This post was inspired by a discussion born from the thread “Fund and Grow Financing” by @Justin Sheley. In contemplating the discussion, I found it worthy to start a separate thread examining what companies like Fund and Grow are doing behind the scenes. Please note that my analysis is nothing more than speculation intended to stimulate discussion amongst the BP community. My ultimate goal is to provide transparency concerning the credit application process and uncover if consumers can apply for and secure the same type of credit on their own if they so choose. I am in process of applying for business credit myself and I will keep everyone posted as the process unfolds. At the time of writing, I am letting my three personal cards “season”. My FICO score is roughly 750.
What is FG submitting on applicants behalf? Are they telling the CC companies that they are acting on their clients’ behalf in a professional capacity, or are they purporting to be the applicant themselves? If it is the latter, what does this mean down the road if one were not able to repay their debt or are for any other reason compelled to answer for the information “they” submitted to the companies?
Understandably, if FG were to disclose the tactics used to apply/communicate with the CC companies, they would risk losing some potential clients who will follow the formula themselves. I have no problem whatsoever with a company like FG charging for services – in cases like @Justin Sheley they were a blessing, and in no way is the point of this thread to belittle FG or their equivalents - but the idea that the consumer does not know what has been applied for and asserted on their behalf is a bit unsettling to me.
Here is my unprofessional analysis of how companies like Fund and Grow are obtaining credit:
1) Ensure that the applicant has a FICO of 730 or better;
2) Ensure that the applicant has at least 3 personal credit cards that have seasoned for at least 6 months;
3) Apply for business credit cards available in the applicant’s state of residence. The applicant applies as a Sole Proprietorship. The applicant WILL NOT declare that their Sole Proprietorship is operating for the purpose of real estate investing. A key question I have in respect to FG's tactics: what are they telling the CC companies the SP’s business intentions are?
4) Referencing #2, the amount of business credit applicants receive will be closely proportional to the amount of existing personal credit which has seasoned for at least 6 months or more. Case in point: @Justin Sheley had 25K of preexisting personal credit. FG obtained 29K of business credit.
5) After the initial business CC approval and issuance of credit, a representative will contact the CC company and ask to speak with an underwriter. In essence, the underwriter will be told that the applicant was unduly denied the appropriate amount of credit by the CC’s algorithmic processing system. The underwriter will be asked to override the algorithmic analysis and issue the applicant more credit.
6) The main incentive of using business CC’s (second to that they do not show up on your personal credit score UNLESS YOU DEFAULT) is to capitalize on their 6-12 month 0% interest rate. If an applicant has utilized their credit during the introductory period and has not found a way to pay down the debt (e.g., refinance, etc.), the next step available by companies like FG is to apply for new business cards. If the utilized CC’s are balance transfer friendly, the next step is to do a balance transfer onto the new card, therefore extending the 0% interest period for another 6-12 months or however long the new card allows.
To recap, I am by no means an expert on this subject and was only recently turned on to Fund and Grow by watching the Clayton Morris YouTube videos promoting the company. I would like to hear what other BP members have to add to this discussion. Thanks, everyone.
