Business Credit Myths vs. Reality

You may not know just how important your credit profile is to your business's success. Don't let the following common myths lead you astray. 

Myth 1
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Reality 1
Just because you may deal with a small lender doesn’t mean there isn’t a big bank behind the credit the small lender extends to you. In reality, business deals made with a smile and a handshake are few and far between. After you submit your application to a small lender, behind the scenes your credit factors may be assigned numerical scores that allow your application to be processed automatically, without the direct involvement of your credit manager.

Given the relative size of small business loans, many financial institutions that process large numbers of applications typically use automated decision-making processes. Some of the most popular decision engines use cutoff scores to accept or decline the lion’s share of applications, relying on manual evaluation only in those cases that are inconclusive .Therefore, even though your neighborhood bank officer thinks you are creditworthy, he may be unable to decide whether to extend you credit, and on what terms. This is true not just for lending, but also for insurance, leases, and similar financial arrangements.