The SBFE abbreviation stands for the Small Business Financial Exchange. The organization was established in 2001, and it describes itself as a small business lending trade association.
The goal of the organization is to serve the business lending industry by providing accurate and reliable data to help lenders predict small business credit risk.
As a small business owner, it’s important to understand how the SBFE could impact you when you need to apply for new business financing. Business credit reports that contain data from the SBFE might make or break your future business credit applications.
The outcome all depends on whether the information the SBFE collects about your small business is positive or negative.
What Is the SBFE and What Does it Do?
The Small Business Financial Exchange (SBFE) is a trade association that allows lenders and others to share credit information about their customers.
In turn, those same companies (aka data furnishers) can access credit information about other small businesses, such as those that apply for new business financing like business loans, leases, and more.
The SBFE maintains the small business payment data it receives in a large database. According to the company, the SBFE data warehouse contains information about over 37 million small businesses in the U.S. and more than 89 million individual small business accounts.
Furthermore, the top ten business credit card issuers in the United States are contributing members that share data with the SBFE. And nearly all of the top commercial lenders (9 out of 10) contribute information to the organization as well.
How Does the SBFE Work?
The SBFE is similar to your average business credit reporting agency in several ways. However, as a data exchange, there are some key differences too:
- No marketing. One of the biggest differences between SBFE and other business credit reporting agencies is the fact that SBFE data is not available for marketing purposes. The purpose of this policy is to help members (aka small business lenders, credit card issuers, etc.) feel more comfortable sharing proprietary customer information that they might not want their competitors to see.
- Member-owned. The SBFE operates under a “give-to-get” system. You must be an active member of the SBFE who contributes information about your small business customers before you can access SBFE data supplied by other members.
- No SBFE credit reports. Although the SBFE maintains a database of information on millions of small businesses, it does not create its own business credit reports or business credit scores to sell to others. Instead, the organization shares information through authorized SBFE certified vendors like Dun & Bradstreet, Equifax, and LexisNexis Risk Solutions. Only an SBFE member, however, can purchase credit risk products (i.e., business credit reports or business credit scores) from an SBFE certified vendor.
What Information Does the SBFE Collect?
The SBFE collects a variety of credit information that can help its members manage risk. Risk management, after all, is the core purpose of credit reporting and credit scoring.
Examining credit behaviors like payment history, credit utilization, and more can help lenders determine whether a business is likely to repay its current and future debts as promised.
Most of the information the SBFE has in its database of 89 million accounts include details such as the following:
- Business Identifying Information. Details that can help identify your business from others may show up in your company’s SBFE credit profile. These details may include your company’s legal name, DUNS Number, EIN, address, NAICS code, and more.
- Small Business Loans. This SBFE data section may feature details about your company’s payment history to lenders, suppliers, vendors, and more. Your outstanding balance on accounts, original loan amounts, and more could also be present in your business’ SBFE credit file.
- Business Leases. Like business loan information, the SBFE database may also maintain data about various leases your company opens in its name.
- Business Credit Cards. Business credit cards are another type of account that the SBFE collects information about where small businesses are concerned. In addition to your credit history and other account details, your credit card limits may also show up on credit reports that contain SBFE data.
Positive payment history in the SBFE database could work in your company’s favor when it applies for new credit.
But if a lender reviews a credit report from an SBFE vendor and it contains negative information like late payments or other issues, you’re less likely to qualify for new business financing.
If you do qualify for business financing despite negative SBFE data, the borrowing terms your business receives may be less attractive. Your interest rate, the fees a lender charges, loan amount, repayment terms, and more could all be affected.
Who Is Able to Access the Data the SBFE Collects About My Business?
In the world of personal credit, the Fair Credit Reporting Act (FCRA) places strict limits on who is allowed to access your credit information.
Per the FCRA, a lender or insurance provider (along with a handful of others) are only allowed to see your personal credit report details if a credit bureau has a “permissible purpose” to release it.
Yet permissible purpose isn’t a requirement in the business credit space. Federal law doesn’t place the same restrictions on who is allowed to access a small business credit report or business credit score.
A company could pay to check your business credit report or credit score for a wide variety of reasons, not just in response to an application for new credit (or other FCRA-approved purpose).
Of course, with SBFE, small business data access is more restricted than it is with traditional business credit reports. However, this stricter access is a choice the SBFE made, not due to federal regulation.
Per SBFE guidelines, you must be a member of the organization to access its predictive data on small businesses from a certified vendor.
Furthermore, you must also share information on your customers so that other SBFE members can benefit from the organization’s predictive analytics as well.
Bottom Line
Data that the SBFE collects about your business can have a meaningful impact on its ability to secure affordable business financing. Of course, the same is true for the data that a traditional business credit bureau collects as well.
On a positive note, you are in the driver’s seat in the same way you are when it comes to your personal credit score and report.
If you work to build business credit and follow good credit management practices, your small business should be in good shape if a future lender reviews data about your company from the SBFE.
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