Tag: Blunders

Business Credit Builder: Avoid Major Credit Blunders with this Simple Tool

Credit is a complicated creature. The second you think you have it figured out, it turns on you.  Truly, if you don’t handle it just right, it can morph from powerful ally to mortal enemy in a flash.  This is especially true if you are trying to run a business.  Thankfully, the Business Credit Builder can help in a big way. 

Get our business credit building checklist and build business credit the fast and easy way. 

3 Major Credit Blunders and How the Business Credit Builder Can Help

Across the ages, one major problem business owners face is funding. Funding is an issue that cuts across all industries, all owner experience levels, and all business entity types. 

One reason business owners may have trouble finding funding is, they do not realize there are actually two types of credit.  Not only is there personal credit, but there is also business credit. Once this simple revelation comes to light, the trajectory of the business can begin to change for the better. Personal finances do not have to suffer. 

What is Business Credit? 

Business credit is credit in the name of your business only. It is based on how likely the business is to repay bills, not the owner.

As a result, business credit accounts do not show up on your personal credit report.  In fact,  they do not affect your personal credit score at all.  In addition, the business is responsible for repayment, not the owner. 

Why Do You Need Business Credit? 

Few business owners understand all the benefits of business credit. 

Some of these include: 

  • Liability protection
  • Lower debt-to-credit ratio on your personal report
  • And higher credit limits

How the Business Credit Builder Can Help

So, how do you build business credit? How do you get accounts that are not connected to your personal credit?  With the Business Credit Builder of course! It sounds simple, but here is the thing. While building business credit is not necessarily hard, there are a lot of steps. It can be overwhelming without guidance.

This is where the business credit builder comes in.  It can help guide you through the process.   Even better, it can help you avoid these three major credit blunders, among others.

Blunder 1: Ruining Personal Credit with Business Debt

This is a huge problem. So many business owners do not know that they can get business credit without a personal guarantee. These are credit accounts that will not affect your personal credit profile should your business not be able to pay. 

Of course, being personally on the line for business debt can cause a lot of issues.  For an extreme example, consider the case of West Virginia Governor Jim Justice. He personally guaranteed over $700 million in loans for his coal company, Bluestone Resources.  The loans were through Greensill Capital, which is now defunct.  The downfall is due to an insurance carrier choosing to no longer underwrite funds for the popular finance company.  As you can imagine, the domino effect is vast and far reaching. 

Get our business credit building checklist and build business credit the fast and easy way.

Currently the impact on the Governor’s personal finances remains to be seen.  However, it’s not hard to imagine the devastation something like this could wreak on a small business owner. Fortunately, working to build business credit with the Business Credit Builder can help you avoid this type of credit blunder and protect your personal finances. 

Blunder 2: Ignoring Fundability Factors

Fundability is the overall ability of a business to get funding. There are over 100 factors that affect it.  That makes it difficult for the average small business owner to navigate and assess the fundability of their business on their own.  

The first part of this is what you will work through in Step 1 of the Business Credit Builder. It walks you through the process of building a foundation of fundability.  After all, you wouldn’t build a house on a shaky foundation.   You shouldn’t try to build business credit without a strong, fundable foundation either. 

Blunder 3: Accounts Not Reporting

The only way to get a business credit score is to get accounts that will report to the business credit reporting agencies. 

Honestly, this is tricky.  With consumer credit, pretty much all accounts report payment history to your personal credit report.  In contrast, only about 7% of companies that issue business credit report payments to business credit reports.  Without this payment history, you do not have a business credit score. 

Get our business credit building checklist and build business credit the fast and easy way.

What makes it harder is the fact that most companies that do report do not make that fact common knowledge. In fact, the only way to build business credit payment history on your own is through trial and error. You have to guess at which vendors will report your payments.  And of course, there is the fact that you have to get accounts that will not only report, but that will extend business credit before you actually have a business credit score so that you can get started. 

How the Business Credit Builder Helps You Get Accounts Reporting

Step 2 helps you establish your initial business credit profile, so that accounts have something to actually report to. 

Then, in Step 3 of the Business Credit Builder, you will get exclusive access to starter vendors that will issue net invoices without checking credit. Then, they report your payments on those invoices to the business credit reporting agencies. We remove the need for trial and error and show you the exact accounts you can get to get the business credit score process going.

After enough of these types of accounts are reporting payments, you will qualify for more types of accounts.  

Step 4 addresses this by showing you how to get copies of your business credit reports and see which accounts are reporting.  You will also have the opportunity to review these reports with one of our expert advisors to learn more about what it says and how to address issues and mistakes. 

How do you know when you have enough accounts reporting? How do you know which accounts to apply for next?  Fortunately, the Business Credit Builder can guide you.  In fact, this is your all-in-one tool for business business credit. 

Steps 5-7 take you through the process of adding accounts to continue to build credit.  As you gain enough accounts in each step, you will unlock access to vendors that will both approve you at your current step in the process and report your payments.  

Other Benefits of the Business Credit Builder

In addition to all of this, there are a number of other benefits to the program. For example, you will get free, unlimited use of a business valuation tool. This will allow you to see what your business is worth right now, and monitor its growth into the future. 

You’ll also have the opportunity to save up to 90% on business credit monitoring, and have access to expert help. You’ll get a whole year of business advisor support and 5 years of finance officer support, all included!

Are You Ready to Get Started? 

Honestly, the best way to start is get a free consultation with a business credit expert. This is someone who can help you determine where your business stands now, help you find financing, and help you determine if the Business Credit Builder is right for you.

The post Business Credit Builder: Avoid Major Credit Blunders with this Simple Tool appeared first on Credit Suite.

5 Disastrous Blunders to Avoid When Applying for a Small Business Loan

And What to Do Instead When it comes to applying for a small business loan, there is a right way and a wrong way to do things.  The problem is, no one really tells you the wrong ways.  There is not a class that tells you what not to do.  There are directions given, sure.  … Continue reading 5 Disastrous Blunders to Avoid When Applying for a Small Business Loan

5 Disastrous Blunders to Avoid When Applying for a Small Business Loan

And What to Do Instead

When it comes to applying for a small business loan, there is a right way and a wrong way to do things.  The problem is, no one really tells you the wrong ways.  There is not a class that tells you what not to do.  There are directions given, sure.  However, there is much room left for mistakes when someone is only telling you what you should do.

The truth is, it can be just as useful to know what not to do.  Knowing what the common mistakes are and how to avoid them is vital.  Here are 5 common mistakes that can mean disaster for your application approval odds.

1.      Not Having a Complete and Professional Business Plan Before Applying for a Small Business Loan

Any traditional lender is going to need to see a business plan as part of the loan application process.  The problem is, many business owners have no clue what this should look like.  There is so much more to it than just filling out a few lines to answer questions on the application.  It is much more than writing answers in a template.

Learn business loan secrets with our free, sure-fire guide.

A complete business plan is really a combination of a number of reports that need to be researched and written.  It is rare that a business owner has all of the knowledge and skill needed to sufficiently put together an entire business plan on their own.

A complete business plan should include the following:

Introduction

  • An Executive Summary

This is a complete summary of the business idea.

  • Description

The description goes into further detail than the summary, describing the business. What type of business is it? What product or service will it offer? This is where you work to get others excited about your business. Note that this is important even if your business is already operating.  It will just be in the present rather than the future tense.

  • Strategies

Layout your plan for getting started. Do you have a marketing plan, area in mind for location, or idea of how many employees you will start with? What is your ramp up plan? Again, already operating businesses will state the current operating strategy.

Market Research

  • Market Analysis

 This actually includes two parts:

o             Analysis of audience:

What need will your business fill, and for who? Explain the need you see in your market and how your business will fill that need.

o             Competitive Analysis

Is there already a business working to fill this need? Is there room for more? How do you plan to compete with them?

If you are not a new business, this will be a market analysis that supports your need for funding, or that shows your business is strong and growing.

Plan and Financial Information

  • Plan for Design and Development

How is all of this going to play out, from start to finish. What steps are you going to take? This part should be more detailed than your strategies section.

  • Plan for Operation and Management

Who will own or does own the business and who will run or currently runs it from day to day. This could be as simple as stating that you are the sole owner and operator.  It could be as complicated as laying out a complete partnership plan or board or directors’ chart. It just depends on how your business works.

  • Financial Information

This section includes current financials, projections, and a budget plan for the loan funds you are applying for.  Lenders need to see that you know how to handle any funds they may give you, including paying them back.

2.      Trying to Put Together Your Own Financials When Applying for a Small Business loan

While it may be possible for a business owner to handle writing a budget for loan funds, it is unlikely that a business owner can provide sufficient financial statements and tax returns on their own.  It is much better to have an accountant prepare all financial statements to be included with the business plan, and any others that lenders may ask for, to ensure completion and accuracy.

The same is true for tax returns.  A professional tax preparer will be better able to ensure accuracy and answer any questions the lender may have.

3.      Not Being Willing to Pledge Collateral When Applying for a Small Business Loan

While it is often not a requirement, it is always helpful to pledge collateral.  Loan terms will be better, interest will be lower, and you will likely end up being eligible for more money. In addition, not being

Learn business loan secrets with our free, sure-fire guide.

willing or able to pledge collateral sends up a red flag from the beginning.  If you aren’t willing to take a risk for your business, why should a lender be willing?

4.      Not Knowing or Understanding Your Credit Scores Before Applying for a Small Business Loan

Before you begin applying for a small business loan, you need to know your credit scores.  Where do they come from?  What do they mean?  If you do not know what your credit score is telling your lender about you, you are going in blind.

Most understand their personal credit scores and where they come from.  Fewer understand their business credit score, where it comes from, and what it tells lenders.

It is way more involved that personal credit, and much less cut and dry.  There are many more options for reports and scores, and each business credit reporting agency calculates the scores a little differently. Furthermore, some business credit reporting agencies allow the lenders to weight certain information.  This means two lenders could end up with a totally different credit report with a different score on the same borrower based on how they asked for the information to be weighted.  It definitely much harder to get a grip on your business credit score.  Let’s break it down to gain a better understanding.

Business Credit Report from Dun & Bradstreet

Dun & Bradstreet offers a number of business credit report options. In fact, there are 6 various reporting alternatives in all. They all supply various info relating to business credit history and credit worthiness. The result is, it takes all of them for a lender to get the complete picture.

However, some lenders only use Dun & Bradstreet to get the PAYDEX. This is probably because it is the easiest to comprehend.  It is the most like the consumer FICO rating, determining how promptly a consumer makes payments on a scale from 1 to 100. Ratings of 70 or higher are good. For more information on Dun & Bradstreet and their other business credit scores and reporting options go here.

Experian Business Credit Scores

Experian uses what it calls Intelliscore. There are greater than 800 different variables that they make use of to forecast a company’s credit risk. With Intelliscore, a score of 76 or greater indicates a reduced risk of default or late payment. If a score drops between 51 to 75, it indicates a reduced to medium threat. Scores from 26 to 50 are medium threat. Lastly, from 25 down to 1 is average high to high risk.  Find out more about Experian credit scores here.

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Equifax Business Credit Score When Applying for a Small Business Loan

Equifax gets its business credit report information in methods comparable to D&B as well as Experian. Like D&B, they have a sharing contract with the Small Business Finance Exchange.

They combine monetary information with industry  information, and they include utility and telephone payment data as well. Public records are also a source of information. Find out more about Equifax business credit scores here.

How Can You Know Your Score Before Applying for a Business Loan?

Just understanding your business credit score is not enough.  You need to know what you can do about it if it isn’t helping you get funding.  That’s where monitoring comes in.  Unfortunately, you cannot get a free copy of your business credit reports like you can with your personal credit reports.  It costs money to see your business credit score.

For example, the big three charge close to $50 or more for each report:

  • Dun & Bradstreet reports range in price from $61 to $229 per report.
  • Experian reports are $49.95 per report.
  • Equifax is $99.95 per report.

You can monitor your credit with D&B and Experian at a fraction of these costs by going to https://www.creditsuite.com/monitoring/.

Don’t forget personal scores  matter as well, for a couple of reasons.  First, most if not all traditional lenders will check your personal credit score before they even consider business credit.  If your personal credit isn’t the best, then good business credit can help you get the loan anyway.  If your personal credit is okay but not top notch, good business credit can help you when it comes to rates and terms.  However, another reason personal credit  is still important is this.  Some of the business credit reporting agencies use your personal credit score in their business credit score calculation.

5.      Not Considering Other Types of Financing Before Applying for a Small Business Loan

Sometimes, applying for a small business loan isn’t the best option.  There are other options, and in some situations, they may be best. Some other options include:

SBA loans

While these are loans still disbursed by traditional lenders, they are guaranteed by the federal government.  This means two things.  First, some business owners may be eligible for SBA loans even if they are not eligible for other loans from a specific lender.  Next, it means that these loans have a much more involved and lengthy application process.

However, if your credit score is on the cusp of what is needed and you meet the other eligibility requirements, then an SBA loan may very well be what works best for you.  Don’t forget to research this option when applying for a small business loan.

Alternative lenders

These are lenders other than banks and credit unions.  They typically operate online.  Due to this, they usually have a faster application process.  These lenders also tend to have less stringent eligibility requirements.  What’s the catch? They generally have higher interest rates.  However, if you are aware of where your credit scores are, you can know on the front end to just skip applying for a small business loan with a traditional lender and head straight to these types of lenders.  It could save you a lot of time and hassle.

Invoice Factoring

If you need money fast, invoice factoring might be a better option than a traditional loan.  Lenders that factor invoices will pay you a portion of what they are worth immediately.  Then, when the funds come in, they will send you the difference less their factoring fee.  You don’t end up with all the funds from the invoices, but you definitely get fast cash.

Merchant Cash Advance

This is an advance against future credit card sales.  The lender averages your daily credit card sales and lends funds against what is expected in the future, at a premium.  This is another way to get cash fast, and while the premium may be higher than the interest rates on some loans, it is a much more convenient option in some cases.

Learn business loan secrets with our free, sure-fire guide.

How Do You Avoid These Blunders When Applying for a Small Business Loan?

So the best first step is to check your credit.  That can help you avoid a lot of mistakes by simply guiding you toward the right type of lender. Once you decide between a traditional lender, an alternative lender, or some other type of financing, you can determine what the requirements are.  If you need a business plan or financials, you can find a professional to help with these items before you even start the process.

Don’t forget to consider collateral. Take everything into consideration.  Your business is the first and most obvious option.  You could also use any land that you or the business owns.  Even company automobiles can be used as collateral.  Explore all your options. It can make a huge difference in terms of interest rate and the amount of money you are eligible for.

 

 

 

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