Business Credit Education

Debt Collection Scams Substantial debt can be a crippling burden to a small business, which is why they are often targeted by con artists who purport they can vastly reduce or even eliminate this debt — for a fee. This type of scam has a long and checkered history — and is showing no sign of abating. In late October of 2016, Ukrainian-born Sergiy Bezrukov — aka John Butler aka Thomas Paris aka Christopher Riley — was arrested by the FBI in upstate New York and charged with mail fraud for having allegedly duped more than 100 small business owners out of more than $500,000. His alleged scheme was simple: mass-mail an offer to reduce small business debt by up to 75 percent in just six to 12 hours. The fee for his services — required upfront — was $1,250, to be sent via wire transfer to his company, Corporate Restructure, Inc. Of course, no actual services were performed. Victims were not only out their initial $1,250, but many had their credit ratings seriously damaged — or further damaged — as a result. “Bogus credit relief schemes are not all that common, but when they do pop up, they give legitimate organizations a bad name,” said Robert Tharnish, senior vice president of ABC-Amega, Inc., a debt collection agency headquartered in Buffalo, N.Y. “There are many ways to deal with commercial debt. Owners just have to do their due diligence.” Robert Ingold, CEO of Commercial Collection Corp. in Tonawanda, N.Y., agrees. “For anyone who receives a solicitation to reduce their debt — be it commercial or consumer — be skeptical. Know who you’re dealing with.” Both Tharnish and Ingold serve on the board of the International Association of Commercial Collectors, the world’s largest international trade association for commercial debt collection professionals. Ingold noted that most companies have accountants and attorneys who should immediately raise a red flag when such sketchy offers come their way. Even so, enough small business owners either don’t have outside help or ignore their paid experts’ advice, allowing scammers like Berzukov to rake in hundreds of thousands of dollars in just a few months’ time. Dealing with a bogus agency can damage already fragile credit ratings, Ingold noted. “In most cases, a company targeted by a debt reduction scammer has debt and delinquencies that have already been noted by reporting agencies like Experian. Bezrukov’s victims weren’t just out their $1,250, but they probably fell further behind in their debt payments expecting relief, and this just decreased their business credit scores even further.” “This is an industry where all you need is a phone and list,” Ingold continued. “We see the same problem on the flip side with fraudulent collection agencies. Fly-by-night collection agencies approach lenders with wild claims of collection prowess, or buy existing paper for pennies on the dollar, then start harassing debtors in violation of all established laws and ethics.” “ Both Ingold and Tharnish noted that the legal system has numerous avenues available for businesses that find themselves over their head in debt. These include: Restructuring the debt with the existing creditors. This often includes devising a monthly payment plan that leaves the business with enough capital to keep growing.Getting an SBA or private business loan.Declaring Chapter 11 or Chapter 13 bankruptcy, which allow businesses to discharge many of their obligations and still keep their doors open. Both experts also emphasized the need for business owners to perform due diligence before hiring any debt reduction or collection agency to work on their behalf. “Ask to see their license. Their certification. Check with the Better Business Bureau,” Tharnish advised. “Also demand references. Ask, ‘Have you done business with anyone I know?’ If an agency can’t provide references, just walk away.” “When confronted with an amazing business solicitation, just remember the old saying,” Tharnish concluded. “If it sounds too good to be true, it probably is.”

Barry Moltz, Small Business Expert Peter Bolin, Director of Consulting and Analytics for Experian appeared on episode #380 of the Business Insanity Talk Radio Show recently to talk about business credit scores. The show is hosted by Barry Moltz. In this blog post we include a transcript of Pete's appearance along with a link to the recording on Soundcloud.  Barry Moltz: A lot of small business owners pay attention to their personal credit score, unfortunately, they don't pay attention to their business's credit score. To discuss this is Peter Bolin who is the Director of Consulting & Analytics at Experian, Peter welcome to the show.Pete Bolin: Thank you very much, Barry. It's very nice to be here.Barry Moltz: Now I don't find too many people who have a LinkedIn profile like yours that starts with "we torture data." So what does that mean?Pete Bolin: That's the truth. We try to use the data assets at Experian to squeeze out as much predictive information, and as much marking information that we can, and to help our customers, and clients and small business owners benefit as much as they can from our data.Barry Moltz: So why is it important, we all know how important it is to have a high personal credit score, but why should the business have a high credit score?Pete Bolin: Having a high credit score for business is critical. It helps them negotiate with creditors better, it helps them negotiate with their wholesalers better and it provides them the opportunity to get the best offer. Get the best rates. Get the best credit terms available and that's all driven by a high credit score.Barry Moltz: Now as a business do you check your credit score the same way you would check your personal credit score for example like on Experian?Peter Bolin: Yes, we have a web site, BusinessCreditFacts.Com, where a small business owner can go and access their credit report, understand all the information. It's very informative, it's very educational. They can even check the credit score planner, which gives them key information on the critical data elements that actually affect their score, and they can start to educate themselves about the factors that they can potentially use to improve their score.Barry Moltz: So Peter what are some of those critical factors? I think we are all familiar with the ones for our personal credit score. What are those for business?Peter Bolin: First of all, you want to make sure that you limit your debt. You want to make sure that you get that as low as possible. You want to make sure that the balance-to-limit ratio which calculates the balances to the total overall balances and keeping that very low will help your credit score. Also, obviously pay your bills on time, that's a big one. Limit the number of inquiries - meaning, limit the number of times you're actually shopping for credit. Only look for credit when you absolutely need it. Those three things are critical in keeping a credit score very high.Barry Moltz: So what's a good credit score for a small business, I know for myself for my personal credit score I try to keep it in the 750's if I can. What is good for a business?Peter Bolin: That depends on each lender. I can say that on average, teh average business credit score, base on our IntelliScore Plus is a 50, it ranges from 1 to 100. So the average score is about a 50. So I would recommend keeping it above that in order to get the best terms and conditions for your loan.Barry Moltz: Well I certainly appreciate you being on the show, where can people get more information on all of this to improve their business credit score?Peter Bolin: BusinessCreditFacts.com, which gives you access to the business credit report and also the score planner which is a key educational feature. Barry Moltz: Pete thanks so much.  Peter Bolin:  Thank you for having me Barry. 

Understanding the ins and outs of financial management is important for every consumer. Being educated on managing their credit, understanding the impact of a credit score, or grasping simple bookkeeping can be intimidating without the proper training. When it comes to business owners, it is even more important, because improper management of their finances can be detrimental to their bottom line. However, with current regulations in place, it makes it difficult for consumers and small business owners to know where to turn to seek out advice without having to pay a steep price for assistance. Currently, Congress is reviewing legislation that would remove some of these challenges to further the development and delivery of personalized credit education. While the legislation would have an obvious benefit for consumers, it could also help improve the financial standing of entrepreneurs and small businesses owners. The fact is that many business lenders often rely on the commercial credit of the enterprise and the personal credit of the business owner when extending lines of credit. This is especially true for sole proprietorships and partnerships. Small business owners want, and need access to personalized credit education It’s estimated that more than 120 million credit score disclosures (key factors that may adversely affect a consumer’s credit score) are delivered to consumers each year when they apply for a mortgage, are denied for credit or are offered less than favorable terms on a loan. The number of score disclosures is likely to increase with the growing number of lenders providing credit scores to consumers on their monthly billing statements. Transparency of credit scores is a good thing, but a score disclosure simply cannot help consumers answer the question, “How can I improve my credit score?” For this advice, they often turn to the credit bureaus that generate the score. However, credit bureaus are only permitted to provide general information regarding a consumer’s score. They are unable to provide personalized steps to help consumers understand what they need to do to improve their score. This is primarily due to a little known federal law — the Credit Repair Organizations Act (CROA) — being misinterpreted. CROA stands in the way While CROA has been effective at shutting down credit clinic scams, it has recently been misapplied by the courts in a way that has had a negative effect on innovation and competition in the credit education marketplace. For example, CROA requires consumers to wait at least three days before they can receive the requested services. In today’s interconnected world, requiring small business owners, let alone a consumer to wait three days for timely and personalized credit education simply doesn’t work. A recent joint study from the Policy and Economic Research Council (PERC) and Take Charge America Institute (TCAI) at the University of Arizona, entitled “Is CROA Choking Credit Report Literacy?” sheds new light on the barriers that consumers and small business owners face when accessing the innovative tools that provide individualized credit education to help improve their credit score. The study finds that even after accounting for different price points, including free access, CROA’s requirements may be deterring the people who need such services from taking advantage. Even when it was free, just 31 percent of consumers hit the registration page after exposure to disclaimers on the landing page, and just 6 percent completed the process after the three-business day mandatory wait. Furthermore, 46 percent of consumers indicated that they would have used the credit education product for free if they could do so without having to wait three days. Reform holds potential for small business owners, especially women and minority-owned businesses Changing this law to enable the CFPB-supervised credit bureaus— those best positioned to help consumers in this area — to provide credit advice would have tangible benefits for consumers and small business owners alike. The PERC/TAIC report found that innovative credit education can lead directly to positive financial behaviors. Of those that successfully completed the personalized credit education service experienced positive material impacts (moving to a better risk tier) at nearly twice the rate of those receiving educational materials only. Reform can also be vital to helping women and minority-owned small businesses get on level footing as small businesses owned by men. A recent analysis released by Experian found that a gender gap exists in both commercial and consumer credit files: The average commercial credit score for a woman-owned business is 34, while the average score for a male-owned business is 35; The average consumer credit score for women business owners is 689, compared to 699 for male business owners; More than 22 percent of male-owned businesses have at least one open commercial trade line, while the same can be said for only 18.5 percent of women-owned businesses; In the last 24 months, female business owners had an average of 1.3 personal accounts become 90-plus days past due, while male business owners had an average of 0.9 go delinquent. It is possible that the lack of parity in access to credit has had a direct and quantifiable impact on the bottom lines for women-owned businesses. For example, Experian’s analysis found that more than 24 percent of male-owned businesses have sales that exceeded $500,000, while only 14.5 percent of women-owned businesses see sales of that size. In addition, 21.2 percent of male business owners have a personal income of $125,000 or greater, compared to just 17.4 percent of women business owners. Similarly, in a July 2014 report entitled “21st Century Barriers to Women’s Entrepreneurship,” former-Senate Small Business Committee Chair Maria Cantwell (D-Wash.) found i that $1 of every $23 in conventional small business loans goes to a woman-owned business. While improving access to innovative credit education is not a cure all, small business owners still need to develop solid business plans. However, personalized credit education could go a long way towards helping entrepreneurs improve their personal credit standing so they can access the affordable rates and terms needed for operating capital or a startup loan. Congress must pass legislation to remove regulatory barriers standing in the way of innovative credit education To help remedy the situation, Congress should pass H.R. 347, the Facilitating Access to Credit Act of 2014. The bipartisan legislation introduced by Reps. Ed Royce, R-Calif., and Ruben Hinojosa, D-Texas, would exempt reputable nationwide Consumer Financial Protection Bureau –supervised and examined credit bureaus, such as Experian, from CROA’s requirements. The legislation also would ensure that the statute’s critical consumer protections still could be enforced against unscrupulous credit clinics. Recognizing the positive impact of CROA reform on financial literacy in the communities that they represent, several national organizations have signed on to get behind this important effort. Policy resolutions supporting reform of CROA have been adopted by the National Black Caucus of State Legislators, the National Hispanic Caucus of State Legislators, the National Bankers Association and the United States Hispanic Chamber of Commerce. The bottom line is that financial education is extremely important. What is even more critical is the ability to have organizations that are qualified to provide the tools to improve credit standing and advice on how to utilize them. In the end, this will not only help consumers enhance their own financial experience, it will help small business owners be better prepared for potential growth opportunities and stimulate the economy.

An interesting thing happened while I was completing a purchase at Urban Outfitters recently. The cashier asked if I would like to have my receipt either printed or emailed to me. Without giving it much thought, I asked for a printed receipt. And then I got to thinking: Why would a retailer want to email a receipt? I’m probably way behind on this trend, but apparently it’s one that is gaining steam among retailers. No longer reserved just for the travel industry, self-service DVD rental stations and the like, emailed receipts are infiltrating the mainstream and becoming a part of the typical checkout vernacular. What may feel unfamiliar to someone like me who hadn’t yet heard a retailer offer to email a receipt could rapidly become as mainstream as asking a customer to complete an online survey regarding his checkout experience. To make emailed receipts an effective part of your customer engagement strategy, consider them as opportunities to up-sell as well as solidify your brand with customers. Much like transactional emails that are generated as a result of online sales, point-of-purchase emails that result from in-store transactions have the potential to generate additional sales among recipients who are already engaged with your brand. These emails need to follow all the rules of transactional emails, too, namely: Deliver the email promptly. Customers want to see that receipt right away, especially if they have any reason to return or exchange an item. Use an engaging subject line and design. Just because your email is primarily informative in function doesn’t mean it can’t go beyond the basics. Customers will be more likely to open the email if they get a sense that you’re offering more than just an order confirmation. Add value. This is your chance to offer a special promotion, invite the customer to join your social network fan base and email list (don’t add them to list without their permission, even though they’ve agreed to an emailed receipt), cross-sell other products and services, and generally engage the customer beyond the purchase.  Beyond simply saving paper, emailed receipts have the ability to gain extra mileage from every transaction. Use them to extend your brand, build your email list and gain a loyal following, and soon your emailed receipts will become a vital part of your marketing strategy.