Dakota Business | Community Advantage Recovery Loans | Credit Reports & Credit Scoring

North Dakota District Office

u s small business administration
Dakota Business Newsletter, August 11, 2020

North Dakota Department of Commerce will begin accepting Economic Resiliency Grant applications August 12!

The ERG is a grant opportunity designed by Commerce to enhance revenue in both the immediate and long-term future by growing consumer confidence. The grant will provide funding to private companies operating in North Dakota for costs associated with the business improvements to reduce the spread of infection and instill consumer confidence in the marketplace.

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SBA Community Advantage Recovery Loans

In response to the Coronavirus Disease 2019 (COVID-19) pandemic, SBA has developed a new, temporary Community Advantage loan product titled “Community Advantage Recovery Loans” (CA Recovery Loans). These loans will be delivered through certain eligible CA Lenders; in North Dakota, the SBA-approved CA Lender is Dakota Business Lending.

CA Recovery Loans are to assist small business owners, located in underserved markets, retool their business models for the COVID–19 environment and build financial resiliency against potential future disruptions.

For CA Recovery Loans, underserved markets includes:

  • Low-to-Moderate Income (LMI) communities;
  • Businesses where more than 50% of the full time workforce is low-income or resides in LMI census tracts;
  • Empowerment Zones and Enterprise Communities;
  • HUBZones;
  • New businesses (firms in business for no more than two years);
  • Veteran-owned businesses;
  • Promise Zones;
  • Opportunity Zones; and/or
  • Rural Areas.

Associated fees and principal and interest payments for the first six months of the CA Recovery Loan will be paid by SBA under Section 1112 of the CARES Act.

CA Recovery Loans will be available through September 27, 2020. For more information for North Dakota small businesses, contact Steve Dusek, President & CEO of Dakota Business Lending at 1-800-611-8997 or sdusek@dakotabusinesslending.com.

What's The Score? Credit Reports & Scoring At A Glance

By: Hetti Cekalla, Senior Area Manager
Bismarck Area Office - North Dakota District Office

In these uncertain times, small businesses are dealing with unprecedented economic stress. Many have found needed capital through SBA’s disaster loan programs. The Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program have helped businesses pay their employees and monthly bills by offering low interest rates, longer terms and the potential for loan forgiveness. In North Dakota alone, lenders have assisted small businesses, agriculture producers and non-profit organizations obtain more than 20,000 PPP loans for over $1.7 billion dollars.

The EIDL program has funded more than 5,000 loans to North Dakota small businesses, ag producers and non-profit organizations, providing over $333 million in needed working capital during this pandemic.

For some individuals and small businesses, however, access to capital has been difficult to find because of insufficient or unsatisfactory credit history. Your credit history is a record of how you have used money in the past, including credit cards, loans and whether you pay your bills on time.  Your ability to repay a loan is normally gauged by evaluating your credit report (a summary of your credit history) and credit score.

Where do credit reports come from? In the U.S. the three major credit bureaus are Experian (www.experian.com), TransUnion (www.transunion.com) and Equifax (www.equifax.com). These credit reporting agencies collect information submitted by companies you do business with, such as, retailers, lenders, utility companies, housing organizations, medical facilities and collection agencies. These creditors voluntarily report your credit history to one or more of the credit bureaus.

Credit bureaus use their own customized versions of FICO® (Fair Isaac Company) data analysis to calculate a credit score. This process is entirely automated. Scores calculated using the FICO® system can range from 300 to 850. The average FICO® score in the U.S. is 703, according to data from Experian.

What information is reported to credit bureaus? All information on your personal credit report is tied to your Social Security number. Information included on a business credit report is tied to your Employer Identification Number.  Information collected and reported will include:

  • Types of credit available (mortgage, installment, revolving)
  • Payment history (on time, 30-60-90 days late)
  • Credit account numbers
  • Any defaults on credit or unpaid debts turned over to collection agencies
  • Bankruptcies
  • Judgments, foreclosures, any other public records
  • Credit limits and balances on accounts

Credit scores are the result of the individual credit bureaus’ FICO® system algorithms that take into account:

  • Payment History. This factor is given the most weight in scoring. Have you paid your accounts on time? Late and missed payments hurt your score. Weight: 35%
  • Amounts Owed. How much debt you have is the second most important factor, including how much available revolving credit you are using. If you can keep your use of credit at 30% of your maximum credit allowed, it will improve your score. For instance, if you have a credit card with a limit of $10,000, you should try to keep your spending on that card at $3,000 or less. The scoring also takes all types of credit (not just credit cards) into consideration when calculating the percentage of credit used. Weight: 30%
  • Length of Credit History. How long have your credit accounts been open? How long have you been managing and repaying debts? Weight: 15%
  • Recent Activity. How many credit inquiries have you had within the previous 12 months? How many new credit accounts have been opened? Weight: 10%
  • Credit Mix. How many different kinds of credit do you have? Includes mortgages, credit cards (major and store), auto loans and other installment loans. Weight: 10%

Who can request your credit report?

  • Creditors and potential creditors
  • Landlords
  • Potential employers
  • Insurance companies
  • Cell phone companies
  • Car rental agencies
  • Utility companies
  • Student loan lenders
  • Government agencies
  • Collection agencies
  • Judgment creditors
  • Entities with a court order

Who cannot request your credit report? Most others not on this list cannot legally request a copy of your credit report. The credit reporting agencies are governed by the Fair Credit Reporting Act (FCRA) which ensures you have rights and remedies if your information is not handled correctly. You have a right to know what is on your credit report and a right to correct or dispute inaccuracies. You also have the right to get a free copy of your credit report annually by going to www.annualcreditreport.com or by calling 1-877-322-8228.

If you are having difficulty obtaining credit you need, the first thing you should do is check your credit reports (from all three bureaus) to make sure the reports are accurate. You can dispute any inaccurate information with each credit bureau. If you are a victim of identity theft, you can post a “Fraud Alert” on your credit reports or actually obtain a security “Freeze”. By posting a Fraud Alert or Freeze, creditors are notified that they must contact you personally before they can open any new accounts. For more information, visit the Federal Trade Commission's ‘Understanding Your Credit’ article.

Improving credit scores may take time. Credit information is added, updated or deleted frequently, but typically monthly. Here are some things you can do to improve your credit scores:

  • Reduce the amounts of credit used on your accounts to 30% or less of the credit limit.
  • Make your payments on time.
  • Do not apply for additional credit unless absolutely necessary.
  • Be aware of your credit mix.
  • Do not cancel credit accounts that have a long history; just make sure they are up to date and balances remain below 30% of the maximum credit limit.
  • If you need additional credit added to the limit, you can ask the creditor to increase your credit limit. They may agree to do this, but will most likely want to see some additional income verification to justify the limit increase.
  • Get a pre-paid credit card from a lender who reports to a credit bureau.
  • If you have made payments to a company that does not report to a credit bureau, you can work with the credit bureaus to get that information included on your reports.
  • Become a co-signor on a credit card with someone who has good credit.

Negative credit should fall off your report within seven years. Bankruptcies fall off in 7-10 years, depending on the type of bankruptcy.

Business credit reports and scores are similar to personal reports, but scoring is different. Business credit reporting agencies collect all of the same type of information, but add in some additional data:

  • Business/industry trends
  • Business size
  • Years in business
  • Industry risk

Business credit reporting agencies include Dun & Bradstreet, Equifax Business, Experian Business and Business Credit USA among others. These companies use different scoring methods and scores range from 1 to 100. If your company is relatively young and you need to establish or build your business credit, here are some things you can do:

  • Register your business entity (choose C-Corp, S-Corp, LLC or LLP)
  • Get an Employer Identification Number (EIN), free at irs.gov
  • Open a business bank account and then keep personal and business expenditures and income separate
  • Establish a dedicated business address and phone number and get required licenses
  • Apply for a DUNS number at dnb.com
  • Establish trade lines with suppliers
  • Get a business credit card or line of credit
  • Borrow from lenders who report to business credit bureaus
  • Check your business credit reports for accuracy; know your scores
  • Pay all business bills and loans on time

You can see a sample business credit report at www.credit.net/solutions/business-credit-reports/sample-report/.

For professional, no-cost business assistance, you can reach out to SBA’s Resource Partners:

Upcoming Events:

North Dakota Women's Business Center Traveling Office Hours

Monday, August 17, 2020
Dickinson, ND

Thursday, August 20, 2020
Minot, ND

Meet with North Dakota Women's Business Center representatives in-person to talk about starting and growing your businesses or ideas. It's free and confidential. Book your appointment at https://tinyurl.com/y239kw

Military Spouse Entrepreneur Summit

Wednesday, August 19, 2020

Military spouses make great entrepreneurs. Small business ownership can be a transportable vocation that supports a military career. Attend the virtual Military Spouse Entrepreneur Summit, hosted by SBA and Hiring Our Heroes, to learn about access to capital, government contracting, and disaster prep resources to help your small business thrive.  


Financial Management Webinar: Eight Easy Numbers

Thursday, August 20, 2020

This SBA webinar will look at the management advantages of ratio analysis through eight measures. Learn how to understand and apply these measures to strengthen your decision-making and guide your business to a more profitable future.


Government Contracting Webinar: Managing Cash Flow Across Contracts/Projects

Tuesday, September 1, 2020

When engaging in multiple projects at once or with a new vendor, such as the State/Federal government, managing cash flow expectations is crucial.  Preparing for access to cash or credit will be necessary in advance of any new project. When and how will you invoice?  When will you receive payment?  Will the contract terms influence your cost of doing business?  Gather some key cash management tips to prepare and thrive when pursuing business with the government.


Business Builders Webinar: Cash Flow

Tuesday, September 8, 2020

Increasing your cash flow increases your resiliency as a business. Join West Central MN SBDC Executive Director Matt Magness as he walks you through the fundamentals of understanding cash flow and how your business can better manage it.