Businesses using Lumenous find a framework that helps them create a complete profile for standard commercial credit evaluations. Our engineering focus has been on managing user-supplied financial data, making it easy and safe to selectively and privately share it to meet diverse disclosure and reporting needs.

For the rest of a complete profile and to make sure any invited stakeholders review financial data in the right context character, we recommend linking to other online services a business already uses. For example, link management team profiles from LinkedIn and company presentations posted in Slideshare.

We don’t expect this acquisition to have any immediate impact on our application or users but it looks like a very good deal long-term. Congrats especially to our friends at Slideshare!

Andrew’s first steps were to review the business top to bottom. He quickly discovered that the team’s inexperience with financial management had resulted in a balance sheet that was misleading. We didn’t really discuss the details of what Andrew found but the point here is he felt he had no choice but to notify the bank of his discovery. The bank didn’t demand payback but needless to say put an immediate stop to the company’s ability take any additional cash.

There’s more to the story but stopping at this point I see a first important lesson. Andrew didn’t try to slip the new balance sheet by the banker. He made an appointment and sat down in person with all the information in front of him. My own experience has been this level of candor and in-person disclosure earns points. I’m confident it’s the reason the bank didn’t take a more draconian step with the company.

Still, this would be discouraging if the story stopped there. In my view the most compelling aspect of character as shown in Andrew’s story was the rest of the story–behavior that assures a banker the company will repay its debts. Andrew had a plan to turn things around and he galvanized the entire company to execute it.

For six months everyone including Andrew sacrificed in compensation and efforts put into restoring the business to financial stability. At the end of this time, the company was more healthy than it had been at any point in recent history.

To summarize, here are the key aspects of character shown in Andrew’s experience:

• Prompt disclosure of accounting errors that affected qualification for a bank loan
• Supplying the information in person
• Coupling disclosure with an aggressive plan to restore financial health
• Involving all employees in the challenge and the plan
• Demonstrating leadership and resolve in executing the plan

If you have your own stories, observed in others or from personal experience, please share them with us!

–LaVonne Reimer, Founder

The point of looking at the concept of character from a credit analyst’s perspective is the insights it can give to business owners and teams on how to supply the right proof.

Some creditors view character solely from a financial perspective, concerning themselves only with trust– Can I trust this business to pay its debts on time? Does the founder or owner have a reputation for paying bills on time? Credit scores initially gained popularity as an efficient leading indicator of this narrow version of proof of character.

We think of that definition as the hub. The rings that extend from the hub are where this credit “test” are just getting more interesting as new forms of online data including rankings and ratings become available.

Looking at common credit practices, we see the next ring out taking the next logical step to include other evidences of reputation for acting with integrity and strength of character. For example, the founder or owner is consistently given high marks by customers and other stakeholders. These may be found in Yelp ratings, recommendations on LinkedIn or testimonials on the corporate website. Solid references from these business connections support two types of proof–the business is generally reputable and because its customers and stakeholders are happy, revenue will continue to flow along with other sources of financial stability.

Additional indicators would be a business that is active in the community and/or the industry in which the it operates. It seems reasonable that a team that has made itself visible will be careful to avoid other actions that could tarnish the company’s image. Bankers tell us there is another important side-benefit. If the business does fall on hard times, community support and solid peer networks can sustain the team in a way that makes it possible to survive.

AngelList – a popular service for startups seeking investors – uses the term “social proof.” This is another aspect of character. The quality, experience and reputation of a team’s network reflect back on the team. Confirmation from these people that they are connected to the team is the proof. Thus a potential lender or corporate procurement officer might place a bet on someone they haven’t worked with before because they know and trust members of the company’s board of directors or advisory council.

Some creditors are beginning to look at new forms of referencing available from social networking services such as number of followers on Quora or score at Klout.

Though character is the most subjective of the 5 C’s, it is about behaviors and traits that correlate to likelihood the business will survive and pay its debts. Still, the concept of social proof in credit analysis is one we expect to grow in importance even as it adapts to interesting new ways to build a track record for the team as individuals and the business itself. More material for future posts!

–LaVonne Reimer, Founder

Today we begin a series on a framework used to determine whether a business is worthy of credit and trust. It’s called the 5 C’s and includes character (the team’s track-record, reputation, and even perceived ability to execute), three finance-oriented C’s (capacity, capital and collateral), and conditions (external factors that might impact the company’s ability to survive and succeed).

Rarely used as a literal checklist, the framework still encompasses a set of considerations generally cited by credit analysts or managers as fundamental to how they evaluate a company. As we researched how to embed the framework into our application, it struck us that businesses could use it as their marketing plan for creditors. Viewed in that manner, the odds go up it will be convincing but the business also ends up with a roadmap to real and positive financial results.

The next post will focus on character, a somewhat old-fashioned notion that is gaining new meaning in today’s social media and networking-rich environment.

–LaVonne Reimer, Founder

As we give you more information about the Lumenous team in coming weeks, you’ll see we each have launched and co-founded multiple venture-backed startups. It is a great ride for those who want and get to experience it. But we know that world isn’t what business is mostly about.

A discussion in Quora a few months back provoked me to share a story that illustrates what I mean. See the context here. It started with a question about what is wrong with “lifestyle businesses.”

That question made me nostalgic for a roadtrip I took with my then 85 year old dad and daughters some years ago. He still had 10 surviving siblings and I wanted to make sure he had one more reunion with them back in the midwest.

At the time I was facing big challenges at my first venture-backed company. By then $20M into the company and it wasn’t looking like a home run was possible. Revenues were growing, we had many happy customers but the business didn’t seem scalable in the venture capital sense.

This was very much on my mind as we arrived in Manitoba and the family dinners began. What I encountered was a family as huge as expected but more surprisingly, all of them entrepreneurs. It was almost like a family mantra, you must start and run your own business.

On my Dad’s side they tended to start businesses around their inventions. On my Mom’s side it was all about the conviction they could take an existing business or product and do it better.

Whatever, they all assumed they had to offer real customers something of real value. They built their companies on personally-guaranteed loans, a ton of hard work and revenues. I have never felt so humbled in my life. I never told them how much money I had raised and I have never again considered any company to be a “mere” lifestyle business.

Today we introduce Lumenous, a service for entrepreneurs who mostly build their companies on hard work and income from customers to whom they deliver real value. Real businesses!

–LaVonne Reimer, Founder