Business Credit:
Why the Old Way of Borrowing is Holding You Back
By Merrill Chandler
provide extensive documents, and they would base their decision on a Dun & Bradstreet PAYDEX Score. Back then, small businesses faced an uphill battle because lenders didn’ t like making loans under $ 1 million. Why? Because approving smaller loans required just as much time and paperwork as big ones, and it wasn’ t worth their effort.
For entrepreneurs, this system was inefficient and hard to navigate. Many applications were rejected simply because small businesses didn’ t fit the mold of what lenders wanted.
The New Paradigm: Automatic Underwriting
Many entrepreneurs still believe outdated myths about business credit, and it’ s hurting their chances of getting approved for funding. The truth is, the way lenders decide who gets funding has completely changed. The old system relied on manual, fulldocument underwriting, but today, it’ s all about automatic underwriting. Let’ s break down the difference between these two approaches and show you how to adapt to the new way of doing things.
In 2008, everything changed. Now, most lending decisions are made using automatic underwriting systems. These systems use algorithms to decide whether you’ re fundable, based on specific criteria.
Here’ s how it works:
• 80 % of the decision comes from your personal credit profile.
• 20 % is based on your business data and identity.
The Old Paradigm: Manual, FullDoc Underwriting
Before 2008, lenders mostly relied on manual underwriting, where they reviewed every application by hand. You had to
The old system relied on manual, fulldocument underwriting, but today, it’ s all about automatic underwriting... In 2008, everything changed. Now, most lending decisions are made using automatic underwriting systems. These systems use algorithms to decide whether you’ re fundable, based on specific criteria.
Lenders want borrowers who seem trustworthy, professional, and lowrisk. Instead of viewing you as a“ selfemployed business owner,” they prefer to see you as an“ employed professional” running a legitimate business.
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