You've seen advertisements from many small business factoring companies indicating that your personal credit does not matter and that factoring companies really only rely on the credit worthiness of your customers.  This is true to a large degree, however, it is important to note that many small business factoring companies want to get a sense of how much a person cares about maintaining a good credit history. 

Often times, we encounter potential prospect clients that have poor credit.  Many of them have very reasonable explanations for the reason why their personal credit is less than stellar.  For example, one client of ours was in a car accident and his car was totaled.  Due to the fact that there was litigation and the insurance company was involved, he had to wait to receive a settlement from the insurance company for the wrecked vehicle.  However, this amount was not sufficient to pay off the auto loan he had on the vehicle.  A multi-month adjudication process ensued prior to his having the ability to settle up with the auto lender.  The auto lender's servicer went on auto-pilot, and when payments didn't show up every month, whammo...his personal credit got whacked. There was a very reasonable story that explained his poor credit score, and when we pulled his credit report, this is exactly what we saw.  His candor and transparency about the issue was appreciated during our underwriting process.  This is just one example and why we often encourage prospects to apply for factoring services even if their credit is less than perfect.

I was very pleased to see the news in a recent Wall Street Journal article regarding the Credit Agencies that the US government is getting involved (for the first time) in providing some additional oversight to these huge companies in an effort to assist the consumers they rate every day.  Consumers need the ability to dispute items on their credit reports, and have corrections issued in a more timely manner.  In the end, if there is just a better process for this, it will make for a better resolution system when reasonble disputes arise.  Rather than having "no one to talk to" and since the credit rating agencies have such a strong influence on validating a person's "reputation", hopefully this new focus by the US government will push for some solid reforms for consumers...and entrepreneurs.

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