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

30. October 2017

Unfortunately the largest percentage of small businesses find themselves being under capitalized. The table below shows that 62% of small businesses have less than $50,000 in working capital when they begin. This is the primary cause that 97.5% of small business startups fail.

Less Than $10,000 33%
$10,000 to $49,000 29%
$50,000 to $249,000 26%
More Than $250,000 12%

Much of the problem can be traced to business owners not knowing where to find financing and not knowing how to pre-qualify for approval. This leaves new business owners almost solely dependent on their personal resources such as their; savings, home equity, personal or family assets, and personal loans.

While these personal resources may get their new business through the first year of operation it is less likely to take them any further and has probably restricted revenue due to the inability to market and or grow.

After a year of business where do most small businesses find themselves? Well honestly, failing is where they are. Their personal resources are gone and in most cases the business owners have done nothing to change their business financing circumstances.

So what can be done? Well, the first thing that can be done is to start at the very beginning to make your business pre-qualified, fundable, and bankable. You must do the things that will allow your business to stand on its own for financing and make it attractive to lenders. This are things like completing all Lender Compliance items, making sure your business has at least ten reporting business credit trade lines, and building your business credit scores that are 70 or above with each agency.

Business lenders use mostly the FICO 8 scoring to evaluate the personal credit of business owner borrowers. Therefore, you need to know what the FICO 8 scores are for each owner of the business. You should strive to optimize those scores to 720 or above for each agency and each owner.

Lastly your business is going to have a "bank rating". This is a measure of whether or not your business will be able to debt service the financing you are seeking and must have to succeed. The issue here is that I have yet to meet a small business owner who knew what their business ban rating was or even what a bank rating was for that matter.

There is a lot of capital and financing out there for small business owners. The problem is not the availability it is the access. Access only come from educating yourself where and how to access it. For example, there is up to about $150,000 available to each owner of the business in the form of credit cards. It is easy and fast to get to yet only 11.8% of small business owners ever do.

Fundability.com is a free business finance and credit educational system that will teach you every you need to know about how and where to access business capital.

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

28. October 2017

The Census Bureau defines Microbusinesses a firms having one to nine (1 to 9) employees. They count them in the years ending in 2 and 7, so in our case 2012 and 2017. 

They last reported that microbusinesses are the most common kind of businesses which have employees and that in 2012 there were 3.7 million microbusinesses. 

Most microbusinesses are not startups but rather have already survived that 97.5% startup failure rate. They are in fact over 60% more than five years old. (Source: Bureau of Labor Statistics)

Microbusinesses typically account for more than 20% of the new job growth in the USA each year, therefore they account for a major shot in the economy's arm. 

The real estate, insurance and finance industries make up the largest shares of microbusinesses. And at last count made up 85 percent of these three industries.

Financing for microbusinesses can be even harder than other types of small business with even obtaining merchant processing accounts being a struggle at times. This is a major reason that microbusinesses need to pay special care to making their businesses pre-qualified, fundable, and bankable. Your industry and your size have placed you at a major disadvantage for obtaining traditional lending and the only way you have of breaking through that is to have already removed all other high risk of default factors before you apply.

The good news is that microbusinesses are providing roughly 12 million jobs in the USA and with just a little help about what it takes for them to become bankable they could provide even more. 

Build Business Credit, Business Loan Approvals, Lender Compliance Items, Pre-Qualify for Business Loans, Small Business Financing

27. October 2017

By government definition, a small business is any business that is independent (not a subsidiary or having a parent company)that has less than 500 employees. 

These "Small Businesses" account for 99.9% of all USA businesses, are currently creating 62% of new jobs, make up 48% of employees, and 41% of the payroll in the USA. 

There are 29.6 million small businesses in the USA with 80% having no employees with roughly 400,000 new businesses being formed each month and also 390,000 closing each month.

So what we have learned is that 6 out of every 10 new jobs are from small businesses, 5 out of 10 employees are, and $4 out of every $10 is being pumped into the economy by small businesses.

Source: https://www.sba.gov/sites/default/files/Whats-New-w-Small-Business-2017.pdf

The other harsh reality is that 97.5% of new small business startups are failing. This usually means their owners have risked everything; personal savings, personal credit, and gone into debt trying to create something they believe in. This is also why Banks and other traditional lenders do not get involved as the risks of default are simply too high.

This leads to the other harsh statistic that 97% of small business loan applications are being declined. Lenders are looking for all the warning signs of a high risk of default and when they find even one they decline. 

Lenders are not in business to lose money for their investors so managing the default ratios in their loan portfolios becomes the primary concern. They have no concern of helping small businesses succeed, they simple do not want to lend to those that will fail.

Therefore as a small business owner if you want to receive traditional or bank lending you first have to make your business "bankable". 

The process of making your business bankable is clearly laid out for you step-by-step inside the Fundability.com business finance and credit educational system. The system is free. If you want to move your business from the 97% who get declined and into the 3% who get approved you will first need to place your business into the 3% Low Risk of Default category which is what Fundability.com teaches you how to do.

The upside of becoming bankable is that you give your business a far better chance of success.   

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