Tag: Affects

3 Surprising Ways Personal Financing Affects Business Funding

It makes sense that, if you do not separate your business credit from your personal credit, you could run into issues. Most get that if they fund their business with their personal credit, their personal finances could suffer. But, did you know that even if you have separated everything beautifully, the reverse can still be true? Here are 3 ways personal financing can affect your ability to get funding for your business.

How Does Personal Financing Impact Business Lending?

Some business funding options consider your personal credit score no matter what. For example, all traditional loans, SBA loans, and even the Credit Line Hybrid focus on personal credit score. Generally, they want to see a personal score above 650, though there are exceptions.  The issue goes beyond this however.

Factors that Affect Personal Credit

The number one factor that affects personal credit is paying on time.  However, some other factors that can affect your personal credit score include:

  • How many accounts are reporting payments?
  • How long have you had each account?
  • What type of accounts are they?
  • How much credit you are using on each account versus how much is available

This last point is important. It includes everything from credit card debt to personal financing for auto loans and mortgages. If you max out your limits on everything without paying it down significantly, your personal credit score will be negatively impacted. All of this means, you could be making all payments on time and still run into issues.

#1:Your Personal Credit Score Can Affect Your Business Credit Score With the Business Credit Reporting Bureaus

It’s true. Some business credit reporting agencies take your personal credit into account. They use your personal credit in the calculation of the business credit score they release to lenders. This means if your personal credit score is bad, your business credit score could suffer.

Experian Business Credit

Experian is different from the other two main business credit reporting agencies in one very important way. Of course, business credit is credit in a business’s name. It depends on how well a company can pay its bills. Yet, Experian uses both consumer and business credit information to gauge risk. They find a blended score is more accurate and predictive.

FICO SBSS

This score is becoming increasingly common and it’s a lot trickier. FICO SBSS stands for FICO Liquid Credit Small Business Scoring Service. Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better, and most lenders demand a score of at least 160.

The scoring model for this score is not the same as other business credit scoring models. It uses your business and personal credit scores, but it does so much differently than Experian.

The  formula for calculations is proprietary and well-guarded by FICO. They do not make the information public. Unlike the other business credit reporting agencies, you cannot request a copy of your report or see your score. Here’s why.  Surprisingly, this score can actually vary from lender to lender. That’s right,  two different lenders can get two different scores for your business from FICO SBSS at the same time.

FICO SBSS Calculation

Here’s how that works. Lenders can ask for certain factors in the score to carry more weight than others. Your score can vary depending on how a lender weighs each factor. One lender may put more weight on your personal credit score or your business credit. Meanwhile, another may choose to weigh annual revenue as more important than payment history. It is their choice.

FICO searches business credit information from business credit agencies. This includes D&B, Experian, and Equifax. They use this information  in the calculation of your score. So, your score with these bureaus affects your FICO SBSS.

The only way to ensure that your personal credit doesn’t impact your business credit in a negative way is to keep your personal credit in good order. This is because you really can never know which factors the lender is going to weigh more or less for that matter.

#2: You May Have to Use a Guarantor to Get Business Funding

Because some types of funding require a strong personal credit score, you may need to use a guarantor to get access. This includes some funding types that can help you build business credit, like the Credit Suite Credit Line Hybrid.

Credit Line Hybrid

A credit line hybrid is a form of unsecured funding. Our credit line hybrid even works for startups, and you can get a better interest rate than a secured loan. It reports to business CRAs, but you need a FICO score of at least 680 to qualify.

However, if your personal FICO isn’t that great, you can use a guarantor with good credit to get approval. It’s no-doc financing, meaning you do not have to turn in any financial documents. Using a guarantor could be worth it if you need funding quickly.

#3 Personal Financing Can Affect Overall Fundability

Business lending, at its core, is affected by the Fundability of your business. There are 4 core factors that affect business Fundability, and each of these factors is made up of a number of principles. Personal financial statements and other data bureaus are included in these factors.

Financial Statements

Some lenders will ask for personal financial information no matter what. Others may only look at them if the business is not considered creditworthy on its own. When it comes to personal financial statements, lenders are usually looking primarily at tax returns. It’s best to have a tax professional prepare them. Other information lenders may ask for include check stubs and bank statements, among other things.

Bureaus

There are other agencies that hold information related to your personal finances as well. ChexSystems is one example. They track bad check activity, and their report makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a business bank account. That, in turn, will cause serious fundability issues.

LexisNexis and the Small Business Finance Exchange also fall into this “other bureaus” category. They can have all sorts of information on you, like:

  • Have you ever been convicted of a crime?
  • Do you have a bankruptcy or short sale on your record?
  • How about liens or UCC filings?

While these bureaus do not directly generate credit reports, they do share information with certain credit agencies. They then use this information for their reporting.

This means personal finance information they hold can affect the fundability of your business, and thus your business lending options.

Personal Financing Can Affect Your Ability to Get Business Funding

Whether it’s credit card debt, a mortgage, or just how you handle your personal bank account, your personal finance management can affect your ability to fund your business.

You cannot change that entirely.  Still, you can limit the extent to which this is true. Separating your business from yourself and building a strong business credit score is the best way. Lenders will be able to depend less on the personal financing aspects of your creditworthiness, and focus more on the fundability of the business itself.

The post 3 Surprising Ways Personal Financing Affects Business Funding appeared first on Credit Suite.

How Fundability® Affects Funding for Law Firms

funding for law firms

When you consider hanging your shingle and starting your own law practice, you have to think about a lot of things.  One thing you may think about is funding. Every business needs funding. There is no business in the world that can run without money. 

So, how do you get the business funding you need when you need it?  You may think a legal practice would have no problem getting funding.  However, even a law firm has to be fundable, particularly because rainmaking can take time — and it isn’t always dependable.  Strong fundability is necessary for any business to get financing. 

There is an added benefit for legal practices when it comes to fundability. Fundability aligns rather closely to all of the little things a firm does to attract, impress, and retain clients.

How Does Fundability Affect Funding for Law Firms? 

When you are just starting out with your own practice, clients may be few and far between. Not only that, but the cases you get are not likely to be huge.  You need a way to make payroll and pay other bills and obligations until cash flow catches up.  This is where fundability comes into play. 

Fundability is any business’s current ability to get financing.  Now, don’t make the mistake of thinking that you’ll be able to get the funding just because of the type of business you own.  It may help.  Still, before lenders approve funding for law firms, they want to make sure the business is fundable. 

Regardless of the type of business, there are 5 core principles of fundability that it must have.  Each core principle is affected by a number of factors. Sadly, many business owners never realize that those factors can affect their ability to get business funding. 

Funding for Law Firms: Even Law Firms Need to Build a Fundable Foundation

The fundable foundation starts where every foundation starts, at the beginning.  Likewise, it has everything to do with how you set your business up. 

Contact Information

A business needs its own phone number and address.  A business phone number should not be your own, even if you are a sole practitioner. You can use a separate line or VoIP and have it forwarded to your personal phone.  Just do not list your personal phone number as your business number.  

As for an address, it has to be a physical address where you can receive mail.  A P.O. Box or UPS Box will not work.  Of course a virtual office is an option. However, realize that some lenders will not accept a virtual office address. 

EIN

Your law firm needs an EIN as well.  Lenders want to see your business is legitimate and credible. If you apply for business funding and do not have an EIN, it looks unprofessional. Likely, this is even more true for an attorney.  The number is free and easy to get on the IRS website. An EIN has the added bonus of keeping your personal Social Security number private.

Incorporate

Of course, attorneys know the importance of incorporating for liability purposes. But, incorporating your business is an important step in separating a business from the owner personally which also increases fundability. The state you are in will determine which type of corporation is allowable for legal practices. In California, for example, if you opt to become a professional corporation, liability protection will not cover acts related to professional malpractice. You could instead form a California Legal Liability Partnership (LLP) and you would not be vicariously liable for the malpractice of other members.

Other states, like Massachusetts, will allow a firm to become a professional legal liability corporation (PLLC). In the Bay State, a PLLC won’t protect you from vicarious liability for the malpractice of other members of the PLLC. And in Delaware, the term is LLC (they don’t use the term PLLC) although you can also create a Professional Corporation in Delaware. Both arrangements provide some protection. It will pay to compare the two types closing before deciding between them.

In general, creating a PLLC or LLC means the members must all be licensed to practice within the state of incorporation. Hence, unlike with other types of business incorporating, you wouldn’t be able to choose to incorporate in Delaware or Wyoming — unless of course your firm is in the applicable state and all of the members are admitted to practice there. Incorporation also must be done as soon as possible. A lot of lenders look for a minimum time in business, and generally they consider the start of business to be the incorporation date. 

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a number of reasons for this.  When it comes to fundability, the key is that there are several types of funding you cannot get without one.  Many lenders and credit cards want to see a business account with a minimum average balance.  

Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Licenses

If you do not have the necessary licenses to run your business, red flags are going to fly up all over the place.  Lenders do not lend to borrowers that they feel are not doing what they should.  In a legal LLC or PLLC, the members will all need to be admitted to practice in the applicable state.

Firms practicing in federally regulated fields (such as securities), will likely need federal licensure.

Website

These days, you do not exist without a website.  However, having a poorly put together website can be even worse.  It’s the first impression you make on many, including lenders.

Spend the time and money necessary to have a website that is professionally designed and works well.  Pay for hosting rather than usings a free hosting service.  Also, make sure it has the same URL as your website.  Don’t use a free service such as Yahoo or Gmail. In particular, free services may not have the kind of security you would need to maintain client confidentiality, anyway.

Another plus to having a professional website and email address(es) is they are an opportunity to establish a trusting relationship with your clientele.

Funding for Law Firms: Business Credit Reports

A business credit report is a tool to help lenders determine how creditworthy a business is, even law firms.  There are a few different sources, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly.  LexisNexis and The Small Business Finance Exchange are two examples of this. 

These two agencies gather data from a variety of sources, including public records.  They even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data these agencies have on your business, you can ensure that any new information they receive is positive.  Enough positive information can help counteract any negative information from the past. 

Identification Numbers 

In addition to the EIN, there are identifying numbers that go along with your business credit reports.  The Experian BIN is simply assigned by Experian.  But you do have to apply for a D-U-N-S number from Dun & Bradstreet. 

Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  Every credit file in their database has a D-U-N-S number.  Apply for one through the D&B website. It’s free. 

Business Credit History

Your business credit history is what makes up your business credit score, which is a huge factor in the fundability of your business.  

Your credit history consists of: 

  • How many accounts are reporting payments?
  • How long have you had each account? 
  • What type of accounts are they?
  • How much credit are you using on each account versus how much is available?
  • Are you making your payments on these accounts consistently on-time?

The more accounts you have reporting on-time payments, the stronger your credit score will be. 

Business Information

Business information needs to be consistent. Something as small as using an ampersand in your business name on one document and the word “and” on another can cause an application for funding to be denied. 

A large number of loan applications are turned down each year due to fraud concerns simply because things do not match up.  Maybe your business licenses have your personal address, but now you have a business address. Do some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application?  

Inconsistency causes warning bells for lenders, and you may never know what the problem was. 

Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Funding for Law Firms: Personal Credit Reports

Your personal credit score from Experian, Equifax, and Transunion all make a difference.  You have to have your personal credit in order because it will definitely affect the fundability of your business.  

Some business credit reporting agencies use your personal score in your business score calculation.  Of course, lenders may pull your personal score as well, regardless of what your business credit score looks like.   

Funding for Law Firms: Financial Statements

Both your personal and business tax returns need to be in order, and you need to be paying them. Tax returns aren’t the end of the story however.

Business Financials

It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends credence to the legitimacy of your business. 

Personal Financials

Often tax returns for the previous three years will suffice.  Again, it is best to have a professional prepare them.  Other information lenders may ask for include check stubs and bank statements, among other things. 

Bureaus

There are several other agencies that hold information related to your personal finances that you need to know about.  Everyone knows about FICO.  Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit. 

ChexSystems is also in the mix.  They track bad check activity, which makes a difference when it comes to your bank score.  If you have too many bad checks, you will not be able to open a bank account.  That will cause serious fundability issues. 

Everything is fair game. Do you have a bankruptcy or short sale on your record?  What about liens or UCC filings? Yes, even these personal things can affect the fundability of your business. 

Funding for Law Firms: The Application Process

First, consider the timing of the application.  Is your firm currently fundable?  Next, ensure that your business name, business address, and ownership status are all verifiable.  Lenders will check into it.  Lastly, make sure you choose the right lending product for your business and your needs.  Do you need a traditional loan or a line of credit?  Would a working capital loan or expansion loan work best?  Choosing the right product to apply for is important. 

Putting together the Fundability Puzzle

Everyone knows the easiest way to put together a puzzle is to start with the edges and corners. These are the easiest pieces to find because of their straight edges.  Once in place, there is a framework within which to fit all the other pieces. 

The fundable foundation is like a puzzle framework. Even with a law firm, it’s easier to start building your fundability from the beginning, especially since many of the steps you need to take are what clients are looking for in a firm anyway. Similarly, the foundational pieces are easiest to find.  As a result, filling in the details of all the other principles goes much more smoothly.  Yet, many business owners do not even realize these pieces are part of the fundability puzzle at all. 

Funding for law firms is out there.  Making sure your firm is fundable assures you the best possible chance of getting the funding you need to grow and thrive.   

The post How Fundability® Affects Funding for Law Firms appeared first on Credit Suite.

How to Apply for a Business Loan and How it Affects Fundability

There are at least 125 factors that affect the fundability.  They can be broken down into 4 main categories. One of them is the Application Process.  It is important to understand how to apply for a business loan in order to have the best chance of approval. To do that,  you have to understand how the application process affects fundability.

Business Loan Application Process and Fundability

Did you know that even the way you apply for a loan affects your chances of loan approval? This is because the application process is a fundability factor. If you aren’t careful, you could be denied before you get started all because of a flub in the application process. Here is how to apply for a business loan to ensure that doesn’t happen.

Find out why so many companies use our proven methods to get business loans.

How to Apply for a Business Loan: The 8 Factors of Fundability in the Application Process

The Application Process principle breaks down into 8 factors. They include:

  • Timing
  • Lender negotiations
  • Application format
  • Lending product selected
  • Application Process and Fundability
  • Lender selection
  • Verifiable business ownership
  • Ability to verify business address
  • Ability to verify business name

Let’s break down each one and talk about exactly how they affect the fundability of your business.

Timing and Fundability

The first fundability factor under the application process principle is timing. This has to do with when you apply for the loan. For example, you may have just paid off a lot of credit card debt. You are looking to do some expansion work on your business building, and you go to apply for a business loan.

The problem is, the payoff will not show up on your credit report immediately. Even if you wait a couple of weeks the balances may still be on your report. To the lender, it will look like you have a lot more debt than you actually do.

The same is true of UCC filings, liens, bankruptcy, and anything else that may be on your credit report. Even if you know it is time for it to come off, it can take awhile. If it is still there when the lender looks, it could cause denial.

This is why it is vital to monitor your business credit and personal credit reports. Then, you can know exactly what is on them, and what is not. This will allow you to better time your application for credit.

Lender Negotiations

This is where having a good relationship with a lender that is familiar with your business and its industry is important. Applying for a loan with an institution you already do business with is helpful. A prior relationship can allow you insight to understand if you can negotiate with the lender.  For example, say you apply for a loan and get initial approval for $6000.  However,  you have a couple of credit card companies that you know are willing to extend substantially higher amounts. You may be able to share this with the lender and get approval for more.

Application Format

In this digital age, it may seem like applying online is always the way to go. It is certainly easier and faster. However, sometimes there are substantial differences in what is available if you apply in person or with a paper application.

For example, some lenders require a personal guarantee if you apply online. However, they have a paper application that does not necessarily require one. That’s just one example. There are any number of possibilities.

Find out why so many companies use our proven methods to get business loans.

Lending Product Selected

Choosing the right lending product for your business needs is vital. If you have a large project you want to complete, a business loan may be best. But, if you have a lot of smaller expenses and you just need to manage cash flow,  a credit card or line of credit may work better. When making a product choice, consider if you will pay off the balance monthly. If so, take note that a line of credit begins charging interest immediately.   In contrast, if you pay off a credit card before the billing cycle is up, you will not pay interest.

Lender Selection

The lending industry ebbs and flows, but not all lenders ebb and flow on the same wavelength. Some lenders may loosen their belts and lend more around the end of the year.  Eventually, they will tighten up again.  Chances are when they do, another group of lenders will decide it is time to increase lending. Knowing which lenders are lending more at the time of application can greatly increase your chances for approval.

Verifiable Information

The last three factors deal with verifiable business information on the application, such as:

  • Business Name
  • Business Address
  • And Business Ownership

When you apply for credit, you have to include your business name and address on the application. The lender will then search with the Secretary of State to make sure you are the owner.  Then, they will make sure your business phone number and business address match what is on file with the Secretary of State.

If they cannot find your business or verify the information, they may automatically deny. Alternatively, they may ask for tax returns.  That is, if they have not already. Even if they originally ask only to verify information, due diligence dictates that they look at the entire return.

The thing about tax returns is, businesses do not want to show they make money. Because of course, the more you make the more you pay. So, if your return shows a large loss, that could result in denial. This may not have been an issue if your information had been verifiable in the first place. They may have used other ways to verify profit, and tax returns may have not come into the picture. Still, if they have them for any purpose, they have to analyze them for everything.

How to Apply for a Business Loan:  Getting the Information You Need

The question now becomes, how do you know where you stand when it comes to these factors? How do you know which credit providers are lending more at the moment?How do you know what is still showing on your credit report? Can you find out if there are different options based on the application format?

Find out why so many companies use our proven methods to get business loans.

How to Apply for a Business Loan: Getting Help

Generally speaking, most borrowers can’t know without help. There are some things you can work on, like paying attention to your personal credit reports. Those are easy enough to monitor for free. But, what about business credit reports? Those aren’t free, though some monitoring options are cheaper than others.

Yet, lending trends, choosing the best lending product, and thinking of all the things that need to be consistent and verifiable for a lender to not deny you are much harder to determine on your own. Those are all things you definitely need help with.

This is where the business credit specialists at Credit Suite can really help. We are in a unique position to be able to see the big lending picture throughout the year. Our finger is always on the pulse of the industry, so we can help direct you toward lenders that are lending the most at the moment. We are able to see what options people are getting with various lenders based on how they apply.

And we can help you set your business up in a way that your information is verifiable and consistent. Then credit providers can see your business the way they need to see it for approval, and inconsistent details will not have to cost you funding.

How to Apply for a Business Loan: Fundability Matters

There are so many things that affect your fundability. It can be very difficult to keep track. Worse yet, credit providers will not usually tell you why you were denied. So, you might never know what the problem is. The best thing is to continually work on building and maintaining strong fundability.

The post How to Apply for a Business Loan and How it Affects Fundability appeared first on Credit Suite.