Invoice Factoring and Accounts Receivables Management Articles
Advice Desk
"The role of credit scores in business and personal finance" Part II
This series of articles provides insight into financial topics of interest, as well as relevant information for both business and personal finance. Mark Mandula, Principal, Vice President, United Capital Funding (an invoice factoring company), offers his guidance from the viewpoint of an experienced business finance professional based in the US.

Tampa Bay Office:
United Capital Funding Corporation
146 Second Street N.
Suite #200
 St. Petersburg, FL 33701
727-894-8232

It is very important to note that a high FICO score for the Principals of a business does not guarantee that the business will prosper and grow; or that a lower score will automatically cause the business to end up in trouble or fail. At our firm, we use a FICO as only one part of an entire series of data to analyze a potential business funding relationship. It would be myopic to rely on any one piece of information as part of the Due Diligence process, and often times, it is more the consistency of the information rather than the raw mathematical results that determine our level of interest.

In this respect, our specialized funding and Accounts Receivable Management firm is much like a traditional lender who uses a series of facts to make credit decisions. Traditional lenders like Banks would look at a FICO scores and at information such as how much debt you can repay based on your personal income, employment history, your credit history, and other underwriting criteria.

How FICO Scores can help in the Decision Making Process

At United Capital Funding Corp., we provide capital to entrepreneurial firms on a national basis, via the purchase of valid commercial Accounts Receivables. This practice is widely known as factoring, and is currently a $120 Billion industry in the United States. Our specialized services also include managing our clients Accounts Receivables, providing credit insurance and other credit information tools.

We utilize FICO scores in order to serve prospects and clients quickly and equitably. As previously mentioned, FICO scores are only one of the many tools we use to qualify a prospect for our professional funding and Accounts Receivable management services. After receipt of an Application, [either online at our top rated Google website, www.ucfunding.com, or via Efax], we use FICO scoring as an initial step in the Due Diligence process.

Why does this assist us and our prospective clients who are seeking funding offered by factoring of invoices? In several very important ways:

1. FICO scores give us a fast, objective estimate of risk. Before we [or other funding sources] could use credit scoring, this process could be slow, cumbersome, inconsistent and potentially biased. Credit scores allow us to quickly make a decision to proceed forward with a funding relationship for a business that has submitted an Application to us. Scores are delivered almost instantaneously. This allows us to better serve our clients with a quick, fair decision.

2. The use of Credit Scores like a FICO is fairer than what decision making tools that might have been used in the past. Firms like ours focus on facts related only to credit risk, and there is no bias. FICO scores do not consider factors such as nationality, religion, marital status, race or gender into the overall score that is calculated. This allows us to evaluate the prospective clients fairly and objectively.

3. FICO scores are dynamic, and are constantly changing based on the data that is maintained by the 3 major Credit Bureaus in the United States. As a result, if a prospective client has had credit challenges in the past, FICO scores improve with the passage of time since the problem occurred. The impact of the past problems can fade, if payment trends and payment history improves. The scoring looks at not only the past challenges, but also positive information that can indicate that credit outstanding is being managed well at the present time. This is fair in the sense that older credit problems count for less in the overall FICO scoring calculation.

Summary and Conclusion

I hope that this short article sheds some light on the role and importance of FICO Scores, credit scoring and their use in the Due Diligence process for our working capital funding and Accounts Receivable management firm. Please feel free to email me at any time with questions, observations, comments or if you need any additional information on the discussed topics. I can be reached via email at mark@ucfunding.com.