29. October 2017

Small businesses use many different types of financing to fund their businesses. Below is research from the Small Business Administration as to where small business owners find the sources of capital they need to operate.

Trade Credit 34.8%
Personal Savings 31.6%
Credit Cards 11.8%
Business Assets 7.9%
Term Loans 5.3%
Personal Assets 4.1%
Home Equity 3.9%
SBA Loans 0.5%
Venture Capital 0.1%

As you can see the two sources that actually receive the most press (SBA loans and Venture Capital) when combined make up less than one percent (only 0.6%) of small business funding. This is why it is so troubling that small business owners may spend so much time chasing these Unicorn's when other sources are more readily available. Let's focus on one of those.

Credit Cards make up nearly twelve percent (11.8%) of all small business funding. Credit cards can now be used for most business expenses such as paying; rent, utilities, supplies, inventory, travel, phones, websites, marketing, and more. There are many services available which allow you to pay any bill regardless if those needing to be paid accept credit cards or not.

Unlike other sources of business financing, credit cards are available on a "Per Principle" basis. This means if you have three owners of the business you can do three sets of financing  or one per each owner. This also allows you to bring in other owners with good personal credit to have them funded as well.

So what are the requirements for Credit Card financing?

The general guidelines are for the business owners to have FICO 8 credit scores of 720 or higher. The debt to limit on revolving accounts (other credit cards) should be 45% or lower. There should be no lates or other derogatory items in the last two years and the number of recent credit inquiries in the last 6 months should be 3 or less. 

If the above requirements are met, then the average amount of financing approved is typically $70,000 to $90,000 per owner with the financing usually spread out over 7 to 9 credit cards.

One of the major advantages can be only applying for those credit cards that offer a year or more of 0% interest. This way you get to use your new source of financing for at least a year before the interest charges kick in. Another advantage is that the accounts are revolving so that if you keep them in good standing you can use them over and over again for a very long time. Yet another advantage is that after 6 months and again at one year you can ask for a credit line increase which if you have kept the account in good standing can be as much as 50% to 100% credit line increases.

Even more of an advantage to credit card financing is that the approvals tend to be automated and in most cases instant so there is little to no waiting to determine if you are approved and for how much. Normally the cards will arrive within 7 to 10 days after approval and you can start using them immediately.

While 97% of bank and SBA business loan applications are being declined, it is 99% certain business owners will get approved for credit cards if they meet the above criteria. Even if you personally do not yet meet the criteria, you can bring in a "Credit Partner" who is a friend or family member that does meet the criteria in order to fund your business.

A survey of small business owners showed that 85% of them were very satisfied with the process of obtaining credit cards to use for their business and how easy it was to pay for everything they needed with those cards.

Build Business Credit, Business Credit Cards, Optimize Personal Credit, Small Business Financing

16. October 2017

You wouldn't think that potential lenders or investors would care much about the online footprint of your business, but more and more they do!

Having your business found on search engines, Facebook, Twitter, LinkedIn, national 411, online directories, mobile map searches, local searches, BBB, and with your State all lead to more credibility for your business which translets into less risk of default.

While having a great business idea is a good thing, lenders and investors are more concerned with the level of risk that your business will fail and therefore default. The more you can do to lower that perceived risk the better chance you have of being funded.

The place to start is with having a professional business website. You do not need to spend a lot of money, but you do need a professional looking website. Whether you do a website tonight from GoDaddy or some other website provider, pick one that compliments your industry and highlights your company's place in it.

Next you will need a professional email account like joe@joesplumbing.com rather than joesplumbing@gmail.com. Nothing against Gmail or any other free email provider. It is simply the lenders have seen a higher rate of default in businesses that use free email accounts, so there again is that whole higher risk thing. Try to stay out of known high risk pools.

Many lenders will do a simple national 411 search and if your business is not found you could be declined. This takes only seconds to fix and remove another high risk item.

When you search locally for your business do you find it? Check Google Maps, run local searches, look on manta and yp.com. If you are not there, then get there. Again it is easy and only takes a few minutes to complete.

Make sure your business is found on the social media sites. The important ones are Facebook, Twitter, LinkedIn, and YouTube. These too are easy to setup and there are many services that will do it for you.

Go online to all the business credit agencies; Experian, Dun & Bradstreet, CreditSafe, and Equifax. Check to see if your business is listed. If not, get it listed. If it is listed then know what is in your business credit reports before lenders do.

You should also know what lenders and investors are going to find out about the business owners. Pull the personal credit reports of anyone owning 15% or more of the business. There are lots of free and no inquiry services that let you do that. If there are major derogatory items on any one business owner you may consider dialing back their ownership at least until after funding or taking the time to optimize those reports before presenting to lenders or investors.

Business Credit Scores, Lender Compliance Items, Optimize Personal Credit, Pre-Qualify for Business Loans

14. October 2017

If you've taken the time to read the "Small Business Finance" articles in the New York Times, The Wall Street Journal, CNNmoney, or Forbes they are always talking about things like:

  • Planning your IPO for going public
  • Making your pitch to Angel Investors
  • Finding the right Venture Capitalist
  • Creating a business plan that banks will love
  • Attracting more funding to your Series A

While this might be nice titles for their articles, what application do they have to "Small Businesses"? When we are talking about small business we are talking about the bread and butter of America:

  • retails stores
  • hair salons
  • service businesses
  • contractors
  • franchisees
  • auto shops
  • restaurants

None of which are ever going to have an IPO, pitch to angel investors, go after venture capital, or do a series A SEC funding. Come on writers and contributors, let's talk about what small businesses need!

In the wake of the financial collapse of 2008 lending to true small businesses all but disappeared. Banks, Credit Unions, Finance Companies all saw there sources of cash for small business lending dry up and blow away. Now here it is nine years later and small business lending has not returned to where it was. So how does a small business get financing now?

The percentage of small business loan declines is staggering. About 97% of traditional business loan applications get declined. That means you have a 3 in 100 chance of getting approved. That is horrible, but there is a way to greatly improve your odds.

First, you have to know who is lending and what types of loans they are making. For example, banks are fairly aggressive about approving credit cards. Therefore if you have owners or principles in your business that have good personal credit scores then they can each be approved for between $25,000 and $200,000, with the average being around $75,000. This means if you have 3 owners or principles you could be funded $75,000 for each one and have $225,000 available for your business. The upside of these credit cards is that many start out with 0% interest for the first 9 to 12 months.

Next are Credit Unions. They were banned from business lending for 7 years from 2009 through 2016. The banks had no money to lend to small businesses so they pressured congress to make sure that Credit Unions didn't rush in to fill the gap. Credit Unions are now back into small business lending and doing mostly vehicle financing, equipment financing, small term loans, and construction loans. The term loans range from $10,000 to $75,000.

And now for some really useful small business advice. Business Lenders care about the personal credit of the business owners. Your goal should be to have FICO 8 scores that are north of 720, have debt to limit on your revolving accounts at 45% or below. Be able to show a good debt coverage ratio for the amount you are seeking and limit the number of recent inquiries on your credit reports.

If you want an "investor", then create your own. Find a partner with good personal credit scores who is willing to use those scores to get your business approved for financing. It is called a "Credit Partner" and they are much easier to close a deal with than are "Venture Capitalists"! 

Business Loan Approvals, Optimize Personal Credit, Pre-Qualify for Business Loans, Small Business Financing

9. October 2017

It is true for start-ups and established businesses alike, that if your business is unable to acquire business funding it might cripple your efforts to move forward, or even cause you to close the doors on your dreams. Product development depends on having working capital. Along with advertising, marketing, hiring production personnel, and covering the overhead increases that come with growth. The process by which businesses qualify for loans is to first, establish a quality business credit score, secondly, to establish a bank business line of credit, and finally, to use solid performance in the first two areas to secure the necessary bank loan. Securing a bank loan opens the door to obtaining loans from non-bank business lenders.

We offer you our expertise in separating your personal credit from your business credit as soon and quickly as possible

bank business line of creditYou should not link you business credit with your personal credit. That course of action will typically harm your personal credit score and may even put your personal assets at risk. Your business should have its own bank business line of credit that is entirely separate from your personal credit circumstances.

This line of credit is the largest hurdle to obtaining business loans, which will give you the capital to fuel success in any industry. In order to qualify for a bank business line of credit, your business must comply with a list of industry standards that demonstrate your credit worthiness.

In the murky and often treacherous waters of trying to obtain funding for your business, it makes sense to partner with a company that has the experience and expertise to guide you through the process. They will help you position your business to have high business credit scores with the national business credit reporting agencies, and comply with a lengthy list of industry standards that all lending institutions require before a lending.

Our Business Credit Building System has guided thousands of businesses to establishing and obtaining better business credit since 1995

The Business Credit Building System is one avenue that are helping many small business owners. Having the best products and services available will only bring success to your company. The Business Credit Building System will help you receive funding required to bring them to consumers in need of what you have to offer. Begin building your bank business line of credit today and take a crucial step toward reaching your goals!

Business Loan Approvals, Optimize Personal Credit, Pre-Qualify for Business Loans, Small Business Financing

3. October 2017

I’m sure we can agree that for far too long business owners have relied on the strength of their personal credit to dictate their ability to obtain funding for their businesses.

Unfortunately this dependence can be easily avoided if more business owners knew about the advantages that business credit provides. 

To provide some insight I have assembled some of the key advantages of business credit compared to personal credit that I know will get your attention:

Social Security vs. Federal Tax ID

Your social security number (SSN) is your personal unique nine-digit number issued to you so you can pay taxes and pay into the social security system. It’s also used by the credit reporting agencies in the creation of your personal credit files.

A Federal Tax ID Number (EIN) is the corporate equivalent to a social security number. It’s a nine-digit number assigned by the IRS to business entities operating in the U.S. in order to identify each company.

The major difference here is even though you are issued only one social security number as an individual as a business owner you can obtain multiple Federal Tax ID numbers if you own multiple companies.

Single Personal Credit File vs. Unlimited Company Files

Now this is the part where it gets really exciting because while you have only one consumer credit file linked to your SSN you have the ability to create and establish multiple business credit files with the business credit bureaus.

You can accomplish this because each company you incorporate has its own individual identity separate from that of its owners. Each business can obtain its own unique Federal Tax ID number allowing it to build its own unique credit file as well!

Limited Credit Capacity vs. Unlimited Credit Capacity

 If you’re like most business owners who rely on their personal credit for business you’ll really get a kick out of this one.

Did you know that business credit has 10 to 100 time’s greater credit capacity then personal credit?

When you use personal credit to apply for business financing your mortgage, auto loan, credit cards and even student loans are affecting your ability to qualify.

But when you take advantage of business credit reports you truly get to leverage the power of your business. Your files include your company’s payment history and may include revenues, assets and company financials depending on how much information you furnish to the business credit bureaus. In addition your files will not show your personal debts or personal financial obligations.

What’s even more exciting is if you own several companies each of the businesses will have its own credit capacity giving you unlimited financing potential.

FICO® Credit Score vs. Paydex

Now I know there are many different scoring models out there but the most widely used on the consumer side is FICO® so for simplicity let’s cover that one.

The FICO® scoring system has eighty-eight negative rating factors that can hurt your personal credit score and only six positive ones. What’s even worse is you only have control over five of them so needless to say you’re fighting an uphill battle on the consumer side.

However, one of the main business credit bureaus known as Dun and Bradstreet issues its own business credit score known as paydex. This score is primarily based on how your business pays its bills and it’s much easier to understand and maintain compared to FICO®.

As you can see business credit will always trump personal credit and if you are just starting to launch a business or run an existing one now is the time to utilize one of the best kept secrets in the business world.

Build Business Credit, Optimize Personal Credit