The Facts (and Fallacies) About Credit "Inquiries" in Business Funding
Absolutely the most misunderstood and mislead topic in Business funding is
"Credit Inquiries."
Are they important? Rarely.
Are they so important you need to obsess about them? NEVER.
Here's the FACTS (and fallacies) from a 33 yr financial funding company A1 Financial USA:
-Inquiries make up 5% of your credit score,
which is only 5% to 10% of the funding decision.
- We once funded a business with a 583 FICO score with 42 inquiries $28,000.
-We once funded a business with a 815 FICO score and 53 inquiries $270,000
(See? Inquiries and FICOs are basically irrelevant.)
Once you reach 680, business lenders "accept" you as "not high risk" based on credit. An 850 is the same as a 680 with everything else being equal.
A credit score by itself is not the "be-all" and
'end-all" that most folks think it is.
You could have an 850 score and get declined because something else is wrong, by a lender that approved a 350 with many strengths.
Inquiries are WAAAAY Over-Rated.
Some folks get discouraged when they have their nice 700 score declined.
It's because they haven't opened enough credit cards, or other forms of financing to show they can pay back...Better to have a 600 score with 12 consistent trade lines than an 800 with one.
If you're buying a home, perhaps try to keep inquiries down, and maybe for hard-to-get elite credit cards...but for business funding, pretty much ignore them completely and focus on the real issues:
-Current Debt
-ADBs (average daily balances -
A HUGE Factor-keep them as high as possible)
-Missed payments
-History of paying off loans, and the docs to show it (called ZBLs: Zero Balance Letters)
-Your Background Report
-Rent being current
-Negative days in your banking history
-NSFs
-Consistency in deposits (keep them similar each month)
-Frequency in deposits (keep them high...10+ is good, 5+ minimum)
-True deposits not transfers "in"
(Always deposit to your Business Checking every penny you earn or find - transfer "out" if you must, but never "in" if avoidable...this is the single highest declining factor).
