In an effort to prevent the loss of jobs and preserve jobs in the wake of a nationwide downturn, the U.S. Congress has established The American Recovery and Reinvestment Act (ARRA) to help restore a steady stream of revenue. One section of this act, Section 515, focuses on a business credit history check that can provide a business owner with accurate information about their business' financial health. According to the Saratoga Springs Business Guide, any “large or medium scale business” is required by law to obtain a copy of its businesses credit report from a three-party agency called the Annual Credit Report (ACE). This report contains information gathered from many sources, including the United States Federal Reserve, The U.S. Office of Thrift Supervision (OTS), The Council of Economic Advisers (CEA), and many state agencies. The U.S. Department of Education, Federal Trade Commission, and the Federal Deposit Insurance Corporation also require business credit reports from many business owners.
In order to qualify for a business credit history check, an applicant must agree to a personal statement and complete a Non-Employee Recruitment Identification Number (NER) interview. Applicants may be required to supply certain documentation as well, including their tax returns, copies of letters of reference, and letters from their employers. If the applicant does not provide all of the requested documentation, the company may use other sources to verify the applicant's financial situation, such as the Better Business Bureau, the Bureau of Consumer Protection, and their state regulatory agency.
Before a business credit history check can be conducted, the company must determine whether the business meets the minimum reportable entity requirements. To meet these requirements, an applicant must agree to a personal statement, agree to a business formation, and provide copies of the business's operating agreement and its certificate of occupancy. The owner may also be required to provide information regarding any prior bankruptcies they may have had, any tax liens on the business, and current bankruptcy filings. The company may also be required to provide copies of their federal tax returns, state tax returns, and pay stubs.
Generally speaking, the following will weigh favorably on application evaluation: job retention loans, personal references, and NRE. Because most business credit history checks are conducted on an annual basis, it is important to review the information provided in the report at least once a year. Additionally, the company may be required to perform an extra job retention loan if the individual fails to disclose their bankruptcy filing on their initial application. Regardless of how or where the application was processed, applicants must understand that applying for such a loan will be a major step towards achieving success in obtaining a non-business GME or MBA.
As previously mentioned, the most significant factor impacting whether or not an applicant qualifies for a non-business GME or MBA is whether or not the individual possesses a good standing prior to seeking the financing. An applicant must agree to a personal and financial disclosure document that discloses their complete personal financial situation, including their debts and assets. For businesses, this document becomes part of the business credit history check. If an individual possesses a good standing prior to seeking a business loan, it increases the likelihood that they will qualify for a loan as well. However, if the individual's prior record includes . . . . . . numerous instances of default financial decisions, it can negatively impact their ability to obtain a business loan.
Most business credit history reports contain detailed information regarding the financial activities of the individual such as their monthly bills, current debt levels, credit card balances, and co-signers. In addition, each report will include employment information such as the current employer, length of employment, business ownership status, and their potential salary expectations. Each section of the report will contain a summary of the individual's score as well as the evaluation criteria. The score is a mathematical measure of the individual's credit history, which is calculated based on all of the individual's financial transactions.
After the credit history is reviewed, the individual's score is divided by each of the sections to arrive at a single numerical value called the “raw score.” This score is then further divided among various estimation criteria. The job retention feasibility of the individual is determined based upon the individual's “raw score,” “evaluate criteria,” and “expectation level.” The individual's score is also compared to the current job market in order to ensure that they are not over-represented in the applicant pool.
The final sections of the credit history report will contain recommendations for remedying the borrower's situation. These recommendations are most often based upon the evaluation criteria identified in the individual's credit history. If an individual has a high score but is behind in their payments, they may be advised to contact their lender and work out a repayment plan. If an individual has a low score but is eligible for a loan, they may be advised to contact their application review team and attempt to increase their score.