1. November 2017

The Federal Contract process can be very complex and a little overwhelming. This can result in small businesses either not bidding on contracts or hiring someone to help them through the process. The problem comes from the latter. Unfortunately this sets small businesses up for scammers.

Businesses who wish to bid on federal contracts are required to register with the General Services Administration's (GSA) System for Award Management (SAM).

It is at this point that small businesses are being scammed into thinking that they must pay high registration fees in order to become eligible to bid on government contracts. This could not be farther from the truth. Both the registration and bidding are 100% free and open to all businesses.

The problem actually begins once you register. At this point your information becomes public and that is where and when the scammers get a hold of it. Everything you listed in your registration is available to them; your name, your business name, phone number, email address, and more.

These scammers then act as either real consultants or government officials and begin calling and emailing you almost immediately after you register.  Scammers will go to lengths of impersonating government officials just to mislead you into paying them.

Most small business owners do not know that there is free help for the registration and bidding process that is provided to them by existing federal programs. Therefore they end up engaging with the scammers who are seeking hundreds if not thousands of dollars for their so called registration and contract bidding help.

There are many companies providing legitimate registration and contract bidding help.  If your business does elect to engage a consultant, make sure you check them out. Do they have a BBB.org listing and rating?If not or if it not at least an "A", you should probably stay away. Ask for references of businesses they have helped to successfully obtain contract awards. Remember contract awards are public so you can see business that were awarded contracts. Since their business data is also public, you can call them to ask if they used the consultant and what was their experience.

There is also the Association of Procurement Technical Assistance Centers (APTAC). They want to get your business the help you need at no cost. They are a nationwide network of Procurement Technical Assistance Centers (PTAC). You can search to find the one closest to you and, more than likely, get all the registration and contract bidding help you need for free.

Avoiding Small Business Scams, Build Business Credit, Lender Compliance Items

31. October 2017

Does it really? A common mistakes of most small business owners is overlooking the use of all types of business capital to make ends meet. Let's take a look at a few.

Equipment Financing - Very many types of equipment can be financed or leased so that purchasing them does not eat up your valuable working capital. Obviously you can finance; cars, trucks, utility vehicles, fork lifts, tractors, yellow iron, but did you know that you can finance office furniture, cash registers, computer, tablets, software, inventory racks, building signage, vehicle wraps, and much more. Too many times small business owners burn up their cash without even trying to finance the hardware and software they are purchasing.

Invoice Financing - You can turn your invoices into cash the day you send them. As a business owner you know that cash flow is king and having to wait 30, 60, or 90 days to get paid can be a back breaker. There are many companies out there that will purchase invoices from you at 97 cents on the dollar. You get paid next day and best of all they will handle all the billing and collecting so you never have to chase you clients around to get paid. The other advantage to this type of financing is that they become your AR department and now you can offer extended credit terms to your clients.

Purchase Order Financing - You finally got that big order or that big contract but you don't have the means to fill it. These types of lenders will advance you the money based on the strength of your buyer and not on you. They typically like to finance finished goods and act as the middle man between you and the deliver to make sure everybody gets paid and the products get delivered. An excellent way to conserve cash flow by not having the shell out a huge amount of cash before you can get paid.

Credit Cards - Buy now and pay later. Credit cards are the easier to acquire type of financing. Most are show up with good credit scores, state your income, and get approved. As a business owner you can float 10, 11, or 12 cards with limits from $5,000 to $20,000 and use them just like cash. You can balance transfer from one card to another if you need more time to pay and in most cases if you pay within 30 days there are no interest charges at all. Business owner can easily float $100,000 to $200,000 on credit cards and it becomes all about money management and cash flow to be able to pay the cards down so that you can run them up again as needed. The advantage to this type of financing is that it never goes away and you could keep using it for 5, 10 or more years. Also if you keep your balances drop and your payments never late, the credit card companies will keep giving you increases every six months. It is not uncommon for $200,000 in credit card financing turn into $300,000 in financing within a year of excellent payment history and card balance management.

Vendor Credit Lines - Over 90% of the small business financing in the USA is Business-To-Business and not Lender-To-Business. It is very likely that all the inventory, supplies, materials, and even services your business needs can be obtained on Net 30, 60 or 90 day payments by requesting payment terms for your vendors or finding replacement vendors who are will to grant you the terms of need.

There are more non-direct cash business financing methods and all just as effective at offsetting cash flow. So you see, your business may not need more money it may just need better money management.

Alternative Business Financing, Business Credit Cards, Small Business Financing, Vendor Credit Lines

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

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

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