Role of business credit in SMB success

Business credit is a cornerstone of success for small and medium-sized businesses (SMBs). It influences access to financing, supplier relationships, and growth opportunities. At Kanmon, we leverage business credit insights to offer embedded financing solutions that simplify the borrowing process and empower SMBs to thrive. These reports comprise one piece of the picture we put together, when deciding what kind of funding might be available for a business.

Understanding business credit reports: A key to growth

A business credit report is a financial profile that evaluates a company's creditworthiness. It includes information like payment history, financial performance, and public records such as liens or bankruptcies. Unlike personal credit reports tied to an individual, business credit reports focus on the company itself, helping stakeholders assess its financial health and payment behavior.

For SMBs, a strong business credit profile can unlock better financing options, favorable terms with suppliers, and credibility with stakeholders like landlords or partners. Kanmon incorporates business credit data into our lending decisions, ensuring SMBs receive financing tailored to their needs and capabilities.

National credit bureaus and their role in business financing

In the U.S., national credit bureaus such as Experian, Dun & Bradstreet, and Equifax primarily maintain the business credit information on which lenders rely. These organizations compile data from trade lines, public records, and other financial sources to produce reports and scores that help businesses, lenders, and suppliers make informed decisions.

Experian, for example, supports credit reporting for over 27 million businesses, offering tools like Intelliscore Plus℠, which predicts payment behavior and evaluates risk on a scale from 1 to 100. Such insights are invaluable for SMBs striving to improve their credit standing and access better financial opportunities.

How Kanmon utilizes business credit data

Kanmon integrates business credit insights into its lending process to provide financing solutions that are accurate, efficient, and customized for SMBs. By analyzing factors like payment history, financial performance, and public records, we ensure our offerings align with each business's unique financial profile.

Through our integration with Experian, here are some of the data points that we often review in connection with a business' loan application:

• Business background information: Details about ownership, parent companies, and subsidiaries, helping to verify company structures.
• Financial data: Insight into sales, payment trends, and credit utilization, enabling a comprehensive assessment of credit risk.
• Banking, trade, and collection history: A record of payment behaviors, helping unpack historical trends.
• Public records: Information on liens, bankruptcies, and judgments, offering a view of potential financial risks.
• Credit scores and risk factors: Summarized data that predicts payment behavior.

Kanmon includes this information as one part of a comprehensive analysis of each business' capacity for funding. Here’s how this data helps us empower SMBs:

• Informed decision-making: Access to detailed credit insights allows us to evaluate risk effectively and streamline funding processes.
• Tailored financing options: By understanding the financial needs of SMBs, we create solutions that minimize friction and maximize value.
• Encouraging credit health: We help businesses monitor their credit and take steps to improve it, unlocking opportunities for better financing terms.

Steps SMBs can take to strengthen their business credit

Building and maintaining a strong business credit score is crucial for long-term success. Here are some strategic steps SMBs can take:

1. Make timely payments: Payment history heavily influences credit scores. Consistently paying invoices and loans on time is vital.
2. Engage credit-reporting vendors: Work with suppliers and lenders that report payment activity to credit bureaus to build a positive profile.
3. Separate business and personal finances: Establish a legal business entity and obtain an EIN to create a distinct credit profile.
4. Monitor credit reports regularly: Use tools like Experian’s credit monitoring services to track progress, address inaccuracies, and identify areas for improvement.

Final thoughts

Strong business credit is a valuable asset for SMBs, enabling better financing terms, improved supplier relationships, and enhanced financial stability. Kanmon supports this journey by embedding business credit insights into our lending solutions, helping SMBs navigate challenges and seize growth opportunities.

Discover how Kanmon can simplify the financing journey for the businesses on your platform, enabling them to succeed with seamless, data-driven solutions.

As always, if you’d like to learn more about how Kanmon helps software platforms that support small and medium businesses every day, we’d love to hear from you!