains: are you sure you're getting the best deal for your business? SME finance is a topic that Andrew Boyd, co-founder of CreditCardCompare.com.au, is passionate about. His advice is that "Australian small business owners often miss out on the best offers because they stick with whoever they are banking with currently and fail to look at what is on the market. We have found that there is a common misconception that opening a new credit card also means switching who you do your banking, which simply is not true. And because most credit cards for businesses offer online account management, it's easy to keep current with payments regardless of who issues it." The fact that applying or opening a new credit card is relatively easy does not merit on doing so alone. There are many reasons why a small business should shop around when looking to open a new SME credit card facility. "The banks need to attract new customers", and according to Boyd "they do that by offering new customers introductory offers on purchases and balance transfers, sometimes together, on top of reward programs and other perks like complimentary insurance and concierge services." What this means for the  small business owner is the potential to get a credit card that saves them money because of lower interest rates, at least for a few months, but also provide travel insurance for whoever is travelling, airport lounge entry, etc. If you are in the market and looking for a replacement card for your business, here are some of the more important features to focus on: 1. Get Interested in Interest Before choosing an SME credit card, compare the promotional interest rates each card offers. Some of the banks will offer zero or low interest for a few months, but be sure to read the fine print and see how long each deal lasts. Also consider how much the rate will increase once the promotional period expires. Ideally, you'll find a card with a long interest rate and a reasonable standard rate following the trial offer. 2. Rewards Matter Many business credit cards offer rewards programs, but they aren't all created equally: different rewards will make more sense for different businesses. Will your employees be flying or driving to their business contacts? If so, look for cards that offer miles or cash back for petrol purchases or frequent flyer points per dollar spent with your favoured airline. Planning on doing a lot of business over lunch? Some cards are aligned with hotels and restaurants, so research accordingly and choose the card that's best for your needs. 3. Travel Perks In addition to rewards, some business credit card companies offer complimentary travel insurance coverage. Ideally, this coverage will handle both domestic and international travel, which is worth considering for business owners looking to grow their company's service area. As with any insurance policy, you need to be absolutely sure of what you are buying. For example, most credit card insurance policies are limited to travel either domestically or internationally. Most will only cover the cardholder, or the cardholder and a set number of people travelling on a ticket purchased using the cardholder's account. Some will offer insurance on lost or delayed luggage, others won't. You get the picture. 4. Customer Service This may seem obvious to most savvy business owners, but strong customer service can, and should, make or break your decision. Does the company offer 24/7 customer service? What about online account management? Are you able to give your employees appropriate access to the account? How does the company handle card theft or account misuse? Any reputable company will take time to answer all of these questions and more, so don't feel shy about asking once you get a representative on the line. 5. Statement Access Rewards and perks aside, be sure that you have clear, consistent access to the financial details of your transactions. Is the online interface easy to use? Can you securely export statements to your chosen financial software? Many credit card companies offer exportable statements to programs like Quicken or Excel, but if this is an important feature then you should check before applying. You'll also want to check if the card generates a BAS automatically or not. Choosing an SME credit card is a major step that can offer increased flexibility and liquidity for your growing business, so be sure to give this process the time and care it deserves. Remember: You shouldn't feel stuck with your current bank. Instead, take time to look for competitive deals that truly serve your business. 

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