In 2001, a group of small business lenders got together and formed a kind of club. They called it the Small Business Financial Exchange (SBFE). The purpose of the club was to take all of the small business payment data held separately by its members and store it in one place.
Today, the SBFE stores data on more than 24 million businesses, and distributes the information to verified business credit reporting agencies, like Dun & Bradstreet and Equifax.
In other words, the SBFE stores important data on your business that may be used in your business credit report. This makes the SBFE an important piece of the business credit puzzle—but most business owners have never heard of it.
Why You’ve Never Heard of the SBFE
When you access a copy of your business’s report, it may contain data from the SBFE, but credit agencies aren’t required to disclose that level of information. Likewise, financial institutions aren’t required to disclose whether or not they’re members of the SBFE, so even if your lender is using SBFE information, you may never know for sure.
Because there’s little regulation (relative to personal credit) regarding business credit, any member of the SBFE can view the info on your company, they don’t need your permission to do so. You can check your business credit data for free at Nav.
You may not be sure if you’ve already encountered an institution that has reported your information to the SBFE for these reasons. To help, here’s a link to a breakdown of which major credit cards report to commercial credit agencies. This knowledge can help you build better business credit and possibly access better credit products for your business.
What the SBFE Knows About Your Business
Data that the SBFE may store on a business include:
- Business name, address, DUNS number, NAICS code, and EIN.
- Bills paid to creditors—both those that you pay on time, and those paid late, or not at all.
- Credit card payment history
- A business’s lease payments
“Lender data is crucial in the creation of credit scores. Without information about how a business has paid its bills in the past, it’s difficult to predict how they will pay in the future,” says Gerri Detweiler, Education Director for Nav. “The kind of data collected through the SBFE is critical when it comes to helping small business [lenders] make credit decisions.”
SBFE members operate under a “give-to-get” exchange, where members contribute different types of data and can access that same type of data contributed by other members. While the Fair Credit Reporting Act (FCRA) protects and limits access to personal credit information, there are no such regulations or protections regarding business credit. As long as an institution is a contributing member to the Small Business Financial Exchange, they have full access to SBFE information.
Although the SBFE distributes information about millions of businesses, it does not generate credit reports on businesses. That job is left to SBFE Certified vendors. These certified vendors include Dun & Bradstreet, Lexis Nexis Risk Solutions, and Equifax.
So while the credit score itself will not be generated by SBFE, the entities who assemble business credit reports and business issue credit scores may be using SBFE data to do their work and produce their scores.
The SBFE’s Impact
So why does this matter to your business? If you apply for credit or financing from an institution that is an SBFE member, they’ll likely purchase a credit report that includes SBFE data. Like with personal credit history, if you’ve paid your bills on time, this information can help your business obtain financing. Similarly, if you miss payments or have derogatory items like UCC filings, your business credit data could hurt your chances of getting financing. Knowing where you stand gives you the best chance of leveraging the data to your advantage.
This article was originally written on May 1, 2018.
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