Service Area: Collection Services

Back to Basics: Two Primary Types of UCC Filings

Posted on March 25, 2019 by - UCC Financing Statements

Two Primary Types of UCC Filings: Blanket & PMSI

In compliance with Article 9 of the Uniform Commercial Code, trade creditors can achieve a properly perfected security interest with a sound security agreement and the proper filing of a UCC-1 Financing Statement.

But, Article 9 can be difficult to digest. So, today we’ll break down the information into bite-sized pieces! Let’s review two basic types of secured transactions – Blanket and Purchase Money Security Interest (PMSI) – and the benefits of each!

Types of Filings

Blanket

A Blanket Filing gives the creditor a security interest in all its debtor’s assets, on a non-priority basis. This eliminates potential conflict with the customer’s primary lender, such as a bank.

With this type of filing, payout priority is determined by first in time, first in right.

Who uses Blanket Filings? Blanket Filings are most common when a creditor is providing financing, selling services, or when a debtor “consumes” rather than stocks the goods provided. For example, a uniform company selling to hospitals and a factoring business providing financing could both benefit from this type of filing.

Purchase Money Security Interest (PMSI)

A PMSI filing provides similar benefits as the Blanket Filing with the addition of priority in the repossession of specific identifiable goods, such as inventory or equipment.

According to Article 9, a PMSI in Inventory refers to securing collateral that’s defined as “goods, other than farm products,” which fall under one of the following:

– Are leased by a person as lessor;

– Are held by a person for sale or lease or to be furnished under a contract of service;

– Are furnished by a person under a contract of service; OR

– Consist of raw materials, work in process, or materials used or consumed in a business.

PMSI in Inventory is applicable to a creditor supplying goods to a debtor for the purpose of those goods being resold.

Who Uses a PMSI in Inventory? For example, an electronic manufacturer sells wireless headphones to a media retailer who, in turn, sells the headphones to their customers.

PMSI in Equipment refers to securing collateral defined as “goods other than inventory, farm products, or consumer goods.” The equipment provided must be used in the course of the debtor’s business.

Who Uses a PMSI in Equipment? A PMSI in Equipment filing is applicable to a creditor who supplies items such as medical exam tables, printers or commercial refrigerators – equipment your debtor would keep for their own use and not resell to customers.

We’re Here to Help!

In the event of customer bankruptcy or default, it is critical you’ve taken steps to properly perfect your security interest. If you’re interested in learning more about the UCC process or need assistance determining which type of filing best fits your needs, let NCS assist you! Contact us today at 800-826-5256 or email SecureYourTomorrow@NCScredit.com.

Close Call with Terminated UCC Filing

Posted on March 22, 2019 by - In Other Commercial Credit News

Close Call with Terminated UCC Filing

In a recent bankruptcy case, one creditor squeaked by and maintained its secured position despite accidentally terminating its UCC filing.

Accidental UCC Termination

This tale may sound familiar. It was just a few years ago JP Morgan Chase Bank (JP Morgan) made a similar mistake, which cost it over $1.5 billion. Fortunately in TRINITY 83 DEVELOPMENT, LLC v. COLFIN MIDWEST FUNDING, LLC, Court of Appeals, 7th Circuit 2019, the creditor caught the termination error before it was too late!

Here’s a quick look at the key parties and key dates of the case:

The Parties

– Creditor: ColFin Midwest Funding, LLC (ColFin)

– Debtor: Trinity 83 Development, LLC (Trinity)

Approximate Timeline of Events

– 2006 Trinity borrows $2 million from a bank

– 2011 the bank sells the loan to ColFin

– 2013 the bank recorded a UCC-3, terminating the security

– 2015 ColFin discovers the UCC was terminated by bank in error and records a document cancelling the termination

– 2016 Trinity filed for bankruptcy protection

…And 2019…

During the bankruptcy proceedings, Trinity argued ColFin’s security interest was not perfected, because the UCC filing had been terminated. Unsurprisingly, Trinity backed their argument with the JP Morgan case. The argument didn’t seem unreasonable, after all, there is a clear parallel between JP Morgan and ColFin = terminated UCC filing.

However, the court didn’t agree with Trinity’s argument. Unlike JP Morgan, ColFin caught the termination mistake and rectified the mistake prior to Trinity filing for bankruptcy protection. The law firm Thompson Coburn LLP represented ColFin during these proceedings and summarized in a recent article:

“Here, the lender caught the mistake prior to the bankruptcy filing, unlike the General Motors case, and corrected the mistake. Since ColFin corrected the error prior to the filing date of Trinity 83’ s bankruptcy case… ColFin maintained its first position lien when Trinity 83 went into bankruptcy.”

In addition to correcting the mistake before the bankruptcy filing, no other creditors had filed a UCC during the time between the filing of the termination and the correction.

Did You Know?

Although Article 9 is relatively the same throughout the country, there are nuances in some states. In this case, for example, Illinois law offers an additional protection to the lender. According to the court opinion, “Illinois treats a mistaken release of a mortgage as ineffective between the mortgagor and mortgagee.”

Parting advice from Thompson Coburn LLP, “If a secured creditor mistakenly releases its lien, it should correct the error as soon as possible. If it is diligent, the secured creditor may not be harmed by the inadvertent release, even if the borrower files for bankruptcy.”

Top 5 Reasons You Should File UCCs

Posted on March 11, 2019 by - UCC Financing Statements

Top 5 Reasons You Should File UCCs

If reducing your DSO, mitigating your risk and improving working capital aren’t reason enough to file UCCs, I’ve compiled a list of a few more reasons.

Five more reasons!

#1. Sell More!

A properly perfected security interest gives you the extra security needed to sell to marginal accounts that were previously off limits.

The marginal accounts may have included those potential customers that came to you with little to no credit history, your existing customers who are teetering at the edge of a maxed-out credit line, and even the accounts where you couldn’t quite meet the same price as a competitor.

Sometimes it’s not about beating your competitors in price; it’s quite possible your competitor wouldn’t extend enough credit to this entity — if you can extend the credit, you can get the business. File that UCC!

#2. Fewer Write Offs!

It’s simple. Fewer write offs lower the costs associated with your product.

These lower costs mean you can sell your product at a lower price while maintaining effective profit margins.

As you’d imagine, selling at a lower price makes your company more competitive.

If you are more competitive, you have an opportunity to obtain a larger share of the market. Do the math: more sales + stable profit margins = life is good!

#3. Everyone’s Doing It!

Growing up I used to whine “But Mom, everyone else is!” And she would respond with the ever popular “If everyone jumped off a bridge, would you do it too?”

Well, I probably won’t jump off any bridges, but I absolutely would file UCCs.

UCC filings are a common business practice; just as common as completing a credit application. Think about it, your mortgage, your car loan, an equity line of credit, all have security language written in to the documents you sign — banks won’t just throw money at you without security.

#4. Low Costs!

The overall UCC process is generally quite economical.

The fees (except for a few states) are low and the long-term maintenance doesn’t require significant monetary investment.

For 10 cents per day or less, you can secure collateral in agreement with your customer’s promise to pay.

What’s better than low fees for you? No fees to your customer! Filing a UCC doesn’t cost your customer a thing and contrary to popular belief, a UCC does not hurt their credit.

#5. BECAUSE YOU CAN!

It may seem like I’m shouting and that’s because I am: FILE UCCS BECAUSE IT IS YOUR RIGHT TO BE A SECURED CREDITOR!

OK, no more shouting. I just wanted to be sure you heard me: as a creditor, you have the right to take precautions to protect your interests.

In the unlikely event that your customer files for bankruptcy protection or defaults on the terms within your agreement, a properly perfected security interest elevates your company to a secured creditor position.

I needed a #6 so I could say:

#6. Don’t Be Skeptical!

Let’s look at the facts:

  • Fact: In bankruptcy, secured creditors have priority and are paid before unsecured creditors.
  • Fact: In the event of default, a properly perfected security interest provides the right to repossess.
  • Fact: UCCs will not hurt your sales opportunities, in fact, UCCs promote sales opportunities by providing security when selling to marginal accounts.
  • Fact: UCCs will not impair your customer’s credit rating.
  • Fact: UCCs are a common business practice.

Is it a Bird? Is it a Rule? It’s a Cardinal Change Order!

Posted on March 8, 2019 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Is it a Bird? Is it a Rule? It’s a Cardinal Change Order!

Change orders. Everyone’s got ‘em! But, what’s the difference between a change order and a cardinal change order? Read on to find out!

Boring Ol’ Change Orders

A change order is a change to the original contract. “I need more material” is a common trigger for a change order. Some construction projects encounter hundreds of change orders – verbal and written (written, of course, is preferred, though surprisingly difficult to obtain).

Generally, a “boring ol’ change order” isn’t for terribly significant changes or changes that would change the entire scope of a project. As I mentioned above, a change order is likely a request for additional material because an estimation was wrong, or the material sent needs altering.

I should mention, although it may not be a significant change it may be substantial enough to change your last furnishing date.

I know…“Can open. Worms everywhere.”

Cardinal Change Orders

When you think of cardinal change orders, think specifically about the word cardinal. Not the red bird, but rather the idea that something is essential, fundamental or vital (thank you Merriam-Webster).

Joseph R. Young with SmithCurrie provides an excellent definition in his article Changes and Extra Work – Is There a Limit?

“A “cardinal change” is a change or the culmination of changes ordered by the owner that are beyond the scope of the contract and that may constitute a material breach of contract.” 

Young goes on to explain that these cardinal changes are “beyond the reasonable expectation of the original undertaking and have significant planning, scheduling, and cost implications…”

How Do I Know the Difference?

Construction contracts and, of course, mechanic’s lien statutes are never black and white. Within the text there are inferences, assumptions and text is always open to interpretation. So, how do you know if the change order(s) is a cardinal change order?

In true construction-related fashion, the answer is: it depends.

Young reinforces this answer:

“There is no bright line rule about what could be considered a cardinal change or what was reasonably contemplated by the parties in the original contract. Unless the contract expressly limits the owner’s right to issue changes, reliance on the cardinal change doctrine is a risky basis to refuse additional or changed work. Clear contract language addressing the scope and magnitude of permissible changes is the most reliable source of addressing significant changes.”

There is a chance that a change may be drastic enough to be an obvious cardinal change, such as changing plans for the construction of a 1200 sq ft single family residence to a 200,000 sq ft commercial shopping center. But, the likelihood of something that obvious is slim at best.

Best defense? Young recommends including verbiage within the contract.

“The contract should address some limitations on the extent of changes or place restrictions on material changes in the use of the project or the contractor’s work. The contract should also address when the contractor may refuse to perform changed or additional work. By clearly defining the limitations of the changes clause, parties can minimize the disputes about ambiguities over the legal concept of “cardinal changes”, and the parties can eliminate the risk of an unnecessary dispute as to whether there has been a cardinal change. The best course of action for all parties is to incorporate the cardinal change concept into the contract and follow the terms of the contract in managing and addressing changes.”

My Advice

If you are drafting a contract, have a contract lawyer review the document. If you are in the middle of a dispute, consult an attorney – don’t try and navigate the possible breach of contract claims on your own.

Time for Preparation, There’s No Rest Post-Recession

Posted on February 22, 2019 by - Credit Risk Management, In Other Commercial Credit News

Use this Time as Preparation, There’s No Rest Post-Recession!

FMI has released its 2019 U.S. and Canada Construction Outlooks. The report contains a considerable amount of valuable information, but one topic is forefront: be prepared for the next recession. Today I’ll touch on steps outlined by FMI as well as NCS best practices you can implement to ensure you are prepared for the next economic downturn.

Awesome T-Shirt: “Keep Calm, Stay Focused and Get Ahead of the Next Downturn”

I’m going to emboss it & stick it to my computer as a reminder! The introduction to FMI’s outlook article is titled “Keep Calm, Stay Focused and Get Ahead of the Next Downturn.” Yes, I think it would be a great t-shirt, but more importantly, it’s a reminder that you have an opportunity to ensure you have the working capital and business model to make it through the next downturn.

What did we learn during the Great Recession? Hopefully you learned the value in proactively securing receivables! During the Great Recession, you likely experienced supply chain disruptions, slow pay/no pay customers, depleted liquidity or cash flow issues, and even customer insolvency. What have you done to prevent these experiences going forward?

FMI recommends addressing these 7 hurdles now:

1. Evaluate underperforming departments and employees. If you have been dragging your feet on eliminating a low performing division or a poor performing employee, now is the time to have the conversations. You don’t want this hanging over the business during tough economic times. FMI says, “During the last recession, these types of issues plagued E&C companies for far too long. Leadership that is slow to react and respond can make or break a company.”

2. Be selective in new projects. Select projects within your core competencies. FMI has a saying: “Contractors don’t starve to death; they die from gluttony. They get too much work, too fast, with inadequate resources, and then they get into financial trouble and run out of cash.”

3. Look at the big picture and have a strategy in place. “Living in a reactive mode and not being proactive and taking charge of shaping your own destiny and future can become your biggest detriments.”

I will come back to 4 & 5. Let’s jump to 6 & 7: get your sales game on!

6. & 7. Strengthen existing client relationships, build new relationships, and get your sales folks prepared.

“…educate your people on “how to behave in a recession”—estimators with project selection, field managers with scope management, PMs with cash management, etc. Client interaction across all company levels will increase your presence with clients, give you an inside track and improve collaboration among future leaders.”

4. Know your costs and plan accordingly. “Understanding the total costs for each project and how these costs break down is the first step in knowing where and how you can improve profit margins.”

5. Cash is King! “Conduct a risk analysis on all existing projects slated to complete more than six months out. Identify high-risk projects and how each will be staffed to take to project completion. Leverage and utilize a multiskilled workforce: In-house, self-perform capabilities can mean a difference on margins, time and manpower, while all-around adaptability can make a firm indispensable to satisfied clients.”

And this is where the NCS best practice fits in: implement a UCC and Mechanic’s Lien process.

Supply goods? Renting equipment?

File a UCC, even if it’s “a good, longtime customer” because absolutely no one is safe from insolvency. A properly perfected security interest affords you crucial leverage if your customer defaults, plus, it puts you at the front of the payment line in the event of bankruptcy.

Furnishing to a construction project?

Serve a preliminary notice. Every. Time. The notice is critical when pursuing a mechanic’s lien or bond claim. Many states require the service of a notice in order to proceed with a lien or bond claim. If you fail to serve a notice and you can’t file a lien, you have lost the leverage the law affords – is that a risk you want to take?

Ensuring the process is in place now helps to normalize the process for your internal customers (sales & credit) and your external customers. This is big: NORMALIZE.

UCCs and mechanic’s liens are not to be feared. It is a business practice used by millions and it can be vital to your working capital and subsequent business survival.

Implementing the process now, when economic times are great, helps put a positive spin on UCCs and mechanic’s liens.

It gives you an opportunity to demonstrate to your customers that there is no harm in either process, because everyone is getting paid & happy. Then, when the next downturn comes around, you will spend less time scrambling to secure these rights and battling upset customers – “Why did you send me this prelien notice?!?!” – and more time increasing your sales and, in turn, your working capital.

There’s No Ice Cream in Bankruptcy. Wait, What?!

Posted on February 18, 2019 by - Credit Risk Management, UCC Financing Statements

There’s No Ice Cream in Bankruptcy. Wait, What?!

In bankruptcy, we frequently hear terms like preference payment, claw back, and new value. What do these terms mean? Further, what do these terms have to do with ice cream?

Let me tell you a little story about an ice cream truck and its weekly deliveries to a now insolvent grocery store.

The Ice Cream Truck – Music to My Ears!

Blue Bell Creameries, Inc. (Blue Bell) supplies ice cream and related items to a variety of businesses, including a grocery store chain, Bruno’s Supermarkets, LLC (Bruno’s). Each week, Blue Bell would deliver ice cream to Bruno’s and twice a week Bruno’s would remit payment to Blue Bell.

Soon, Bruno’s payments dropped from twice a week to once a week. Blue Bell continued its routine deliveries, after all, Bruno’s wasn’t paying twice a week, but Bruno’s was still paying within terms. Then Blue Bell began hearing rumors about Bruno’s cash flow problems, even the possibility that Bruno’s was preparing for bankruptcy. Technically, Blue Bell was still receiving timely payment from Bruno’s — what should Blue Bell do?

Blue Bell decided to continue supplying to Bruno’s, all the way to the date of bankruptcy. Soon after Bruno’s bankruptcy filing, Blue Bell found itself scooped into a lawsuit: the bankruptcy trustee wanted to recover ALL payments Blue Bell received from Bruno’s during the 90 days prior to the bankruptcy filing, to the tune of over $500,000.

Ice Cream Break

This period, the 90 days prior to the date of the bankruptcy filing, is also known as the preference period. Payments made during the preference period are often referred to as preference payments. The court opinion defines preference as

“… as defined by § 547(b), a preference occurs when an insolvent debtor transfers money to pay a creditor for a prior debt within 90 days before filing a bankruptcy petition.”

Claw backs and Happy Tracks. One of these is a term for the bankruptcy trustee obtaining preference payments from creditors and the other is a delicious ice cream treat. You guessed it, the act of obtaining these payments is known as claw back. “The trustee will claw back payments from the creditor.” A defense against preference or to alleviate claw backs? New value.

bankruptcy and new value

Back to Blue Bell

Blue Bell recognized and admitted based on 547(b) of the bankruptcy code the trustee could claw back the money Bruno’s paid Blue Bell. (It’s the “ordinary course of business” defense)

But this story wouldn’t be as sweet if it stopped now. Blue Bell argued the payments it received from Bruno’s provided “new value” which is in line with 547(c).

I like the bankruptcy court’s explanation of new value for this case

“… lots of ice cream products that [Bruno’s] was able to sell to its customer in its efforts to remain financially afloat.”

If the court agreed with the new value defense, the trustee couldn’t go after those payments. But the court didn’t agree, stating the new value defense requires the new value to remain unpaid.

There is a confusion related to the idea of remaining unpaid. I’m not going to create a brain freeze by explaining too much about it, but here’s a high level look:

Essentially, Blue Bell wouldn’t have been permitted to use the new value defense because Bruno’s actually paid them for the goods Bruno’s received from Blue Bell — Blue Bell could have used the new value defense if it continued supplying to Bruno’s and Bruno’s didn’t pay them.

Fortunately for Blue Bell, the Court of Appeals determined Blue Bell could use the new value defense, despite payments received from Bruno’s. Why?

In part, it’s because the “one of the ‘principal policy objectives underlying the preference provisions of the Bankruptcy Code’ is ‘to encourage creditors to continue extending credit to financially troubled entities while discouraging a panic-stricken race to the courthouse.’” Despite the rumors, and subsequent realities of Bruno’s fiscal situation, Blue Bell continued to supply its delicious treats.

You can view the Court of Appeals case here: Kaye v. Blue Bell Creameries, Inc.

UCC the Proverbial Sundae Topper

Could a properly perfected security interest have saved Blue Bell from this melty mess? Quite possibly. A properly perfected UCC provides an additional defense against preference payments.

We’ve previously discussed the higher risks of supplying to foodservice, beverage and hospitality industries. This is no different. Never assume, no matter how large your customer is, your customer is immune to insolvency. File UCCs and ensure you are in the best possible position to get paid.

Arkansas: You Can’t Lien a Property You Didn’t Improve

Posted on February 15, 2019 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Arkansas Mechanic’s Liens: You Can’t Lien a Property You Didn’t Improve

Turns out, if you want to secure a mechanic’s lien in Arkansas, the lien must be filed against property you improved. Kind of feels like a face-palm moment, right?

I know what you are thinking “Kristin, of course I can’t file a lien against a property if I didn’t furnish to the property.” So, let me clarify, if the property owner has multiple parcels of land, you need to specify which parcel is related to the improvement. Identifying the wrong parcel, as one supplier has learned, can result in an invalid lien.

Steps to Securing Lien Rights in Arkansas

Commercial projects and residential projects are treated differently in Arkansas.

Residential Notice:

  • Include notice in contract or serve residential notice upon the owner before first furnishing materials or services. (The notice may be served after furnishing, but the lien, when later filed, will only be effective from the date the notice was served.)
  • A residential contractor who fails to give the notice may be fined up to $1,000.00, and is barred from bringing an action to enforce any provision of the residential contract.
  • No residential notice is required when:
    • the notice is incorporated within your contract,
    • the prime contractor or another lien claimant has served the notice upon the owner,
    • the prime contractor furnishes a payment and performance bond, or
    • you contract directly with the owner, to provide materials or services, but you are not a home improvement contractor or a residential building contractor.

Commercial and Residential (with more than 4 units):

  • Serve notice of non-payment upon the owner and prime contractor after last furnishing materials or services, but within 75 days from last furnishing materials or services.
  • The 75-day notice is not required of prime contractors contracting directly with the owner.

In Arkansas, the mechanic’s lien for commercial and residential projects is a two part process: notice of intent followed by the filing of the lien.

  • Serve a notice of intent upon the owner at least 10 days prior to filing the lien.
  • File the lien after last furnishing materials or services, but within 120 days from last furnishing materials or services.
  • Serve a copy of the lien upon the owner.
  • If the notice of intent cannot be served within the 10-Day time frame, file the lien and suit to enforce the lien within 120 days from last furnishing materials or services, requesting both the lien and foreclosure.

This Is for the Birds, or Is It?

According to the court opinion, the property owner had at least 5 parcels of land. The owner’s home & a barn were on one of the parcels, and the subsequent parcels held several poultry houses.  [The home & barn were at 20190 Garman Road and the poultry houses were at 20178 Garman Road.]

The HVAC materials furnished by the supplier were for the improvement of two poultry houses. When the supplier filed its lien, the supplier included a legal description of the property. But the legal description was for the parcel that held the house & barn [20190 Garman Road], not the parcel with the two poultry houses [20178 Garman Road].

Arkansas statute specifically states “the lien shall contain a correct description of the property to be charged with the lien.” A.C.A. § 18-44-117 In this case, the supplier clearly identified the wrong property in its lien.

In his article Construction Law in Arkansas: Construction Lien Filings and Property Descriptions – Sometimes Less Is More, author Larry Watkins leaves us with great advice:

“… if you provide a detailed real property description, make sure it describes the construction site where the materials or labor were provided. Remember that for describing property for lien filing purposes, general may be better than specific, and, sometimes, less is more.”

Need help securing your mechanic’s lien rights in Arkansas? Contact us today!

Approve More Small Businesses for Larger Sales

Posted on February 11, 2019 by - Credit Risk Management

Approve More Small Businesses for Larger Sales

By: Pam Ogden President, Business Credit Reports

As originally published in the Credit Research Foundation 3Q 2018 CRF News

Small businesses are a critical component of the American economic engine, contributing about half of the gross domestic product of the US. Companies that undervalue this all-important segment are leaving money on the table.

In any credit deal, you want to extend as much credit as possible without exceeding acceptable risk levels to generate the biggest sales possible. This principle is not limited to only large, well- established companies with dozens or hundreds of tradelines. The same applies to smaller, growing companies that may have more limited credit records. The challenge is in collecting enough information on the smaller company to establish a certain level of comfort on the risk front. The more information, the better, of course.

Smaller Companies Have Thinner Credit Records

Companies that issue credit are not required to report their payment data to all of the credit bureaus. In fact, they are generally not required to report payment activity at all. The credit bureaus all have data acquisition teams whose sole job is to get lenders, manufacturers, distributors, utilities and other companies to send them their account data to build and update the credit bureau’s database.

So, if there is nothing forcing companies to report their payment data to the credit bureaus, what is the result? We get disparate credit records across the various credit bureaus. Each credit bureau has a different perspective on a company. Nobody has the complete picture. This problem is amplified in the case of a small business that doesn’t have many credit relationships to begin with. Each credit relationship makes up a greater share of the complete credit picture. Missing even one or two of these can dramatically change the risk profile of a small company.

Credit managers know that less data on a prospective customer frequently means more risk. Credit policies are written to reduce credit offered when there is less information on a company. This puts smaller companies at a disadvantage in terms of obtaining the credit that they need to grow their business. It also means the company issuing credit to the small business is granting less credit, thereby limiting the revenue opportunity.

Combining Multiple Credit Data Sources is the Key

The problem of incomplete credit records on small businesses is solved by leveraging multiple credit bureaus in the credit granting process. If each credit bureau has a piece of the complete picture, putting them all together delivers a full 360-degree view of the company. With three major credit bureaus and several others with strength in particular industries, the only way to get a complete credit picture of a small company is to pull them together.

Many credit managers employ a first-pull/second-pull practice whereby they check one credit bureau first, and then cascade to additional bureaus for additional information as needed. The drawback with this approach is you are paying for multiple reports to multiple providers and those reports are separate reports. Also, a hit on the first pull may result in a credit approval without proceeding to the second pull, which may indicate a higher credit limit.

A more efficient and economical approach is to utilize a business credit information provider that combines the data and analytics from multiple credit bureaus into one report. This means only one report needs to be pulled by the credit analyst and only one credit vendor relationship needs to be maintained by the credit manager. Also, the total price of a blended business credit report is frequently lower than the total price of multiple credit reports.

Higher Hit Rates

Often, small businesses are declined for credit because no record could be found in the queried database. This is a lost opportunity for the small business applicant and could also be a lost opportunity for the company that is considering issuing credit.

Pulling the data of multiple business credit bureaus into one report results in higher hit rates on small businesses. While one credit bureau may not have any information on a small company, another one might. Checking the databases of two, three or four credit bureaus increases the likelihood of finding a credit record on a small company.

While it may not be practical to query two, three or four credit bureaus separately, using a credit information provider or tool that connects to all of the bureaus gets the job done in one search. This results in higher hit rates and more approvals.

Bigger Sales

Bigger sales require higher credit limits. Higher credit limits require more information on a company that supports the case to grant credit. By pulling together data from multiple credit bureaus, you build a thicker, more complete credit record. With a more complete credit record, credit managers are able to approve higher credit lines which accommodate larger sales.

Credit managers that are able to approve larger credit lines without increasing risk are heroes to their companies. Sales people are happy because Credit granted them room to negotiate a large deal. Management is happy because more revenue is flowing in.

More Prospects for Growth

Today’s small businesses are tomorrow’s medium and large companies. Once a budding company has established a relationship with a vendor, it’s unlikely they will change as long as the provider continues to deliver as needed.

Establishing relationships with companies early in their life cycle enables suppliers to grow their own business and increases the prospects of a long, mutually-beneficial relationship.

In fact, one of the main reasons growing companies switch providers is because another provider is willing to grant more credit than the incumbent. Using a multi-bureau credit solution or tool can establish the relationship on the right foot with larger credit lines and keep it that way as credit lines are extended over the life of the relationship.

More Information Means Less Risk

We’ve covered how pulling together data from multiple credit bureaus into one solution increases revenue, but we’d be remiss if we didn’t also mention the fact that having more information on small businesses helps mitigate risk.

Because the credit bureaus frequently don’t have the full picture on small businesses, the credit bureau used in a single-bureau model may paint a rosy picture of a company while missing a key piece of derogatory information. Pulling together multiple credit bureaus’ data into one report reduces the chances of missing a key negative factor.

The Key Takeaway

Don’t leave money on the table as a result of no-hits and thin credit records on small businesses! Access credit reports that pull all the credit bureaus together into one search and one report for stronger hit rates and a more complete credit picture. With a comprehensive picture, you can issue higher credit limits and minimize your risk.

Would you like access to comprehensive credit reports without the hassle of contracts?