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November 24th, 2017
Many have asked for a brief rundown of the terminology and “lingo” used during the business credit process. This informative piece is to help bolster your credit knowledge, so that you can discuss the finance process confidently.
TIB – Time in Business
Not surprisingly, this is one of the best signs of business stability. We always check with each applicant’s state to confirm when a business was incorporated.
Pay History (commercial) Data and Score
Using national data reporting bureaus, finance companies check the payment history of a business (your customer), to see if they’ve been making payments on time.
Balance Sheet and Income Statement
On larger transactions we generally ask for the last two years of financial data. Some finance companies focus on cash flow, but at First Western Equipment Finance/First Western Bank & Trust, we focus on the equity held in the business.
To simplify, the overall value of the business after earnings, losses and liabilities. A simple example: business assets – liabilities + retained earnings (profits) = equity.
PG – Personal Guaranty
Typically, a personal guaranty is used for startups or for businesses with lower or less established credit. A personal guaranty means the owner(s) sign off that they are personally responsible for making the payments.
CBR – Credit Bureau Report
Is a personal credit score from a major reporting service. Typically used for sole proprietors, partnerships and closely held corporations.
Entity or Business Structure
The type of filing the business has with the IRS. This includes LLCs, corporations, partnerships, sole proprietorships and municipalities (government).
Make sure to contact us for any additional requests or for information about business credit, when applying for equipment finance. The First Western Equipment Finance team has worked with businesses of all shapes and sizes.