30. November 2017

We are sure that many business owners have heard the claim that lenders do not use or care about business credit. That claim is made due to the fact that most businesses have never taken the time to build their business credit or even know what is in their business credit files.

Far too often there is not enough history to base any lending decision on and therefore traditional bank type lenders are forced to look only to the business owner's personal credit as a measure of how their business is going to pay its bills. The truth to this is that reliance upon personal credit only leads to vastly over extended business owners, businesses that are way under funded, and then have access to no further funding once the limited resource of personal credit is exhausted.

Less Than 5% Of All Business Lending Comes From “Lenders”
The other side of this story is the fact that when you total up all small business lending in the United States you discover that less than 5% comes from Bank Lenders. The reality is that there are over 500,000 businesses (called vendors) in the United States who are extending credit payment terms to other businesses. This is where 95% of all business lending gets done. This is typically referred to as "Net Terms" where the company extending the credit provides 30, 60 or 90 days in which to pay for the goods or services provided.

Less Than 2,000 Lenders Nationwide
So you when you compare more than 500,000 vendors who are extending B2B credit terms to the less than 2,000 of the traditional bank type “Business Lenders” you also find some other huge differences. One such diffference is the amount. Banks that are making these personal credit based business loans end up with most of these loans being for $100,000 or less. They will not go higher unless the loan is secured by hard assets such as investments, equipment or real estate which are unavailable from the larger percentage of small businesses. Therefore using only personal credit for business lending ends up in businesses that are under funded.

97% Decline Rate
When these “Business Lenders” do not look at or care about your business credit you will find that they are also not reporting credit on your business if they make the loan. They are reporting on you personally. The other untold story there is that they are declining 97% of all applicants. Basically if you are financially well off and have at least 760 credit scores they will make you a $100,000 or less personal loan with your business name on it. They will then make you personally responsible so that when you default they can take your house, car, and savings. Maybe you should rethink business credit.

The Issue With Business Credit
The reason that many bank type lenders do not look at business credit is that most businesses do not have enough business credit history to make loan approval decisions on. I am willing to bet if you check your business credit right now you will see maybe 3 tradelines reporting and even those may have gaps in their histories. That is the real issue, not enough credit history. The average business that has been in business for three years has 3 or less reporting business credit tradelines and even those have gaps in their reporting.

So Little Reporting History
Why is there so little reporting history? While it is true that there are over 500,000 businesses extending credit to other businesses, the other truth is less than 5,000 are reporting payment histories to the business credit agencies. Therefore as a business owners you should try and use those vendors that will report your business payment history and you should strive to build at least 10 of those into reporting tradelines. 

Business Credit Lenders Are Hard To Find 
I am going to let you in on a little secret. Those businesses who build excellent business credit scores and that have 10 or more reporting business credit tradelines do not have to search for lenders. If your business builds business credit scores above 70 and develops at least 10 reporting tradelines you will have placed your business in the top 1% of all small businesses. You will not have to go looking for lenders and “hope” they will approve your business. Your mailbox will fill up with lenders and lending offers almost every day.

Average Daily Bank Balance
Lenders and vendors alike care about your ability to make your debt payments. This ability is going to be demonstrated by your Business Bank Rating. If you think business owners do not pay attention to their business credit you would be right. But something business owners pay less attention to is their Business Bank Rating. In fact most business owners have never heard of a Business Bank Rating and have no clue as to what their bank rating might be. Basically if your Business Bank rating is less than a "Low 5" then your loan application will most likely be declined as your business has shown no ability to have the funds available to cover the debt payments.

Business Becomes Bankable
There are four components to having your business become bankable. Business credit is one of those and your business bank rating is another. If you want to have the ability to move past the limited funding that is available using only your personal credit then you must have your business become bankable.  The full four components of becoming bankable are; having all items of lender compliance completed, having at least 10 reporting business credit tradelines, having business credit scores of 70 or above, and maintaining a business bank rating of a low 5 or above. Becoming bankable requires work and attention to detail by you.

You Choose The Outcome 
Having been is business lending since the early 90s I have seen more that 700,000 businesses in search of capital. From experience those who only seek the money are almost always already doomed to failure. It goes like this ...

Option A: Get the money, go thorugh the money like water through your fingers, business is starved for cash, personal credit is maxed out, business owner has exhausted personal resources, business goes under, and the business owners go bankrupt. Or there is:

Option B: Get the money, go down the become bankable path, establish many non-cash resources to conserve capital, within six months have many additional options for more funding, can call upon vendor relationships to extend more credit or longer terms, lenders will increase existing credit lines, and you will have credit offers filling up the company mail box.

As a small business owner the choice is yours. You have been warned that Option A "Is Going To Be Hot".

Build Business Credit, Business Credit Scores, Business Planning, Pre-Qualify for Business Loans, Vendor Credit Lines

28. November 2017

Unfortunately, fear is a much larger motivator than potential success. That is why out of a population of 326 million people there are less than 10% who ever elect to go into business for themselves.

Fear of failure, financial fear, and fear of risk are the big three that you will have to overcome if you plan on joining the few who become small business owners. It is those small business owners who overcame their fears to create half of all jobs in the United States. 60 million people have jobs due to small business owners who overcame their fears and went for it.

Having these fears is not irrational, actually they are well founded. More than half of all small businesses fail within the first three years. The largest reason for the failures are financial in that there was not enough capital to sustain the business which in turn lead business owners to risk their personal assets thereby covering all three major fears; failure, financial, and risk. So what do you do about it? We suggest you “plan away your fears”. Completing a solid business plan and getting help to review it and pick it apart go a long way to dispelling those fears. Let’s address them.

Fear 1 – Failure
Failure can be planned away by fully understanding the market for your business. Who will buy what you’re selling? How much will they spend for it? What are competitors selling it for? How much does it cost you to sell it? Is the market growing or shrinking? Are there more players in the market now than five years ago or are there less? There are a hundred more planning questions that can be asked which after you answer them will provide you with an answer to the question of “can you succeed at this or not?”

Fear 2 – Financial
Since we already know that the most common cause of business failure is running out of money, then it would follow that this is the most important part of your planning. How much money do you have now? How much will you need to make a go of this? What are your options if you hit a cash shortfall? Where will additional capital come from? How quickly can you access it? How expensive will it be to get it? Planning for both the upside and even more importantly the downside will give you the ability to overcome the financial fear and should also tell you if you should begin or not.

Fear 3 – Risk
The fear of risk comes in so many forms. One major form is responsibility. Who are you responsible for? The more people you are responsible for the greater the fear of risk will be. That is why you see so many successful “single” business owners. Young men and women who don’t yet have anyone to be responsible for other than themselves. Older men and women whose families are grown and out of the nest. So single people of any age who have the ability to take risks without having to account or explain or get approval before they can freely jump in. To overcome the risk fear you either need to have only to gain your own approval or you should get those you are responsible for involved in the decision.

Becoming a small business owner not only involves taking risks, it also takes up alot of time. Lots of your time required to begin, maybe more to grow, and even more to succeed. Detailed, researched, and educated planning is the key to overcoming all three of these major fears if you are going to not only decide to start your own business but you also want to succeed at it.

The old quote “Failing to plan is planning to fail” is oh so true when it is about becoming a small business owner.

Business Planning, Business Startups, Entrepreneurship, Pre-Qualify for Business Loans

27. November 2017

Starting a business always begins with what you think or believe is a great idea. For most people that is where the story ends. Just an idea that they bring out over drinks with friends or at family gatherings but that never becomes more than just an idea. Taking action to move from an idea into an actual business for most is an overwhelming task and one for which they have not been trained or educated.

Having no practical experience in starting a business and no formal education on the same tends to compound what already seems like a huge task. It is at this point that many would be business owners freeze up and while they know there are lots of actions which need to be taken they do not know which to do first or in what order they need to be done. Let’s break it down into bite size tasks and place them in a relative order to make the idea to action part of starting a business a little easier.

Action 1 – Business Name
This may sound easy but maybe not as easy as it appears. You will want a name that no other business is using and not one that just nobody is using in your State. You will want the website name to be available for your business name so that you do not have to add anything to your business name just to have a website for it. Search the BBB.org site, use the godaddy.com domain search, check the TESS (US Trademark search), and you can check the Experian and Dun & Bradstreet business credit files.

Action 2 – Business Entity
Do not do business as a sole proprietor or partnership. Those forms of business are not stand alone entities and they put everything you own personally at risk. One mistake can result in you losing your savings, investments, your home, and anything else you own. Form either an LLC or INC to protect yourself personally and to have a standalone entity.

Action 3 – Your Plan
This doesn’t have to be some kind of canned plan, Rather it should be your idea written down. Answer things like “is there a market?”, “how much competition is there?”, “is it sustainable?”. There are many good business plan checklists out there that will help you write down your idea and see if it really makes sense. Demographics play a huge role, “does anybody want what you are offering?”. An example might be to not open a bagel and coffee shop where everyone has to make a left hand turn on their way to work. Your business has already failed. People will not cross traffic to both get to your shop and then to get back out. And they do not buy bagels and coffee on their way home. Do your homework.

Action 4 – The Money
“How much money will it take to start?”, “do you have enough?”, “do you have access to more when needed?”. Doing the budget before you begin is a massive part of your success. Most business that fail do so due to a lack of cash flow or financing. The budget was not well thought out to begin with, revenue production was over estimated, and there was no pre-qualification done to have access to more cash if and when crunch time came.

Action 5 – Required Services
Your cash flow can be gone quickly when you start adding up all the services you need to successful build and grow your business. You need; a phone system, website, accounting, ecommerce, local marketing, SEO, CRM, ERP, mobile marketing, location, email marketing, direct marketing, and more. By the time you add them all up you find you are spending thousands each month $49 to $499 at a time. But trying to operate your business without these critical services surely increases you chance of failure.

Action 6 – The Best News
The best news you can receive about starting a business is Fundability.com. All of our action steps are clearly laid out and provided. There are virtual coaches on each step instructing you what to do, why to do it, and how to do it. There is also a professional team you can contact at any time to get the answers. Your business success begins one step at a time and getting the best help possible each step of the way.

Business Planning, Business Startups, Entrepreneurship, Small Business Financing

21. November 2017

In the hundreds of thousands of business owners that we have come in contact with over the years we have found certain traits common to the most successful ones. Those traits are:

1. Be Present
So many times as entrepreneurs our minds are going a million miles a minute which tends to make us not present in many circumstances. Business associates are giving you their ideas, yet you are formulating what to say and where the conversation will go next. We tend to do the same thing with co-workers, employees, family, and friends. So excited to get what we have out there that we are not present for what they are talking about or what their needs are. Be present.

2. Hardest Worker
There can be no doubt that you are the hardest worker in the firm, burning the candle at both ends. People don’t follow slackers, they follow by example. It get easier to demand that extra level of commitment when they see that you are already giving it. Set the example that you wish for those you lead to follow.

3. Is 150% Possible
Is it possible for you to be all in and completely passionate about your business. Is anything beyond giving it your 100% best effort even possible? If you want to attract serious business relationships and possibly investors to your cause then they need to sense and see your passion for what you are building.

4. Your Mouth Says, But Your Body ...
We all have seen this one. The mouth is saying one thing but the body language is screaming something completely different. “I am so excited to talk to you” (I wish he would hurry up so I can go). Most people can read body language much better than they think they can and they pick up on the sense that our mouth is no being honest with them. In all your business relationships make sure that your mouth is aligned to what your body is saying.

5. Glass Is Half Full
If you are not a glass is half full type of person, if that is not your normally everyday state of mind, then you have no business being an entrepreneur. Attitude is contagious and you will find that you only attract the glass is half empty people who are always right when something fails. “See I told you so”. It is easy to predict failure when you already made up your mind to be on the losing team. One trait that every successful entrepreneur has is a glass is half for attitude. That positive attitude attracts others with the “we can do this” winning perspective.

6. Love What You Do
This one is so very easy, if you done love what you do then no one else will either. Way too many small business owners create jobs for themselves and view that job like a noose around their necks. Just someplace they have to go and something they half to do to keep food on the table. You would have way less stress just taking the actual job and dumping all the extra business owner headaches. Success in business starts with loving what you do and having a passion to succeed at it.

7. Listen and Be Open 
Sometimes trying to give advice to an entrepreneur and having them listen to it is like talking to a wall. Part of being a successful business owner is that “A” type leader personality. It is having the belief in yourself and your abilities to succeed. But even the best sports player realizes very early that they need the advice and experience of their coaches to get the best out of themselves. So seek out advice and criticism and be open to listening and applying it. You just be surprised how many talented people there are out there who really know what they are doing and that you can learn from.

8. Test and Plan Everything
Even the best researched plans need to be tested. Whatever your product or service is it can stand to be tested to see how it can be optimized, made more efficient, be more cost effective, or have more market appeal. The only way to find that out is to test different things and analyze the outcome. A/B testing is often very effective. “A” draws, “B” does not. “A” costs us less, but “B” out sells. The better you plan and test the more profitable your business will become.

9. Time Out
Take time out so you don’t burn out. As the leader of your business you too need time to recharge your batteries. Sometimes taking a break and getting away from the business for a while can bring renewed clarity or whole new problem solving. There is such a thing as being so close to an issue or problem that you can’t see the forest for all the trees.

Business Planning, Business Startups, Entrepreneurship

6. November 2017

You are about to make that decision, "Do I play it safe and take that job or do I take that leap and start that business?"

Risk versus reward is the question every entrepreneur asks themselves before they start their business. Simply put, "is doing this worth the risk?"  You have a business idea for a product or service that you believe is marketable and that will have more upside than taking that job and that is where the decision is made and you elect to go for it.

Now take your entrepreneurial hat off and put on the lender's hat for just a minute.  You believe in your business idea but is that belief based on supportable research or just your enthusiasm. A lender cannot afford to share your vision as you are asking them to share your risk as well.

When lender's consider sharing the risk of your startup business it now comes down to the numbers and the numbers are stacked against you. The numbers say that over 90% of small business startups fail. Lenders look into their own loan portfolio for default warning and high risk signs. There they find that home based businesses fail more often. Businesses operating from cell phone fail more often. Businesses with only free email accounts fail more often.

Now in you walk all excited to get your great business idea going and to the lenders all they see is all these red flags of high risk waiving in their faces. Their answer has to be "Declined" because you have left them no other choice. They see your business as having all the failure warning signs of so many more that came before you and proven those numbers to be oh so right.

Well maybe their warning signs of high risk of default should be a wakeup call to the your level of risk as well. Most businesses fail due to not doing enough homework before they start and then not having enough capital to execute after they start. 

You can handle the first part by doing your homework. Research your proposed market and be ready to present the facts about; competition, market size, market penetration, cost to market, profit margins, time to market, market demographics, and how is new technology going to impact you.

You can also handle the second part by completing Lender Compliance. These are things like having a business entity, insurance, a real business address, an FCC business phone, a good website, social media presence, local and mobile search presence, a CRM, and a good accounting system. These are all things that you will need, that will send clients to you, and in the end will lower your risk of failure along with changing how lenders look at your risk of default.

To get the best grade possible, you wouldn't take that all important final exam without study and practice. So why would you start a business without research and preparation? We don't know, but that is what most small business owners do, and that is why so many fail. 

Knock out both parts right at the beginning of your new business and you will not only lower your risk but you will find more lenders that are willing to share it with you.

Small Business Financing, Business Startups, Entrepreneurship, Business Planning