1. August 2017

Your business' credit is important. It could be the most important financial figure involved in its success. Whatever the cost of doing business involves: No matter how much money is made daily, weekly, monthly. None of that matters if you, as a business owner, do not keep close track of what is happening with your company's credit score.

Having a bad credit score can cripple your ability to do business. Everybody knows how important personal credit scores are to their ability to get loans, but a fraction of those people understand that even in personal dealings, credit scores can have a big impact on the ability to get housing and jobs not to mention the necessities of life. Business owners are as apt to be in the dark about the significance of those numbers as well.

Who Is Watching Your Score?

It isn't just lenders who dig in to see what your business' credit condition is. Of course, they will, and it makes sense to just about anyone. A lender needs to know several things when they look at the credit score of a business wanting money. They need to know if the owner of the business is financially reliable, meaning that they pay their bills on time. They need to know if the company is over-extended, having too much debt versus the money coming in, or potential to make enough to pay the debt off properly.

It isn't just banks or other financial institutions that will look at a business' credit score, though. Just like in your personal life, as a business owner, just about anyone doing business with you, or thinking about doing business with you, will be checking. It's easier too. With personal credit, there has to be a reason, and permission for someone to check individual credit scores and see who they are working with. In the business world, however, that's not the case. Business credit records are available to anyone who wants to see them. Even a potential customer who has never done business with a company can see what their score is.

Landlords who might be thinking about leasing property to a company, or those who might lease equipment to a business can check. Negative credit scores will make it nearly impossible to conduct daily business unless the owner of the company has the capital to back it all, which is not the usual situation.

Protecting Business Credit

There are several things you can do to protect your business' credit rating. Only apply for loans you have a very reasonable expectation of being able to pay back. Keep payments on time. Most of all, check your business' credit score often. Every business owner should check their company's score at least twice a year, however, more often is better.

Using a credit management service makes it easy to keep an eye on what is going on. Business owners can even be alerted by email or other methods when a score changes, or there is any movement on their records. Don't be fooled into thinking it isn't necessary if you aren't making regular applications for loans or leases. Mistakes and faulty reporting happen. Knowing when it does, and making corrections immediately makes it less likely the problem will have a serious effect on your score. It will also make it easier to clean up when action is taken swiftly.

Business Credit Scores, Business Loan Approvals, Lender Compliance Items, Vendor Credit Lines

31. July 2017

Nothing is quite as frustrating as having a product so popular everybody suddenly wants it, but you do not have the upfront money to provide enough to meet the demands. This is an even bigger problem if you are just starting out, but find yourself faced with an overwhelming purchase order from a large company and no inventory to fill it. Such companies want enough of a product to place in all, or a large territory, of their locations. When a business cannot meet the numbers required, they can easily lose out on a deal that could catapult their business to a whole new level of success.

These types of problems are the kinds that business owners dream of. However, as good as the prospect of such demand is, when the supply isn't available it puts you in an uncomfortable situation. The solution is a lot easier than it seems at first.

Get the Funds

It's as simple as that. When there are purchase orders for a product, it's like money in the bank. While it is just short of guaranteed income, it is as close as a business can get. In order to use a purchase order as backing for a loan, on the products or supplies needed, the business owner needs to be sure that the P.O. is from a reputable, easily researched company.

Finding a Lender

While some banks do short-term purchase order loans, most of this type of lending comes from specialized lenders. Instead of charging interest on the loan, which would not yield a large profit since the loan does not involve years, but rather weeks, or at most a few months, lenders of this type prefer a set fee or a percentage of the sale.

This can work to the business owner's advantage if there is indeed enough growth to follow, and this purchase order is likely to lead to many more of the same in the future. Another advantage of having purchase order financing backing the business is that if bigger orders follow quickly, or other companies come in to buy, the cash to fill those orders is likely guaranteed.

Alternative Business Financing, Business Loan Approvals, Small Business Financing

30. July 2017

Every day business owners have to make important decisions regarding cash flow options for their companies. The choices they make can have a big impact on cost of operations over the days, weeks and months ahead, and determine the financial health of their business over the years to come.

Many of the financial decisions made on a daily basis involve small, every day costs such as supply acquisition and inventory. Other decisions involve major expenses such as mortgage or rent costs, insurance fees and how to meet payroll. These costs are often met with either large loans from financial institutions or come out of monthly operating expenses from cash flow created by the company.

Large Equipment Expenses

However, one type of expense tends to fall into a gray area for many business owners, equipment purchases. Some of the items needed to run a business are low cost and can be purchased outright. For items that are easily covered by the operation's monthly cash flow, or affordable on an easy to pay vendor credit account without incurring interest, it is a wise choice to pay for them upfront.

The Tax Benefit of Equipment Loans

It is true, that a business equipment loan will increase the cost of the item by adding interest to the total amount owed, but that is easily offset by the tax savings that come from paying for the item over time.

Business equipment is not deductible in the same manner as such expendable items as paper, pens or other regular expenses. Instead of getting the full value for the item in the year it is purchased, business equipment is depreciated over the expected life-span of the item. Since full value isn't available as a deduction, paying full value at one time does not make sense. Instead, spreading the amount paid over several years allows for a more equitable tax situation as well as leaving more money available for other expenses through the year.

Finance Availability for Equipment

Like cars or homes, business equipment has intrinsic value. Since the equipment itself is an asset owned by the business, it is its own collateral for a loan. It is easier to get a business equipment loan than lines of credit or other types of financial aid for a business that is based on the ability of the company to thrive.

Alternative Business Financing, Small Business Financing, Vendor Credit Lines

29. July 2017

Cash flow can be one of the trickiest aspects of a successful business. Even the most profitable business comes into times when there isn't enough cash on hand to meet operational expenses. Typical monthly business expenses include:

  • Employee payroll
  • Rent or mortgage
  • Taxes
  • Insurance
  • Advertising/Marketing
  • Equipment rental
  • Office and sales supplies
  • Inventory

Without any one of the above, a business can fail, and the bills come due at different times. A business owner can arrange for a business line of credit from a bank to cover major costs of operation, but even with a bank line available, it isn't smart to keep using lender money for expendable costs.

Using a bank loan for meeting mortgage obligations and paying back the money as soon as it comes available makes sense. A mortgage is a long term asset. Using a bank loan to pay for expendable items such as office supplies, sales supplies or product development is not a good use of a long term loan.

Once the item is used, it is gone and there is nothing to show for a loan that is accumulating high rates of interest over a long period of time. To bridge a short term gap of cash shortage in order to supply quick items for daily operation such as paper, pens, pencils, inventory for sale and in some cases even equipment rental, a vendor line of credit makes a lot more sense.

Using vendor credit to supply a business allows owners to bring in needed items that are intended to be paid immediately as soon as the cash becomes available. Vendor lines of credit typically carry no interest rate unless the repayment terms are not met. 

Typical vendor line of credit terms are payable in 30, 60 or 90 days. That means the owner of the business can get the merchandise needed and pay for them within those time frames without ever paying any interest. If the due date is missed, interest rates are usually far lower than a bank line of credit loan.

Alternative Business Financing, Build Business Credit, Vendor Credit Lines