Tag: Business

Are There More Than 3 Business Credit Reporting Agencies?

There Are More than 3 Business Credit Reporting Agencies, but it All Comes Back to the Big Three

When most people think of business credit reporting agencies, they think if Dun & Bradstreet.  It’s true, the Dun & Bradstreet PAYDEX is one of the scores most commonly used by lenders.  In addition to D&B however, there is Experian and Equifax that are fairly commonly used.

Those aren’t the only three however.  The FICO SBSS score is gaining popularity in the business credit world as an option for business credit scoring.  There are actually a lot more business credit reporting agencies than that, but the one most commonly used outside of the big three of D & B, Experian, and Equifax, is the FICO SBSS.

Keep your business protected with our professional business credit monitoring.

Dun & Bradstreet is the Biggest of the Business Credit Reporting Agencies

There are six different Dun & Bradstreet reporting options, all measuring different areas of credit worthiness.   The most commonly used and simplest to understand is the PAYDEX.   Generally speaking, this is the most like the consumer FICO score.  It measures the speed of payment.  It ranges from 1 to 100.  A 70 or higher is “good.” For example, a score of 100 means that the company makes payments in advance, and a score of 1 indicates that they pay 120 days late, or more.

What Other Scores Does Dun & Bradstreet Offer?

In addition to the PAYDEX, these other reporting options are available                   .

●        Delinquency Predictor Score

The delinquency predictor score measures the likelihood the company will not pay, will be late paying, or will fall into bankruptcy.  The scale is 1 to 5, and a 2 is considered good.

●        Financial Stress Score

The financial stress score is a measurement of the pressure on a company’s balance sheet.  That is, it indicates the likelihood of a shutdown within a year.  It measures on a scale of 1 to 5,  with a minimum of 5 and a maximum of 1.  A business with a score of 2  is in good shape.

●        Supplier Evaluation Risk Rating

This rating ranks the odds of a company making it for the next 12 months.  The minimum score is 9 and the maximum is 1.  A company with a score of 5 is good is doing okay.

●        Credit Limit Recommendation

The credit limit recommendation shows a business’s borrowing capacity.  It is a dollar amount recommendation for how much debt a company can handle. Typically, it is used by creditors to determine how much credit to extend.

●        D&B Credit Rating

The credit rating is an estimation of overall business risk on a scale of 4 to 1.  A two is good.  It’s important to note, the rating is given in conjunction with letters.  The combination of the letters and numbers relay the company’s net worth.

Even if there isn’t enough information on a business to assign a regular rating, Dun and Bradstreet will assign what they call a Credit Appraisal Score.  Unlike a full credit score, this is based on number of employees. In addition, there is an alternative rating based on what data is actually available.

The letter portion of this rating cannot be assigned as good or bad since net worth is not necessarily an indicator of how stable a business is.

Keep your business protected with our professional business credit monitoring.

Experian Business Credit Score

Experian offers a number of different scores as well.  Lenders can choose to use any or all of them. Of course, each one tells them something different.  Consequently, it takes all the scores put together to get a complete credit picture from this business credit bureau.  Still, not all lenders look at all the scores that are available.

Intelliscore Plus

The Intelliscore Plus credit score shows credit risk based on statistics.  It is a highly predictive score.  As such, its main purpose is to assist users in making well informed credit decisions.

The Intelliscore scores range from 1 to 100.  The higher your score, the lower your risk class. The opposite is true as well, meaning the lower your score, the higher your risk class.

Score Range Risk Class

76 – 100 Low

51 – 752 Low – Medium

26 – 503 Medium

11 – 254 High – Medium

1 – 105 High

How Does Experian Business Credit Calculate the Intelliscore Plus Score?

One of the things Intelliscore is most known for is the identification of key factors that can indicate how likely a business is to pay their debt.  There are over 800 commercial and owner variables used to calculate an Intelliscore Plus credit score.  Here’s the breakdown:

●        Payment History

This is just your current payment status. It’s how many times accounts have become delinquent.  Additionally, It also shows how many accounts are currently delinquent, as well as your overall trade balance.

●        Frequency

This one shows how many times your accounts have been sent to collections.  It also notes the number of liens and judgments you may have.  Bankruptcies related to your business or personal accounts are included as well.

Frequency can also incorporate information regarding your payment patterns. Were you regularly slow or late with payment? Did you decrease the number of late payments over time? That affects your score.

●        Monetary

This specific factor focuses on how you make use of credit. For example, how much of your available credit are you using right now? Do you have a high ratio of late balances when compared with your credit limits?

Of course, if you are a new business owner, a lot of this information will not exist yet. Intelliscore Plus handles this by using a “blended model” to identify your score. That means that they take your personal consumer credit score into account when determining your business’s credit score.

The Experian Financial Stability Risk Score (FSR)

FSR predicts the potential of a business going bankrupt or not paying its debts.  The score identifies the highest risk businesses by making use of payment and public records. These records include all of the following and more.

  • high use of credit lines
  • severely late payments
  • tax liens
  • judgments
  • collection accounts
  • risk industries
  • length of time in business

business CRAs Credit Suite2

Experian’s Blended Score

This is a one-page report that provides a summary of the business and its owner.  A combined business-owner credit scoring model is more comprehensive than a business or consumer only model.  Blended scores have been found to outperform consumer or business alone by 10 – 20%.

Equifax is Another One of the Bigger Business Credit Reporting Agencies

Equifax shows three distinct business determinations on its business credit reports. These are the Equifax payment index, your business’s credit risk score, and its business failure score.

Similar to the PAYDEX score, Equifax’s payment index, which is a measurement on a scale of 100, shows how many of your small business’s payments were made on time. These include both data from creditors and vendors.

Equifax Credit Risk Score

Equifax’s credit risk score checks how likely it is that your company will become severely delinquent on payments. Scores range from 101 to 992, and they evaluate:

  • Available credit limit on revolving credit accounts, which includes credit cards
  • Your company’s size
  • Proof of any non-financial transactions (such as merchant invoices) which are late or were charged off for two or more billing cycles
  • Length of time since the opening of the earliest financial account

Equifax Business Failure Score

Lastly, Equifax’s business failure score takes a look at the risk of your business shutting down. It runs from 1,000 to 1,600. And it judges these factors:

  • Total balance to total current credit limit average utilization in the past three months
  • The amount of time since the opening of the oldest financial account
  • Your small business’s worst payment status on all trades in the last 24 months
  • Documentation of any non-financial transactions (such as merchant invoices) which are late or are on a charge off for two or more billing cycles

For the credit risk and the business failure scores, a rating of 0 means bankruptcy.

Equifax Scores

A good Equifax score for your business is as follows:

  • Payment Index 0 to 10
  • Credit Risk score 892 to 992
  • Business Failure score 1400 to 1600

Keep your business protected with our professional business credit monitoring.

FICO SBSS

The FICO SBSS, or FICO Liquid Credit Small Business Scoring Service, is the business version of your personal FICO credit score. It was becoming more and more common for lenders to use this score, rather than the Experian or even the D&B Paydex business credit score.

Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. Of course, the higher the better.  However, most lenders require a score of at least 160.

There are few reasons lenders favor this score.  First, FICO uses business credit information from Dun & Bradstreet, Experian, and Equifax in their business credit score calculation.  Second,they also take into account personal credit score.  Lastly, they consider the lenders preferences for which factors are most important.

Why Rely on Other Credit Reporting Agencies, and How Do Lender Preferences Affect Your Score?

This is a huge difference from other business credit scoring models. The SBSS uses your business credit score from other business credit reporting agencies.  They also use your personal credit score and other financial information such as business assets and revenue. The big change however, is they let the lender decide how much each factor actually affects the score. It is a total global financial picture rolled into one score, and the lender gets to choose which factors have the most impact.

This means you almost always go  into a lender totally blind as to what your FICO SBSS credit score may be. Here is how it works.

How Lenders Get Your FICO SBSS Business Credit Score

  1. You turn in your application and all necessary financial documentation to the lender.

 

  1. The lender processes this information and sends it to FICO with a request for your SBSS score.

 

2.5. This is where it gets interesting. The lender can weight certain factors that make up your SBSS score. Your score can vary depending on how a lender weights each factor. For example, a lender can put more weight on your personal credit score or your business credit. It is their choice. This means your FICO SBSS can change from lender to lender even if you haven’t done anything to change it.

 

  1. FICO then searches business credit information from business credit agencies including D&B, Experian, and Equifax. Since these business credit reporting agencies have already scored the business side of things, the FICO SBSS just used the data from them for that piece of their calculation. If they cannot pull enough scoring information from one, they move on to the next. If there is not enough information from any of them, then it uses personal credit and business financials only.

 

  1. Using the lender’s weighting preferences, personal credit, business credit, and business financial data the system calculates the FICO SBSS score.

 

  1. You get either approval or denial based on your score.

SBA Credit Scoring

In 2012 the SBA began using credit scoring in the loan approval process. Since 2014, they have used it on all loans up to $350,000, not including the SBA Express and Export Express.

They use the FICO SBSS out of all the business credit reporting agencies for their scoring needs.  This is likely because by doing so, they get information from the other major business credit reporting agencies plus some.

The information they receive from FICO SBSS helps them to expedite credit decisions. In fact, overall statistics on the $60 billion-plus portfolio at the Small Business Administration show that those businesses with scores at or above the 140 cut-off have had very good payment history.

While the minimum required credit score is 140, the SBA usually will not approve applications until the borrower’s score is 160 or higher.  Some lenders would rather see even higher scores.  An ideal minimum is 180.

There Are More Than Three Business Credit Reporting Agencies

The truth is, there are definitely more than three business credit reporting agencies. The FICO SBSS is just one that many do not know about.  However, like many of the other business credit reporting agencies, they use information from the big three, D&B, Experian, and Equifax, in their calculations.   What does this mean for your business?  Pretty much regardless of which of the business credit reporting agencies your lender uses, the big three are likely still going to impact your score in some way. Also, it means you cannot ignore your personal credit score.  It can make a difference on your ability to get funding even when using your business credit.

 

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Happiness was achieved…. $61,400.00 in unsecured business cards.

Our client in Bloomington, IL was pleased to qualify for $61,400.00 in unsecured business cards.

This helped them achieve business goals and help their business succeed!

We take pride in seeing our clients succeed and achieve their goals!

Click Here to see how much funding you can get for your business.

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Experian Business Credit Uncovered

The Top Secrets You Need to Know About Experian Business Credit

When talking about business credit, Dun & Bradstreet gets the most attention.  Experian and Equifax still carry plenty of weight however.  It would be dangerous to ignore them.  In fact, Experian has a few secrets you may not know about.  It’s time to bring those secrets to light.  Let’s uncover the mystery that is Experian business credit.

Experian keeps business credit profiles on 99.9% of all United States companies. In addition, it boasts the credit industry’s most broad data on small and mid-sized businesses. In fact, your business is probably already listed on Experian. The mystery is, what exactly does that mean?  What do they have on you, and where do they get their information?

According to Experian, all their information stems from third party sourcing. You cannot add anything to your profile. Of course, you can check your profile and let them know about any inaccuracies.  However, you cannot add anything to it.  As a result, you have to know what that report is telling lenders about you and your business.  You need to know where the information comes from, and what you can do about it.

Keep your business protected with our professional business credit monitoring.

What Makes Experian Business Credit Different?

The great thing about business credit is that it is separate from your personal credit.  Even if you have bad personal credit, you can still get financing for your business.  That is, if your business credit is in order.

Experian business credit plays a little differently however.  While your business credit score is still all its own, they add a business owner profile.  Experian’s Business Owner Link automatically connects the credit history of over 5 million business owners to their business credit history.

This makes it easier for your creditors to get access to your personal credit information.  In the eyes of the creditor, this is important for determining your overall creditworthiness.  If you are being turned down by lenders for business financing and your business credit is ok, that could by why.  Your personal credit history could be to blame.

What Do You Need to Know about Experian Business Credit Scores?

The first thing you need to know is this.  There isn’t just one score.  In contrast, there are a number of reports and scores.  Lenders can choose to use any or all of them. Each one tells them something different.  It takes all the scores put together to get a complete credit picture, but not all lenders look at all scores.

Intelliscore Plus

Quite simply, the Intelliscore Plus credit score shows credit risk based on statistics.  It is a highly predictive score.  As such, its main purpose is to assist users in making well informed credit decisions.

The Intelliscore scores range from 1 to 100.  The higher your score, the lower your risk class. The opposite is true as well. The lower your score, the higher your risk class.

Score Range Risk Class

76 — 100 Low

51 — 752 Low — Medium

26 — 503 Medium

11 — 254 High — Medium

1 — 105 High

How Does Experian Credit Calculate the Intelliscore Plus Score?

One of the things Intelliscore is most known for is the identification of key factors that can indicate how likely a business is to pay their debt.  There are over 800 commercial and owner variables used to calculate an Intelliscore Plus credit score.  They can be broken down like this:

  • Payment History

This is just your current payment status. It’s how many times accounts have become delinquent.  It also shows how many accounts are currently delinquent, as well as your overall trade balance.

  • Frequency

This one shows how many times your accounts have been sent to collections.  It also notes the number of liens and judgments you may have, as well as any bankruptcies related to your business or personal accounts.

Frequency can also incorporate information regarding your payment patterns. Were you regularly slow or late with payment? Did you decrease the number of late payments over time? That affects your score.

  • Monetary

Experian business credit Credit Suite2

This specific factor focuses on how you make use of credit. For example, how much of your available credit are you using right now? Do you have a high ratio of late balances when compared with your credit limits?

Of course, if you are a new business owner, a lot of this information will not exist yet. Intelliscore Plus handles this by using a “blended model” to identify your score. That means that they take your personal consumer credit score into account when determining your business’s credit score.

The Experian Financial Stability Risk Score (FSR)

FSR predicts the potential of a business going bankrupt or not paying its debts.  The score identifies the highest risk businesses by making use of payment and public records. These records include all of the following and more.

  • High use of credit lines
  • severely late payments
  • tax liens
  • judgments
  • collection accounts
  • risk industries
  • length of time in business

Experian’s Blended Score

This is a one-page report that provides a summary of the business and its owner.  A combined business-owner credit scoring model is more comprehensive than a business or consumer only model.  Blended scores have been found to outperform consumer or business alone by 10 – 20%.

Credit Monitoring with Experian Business Credit

Experian sells a number of products which can be used to monitor your business’s credit.

Business Credit Advantage Plan

This option is $149 per month and incorporates mobile-friendly alerts and score improvement recommendations.

Profile Plus Report

This report is $49.95 and includes in-depth financial payment details.  It also offers predictive information on payment behavior.

Credit Score Report

A cheaper option at $39.95, it contains details on the company, credit information, and a summary of financial payment information.

Keep your business protected with our professional business credit monitoring.

Valuation Report

This report costs $99. It presents the market value of your small business and features key performance indicators. It also displays your company’s fair market value.

Premium Corporate Profiles

Experian also sells premium corporate profiles. These are enhanced profiles that contain added information.  For instance, sales figures, size, contact details, products and operations, credit summary, any Uniform Commercial Code (UCC) filings will show up here.  This report also includes fictitious business names and payment and collections history.

You can also subscribe to business credit alerts through Experian’s Business Credit Advantage program.  This is a self-monitoring service that offers limitless access to your company’s business credit report and score. It allows business owners to proactively manage small business credit. Alerts are sent when:

– Company address changes

– Business credit score changes

– Credit inquiries show up

– Newly-opened credit tradelines are added

– Any USS filings open

– Collection filings open

– Any public record filings pop up.  This includes liens, bankruptcies, and judgments.

It’s important to note however, you can monitor your business credit reports at http://creditsuite.com/monitoring for much less than what you can with Experian directly.  This way, you can keep tabs on your information with Dun & Bradstreet at the same time.

How Can I Improve my Score with Experian Business Credit?

There it is, the big question. Once you uncover the mystery of the Experian credit score, then what?  You understand what it is.  You know how they arrive at it.  Still, how can you change it if it is affecting your ability to get financing for your business?  Are you just stuck?

The answer is no.  It isn’t really that simple though.  Changing a credit score doesn’t happen overnight. There are ways to give your score a little boost however.  Eventually that bad score will be a thing of the past.

Make Current Payments Consistently and On Time

As we just discussed, your payment patterns and history are vital to your overall credit score. Overtime, paying your bills promptly will only help you. If your score is low due to payment history, this will absolutely take time.  You have to start somewhere though, right?.

Correct Mistakes

Get a copy of your credit report from Experian and look over it for mistakes.  Send a request for correction in writing.  Be sure to send copies of supporting documents for each mistake that you find.

Watch the Debt-to-Credit Ratio

This is the amount of debt you have in relation to how much credit you have available.  Say you have $100,000 in available credit.  If your balance across all accounts is $99,000, that is a high debt-to-credit ratio.  This will negatively impact your score.  You have to use your credit, and you need to carry a balance.  Otherwise, how would you have payments being reported?  Just try to keep this ratio as low as possible.

Opening new accounts may help, as it will raise your available credit amount.  However, the average age of accounts also carries some weight, and new accounts lower that number.  You will have to find the balance.

Work with Starter Vendors

Working with starter vendors is a way to get more positive payment history recorded. As a result, your score will start going up.  Starter vendors are those vendors in the vendor credit tier.  They offer net 30 invoice terms and report payments to the business credit reporting agencies.  Often, they will even do this without a credit check.  Due to that fact, you can get an account with them despite having a bad credit score.  Note that not all starter vendors report to Experian, so you will need to ask.  Go here to find out more about starter vendors and the vendor credit tier.

Ask Non-Reporting Accounts to Report

Some accounts that you make regular payments on do not report to credit agencies.  They typically are not required to.  However, there is no harm is asking them to report your payments to Experian and the other agencies.  Those reporting payments can definitely improve your credit score.  Therefore, consider asking your landlord, utilities, and telephone companies to report the payments you make to them.

Don’t Forget About Your Personal Credit

While it’s true that personal credit and business credit are totally separate, we have shown that with Experian business credit, personal credit does carry some weight. As a result, be sure you stay on top of your personal expenses.  Avoid unneeded credit inquiries, and refrain from compromising your personal credit for business demands.

Keep your business protected with our professional business credit monitoring.

Now You Know the Secrets

What’s the greatest secret we’ve uncovered here?  There are really two.  First, Dun & Bradstreet is not the only player in the business credit game. While they may be the largest and most commonly used business credit reporting agency, there is nothing to prevent lenders from using a different one.  Many lenders use Experian.

The second secret uncovered is that your personal credit information definitely counts for something.  At least, this is true with Experian business credit.  When lenders pull a business credit report from Experian, they have access to the owner’s information as well.  Due to this, if your personal credit is good, it can only help you. In contrast, bad personal could haunt you despite good business credit.

Experian Business Credit Uncovered: What Now?

The moral of the story?  Everything counts.  Don’t sacrifice your personal credit to build business credit. Rather, keep them both as positive as possible.  Most “tricks” don’t work.  There is no substitute for using credit wisely.  Purchase only things you need. Take on only what payments you can handle, and make payments on-time. Remember also, they have access to other information.  That could either help you, or harm you.  Start now being aware of what is out there on your business, and work hard to balance out any negative information with positive actions.

There is no time like now to start.  First, figure out what is on your report.  Take a look at your personal credit report as well.  You can get a free copy of it each year.  Take a look and be sure to report any inaccuracies on it.  Once you have a solid understanding of what your Experian report says, and where that information came from, you can form a plan.  If things do not look good, make the necessary changes.  Pay on time, do business with starter vendors, and ask non-reporting accounts to report.  However, if everything looks fine, continue as you are and keep it that way.  After all, you must be doing something right.

 

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5 Small Business Loan Options (Some of Which You’ve Probably Never Heard of) 

What Small Business Loan Options are Out There and Which Ones Are Best for You

Funding a small business is no easy task.  There are an overwhelming number of funding options.  From small business loans to crowdfunding, and a seemingly infinite number of possibilities in between, it can be hard to choose.  For most, it will take some combination of these to get the job done.  It can help to know your small business loan options.  There may be more than you think.

Small Business Loan Options: Lenders

The first decision to make is what type of lender to use. A lot of business owners think that it’s a bank or bust.  There are a few different types of lenders to consider when looking at your small business loan options however.

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

Big Banks

These are those nation-wide institutions like J.P. Morgan Chase and Wells Fargo.  As a general rule, they are not a friend to small business.  There is nothing specific that they hold against smaller businesses.  It is simply that these businesses do not generally meet their lending requirements.  It’s all numbers.  If you don’t have the numbers, you don’t get the funding.

small business loan options Credit Suite2

Community Banks

Community banks are the smaller, local financial institutions.  They are the “hometown” banks, if you will.  These guys are friendlier toward small businesses.  They are able to look a little deeper and see a tad bit more than the numbers. Their small business loan options may have slightly less strict eligibility requirements.  However, it is still a numbers game.  Whatever those numbers are, whether credit score, annual income, years in business, or some combination, you will have to have them to be eligible.

Credit Union

Credit unions come in large and small sizes as well.  The main thing to remember is that you must be a member to get a loan from a credit union.  They do usually offer more favorable interest rates however. If you are a member of one, be sure not to count them out when shopping around for loans.

Alternative Lenders

Alternative lenders generally function online, though some do have brick and mortar locations.  Their main draw is that they offer small business loan options to those that may not qualify with traditional lenders.  Their credit score requirements are lower.  They may or may not require a certain amount of time in business or minimum revenue amounts.  The main drawback is that their small business loan options typically have higher interest rates.

Small Business Loan Options: Types of Loans

In addition to the types of lenders, there are various types of loans including:

●        Traditional

These are the standard loans that disperse a set amount of funds, with the borrower repaying over a certain period of time.  The payment is the same each month, and they can be either secured or unsecured.  Unsecured small business loan options usually have higher interest rates.

●        Line of Credit

This is revolving debt similar to credit cards.  Borrowers are given a maximum limit of the amount of funds they can use, but only pay back the amount that they actually use.  For example, a borrower may have a $5,000 line of credit and use $2,000 to buy a new printer.  They will only pay back $2,000, until the time comes that they choose to use more. Lines of credit can also be secured or unsecured.

●        Invoice Factoring

Factoring invoices is an option if you have receivables.   The lender basically buys unpaid invoices from you at a premium, meaning you do not get full value.  You then have immediate cash however, for those open invoices.  The lender collects from the consumer directly at full value.  The older the invoice, the higher the premium. This is due to the fact that the likelihood of collecting on the invoice goes down the older the invoice gets.

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

●        Merchant Cash Advance

If you accept credit card payments, a merchant cash advance can help you out in a cash pinch.  It is basically just what is says.  It’s a cash advance on predicted credit card sales.  They base the amount of the loan off of average daily credit card sales, and then take payment from future credit card sales. This usually happens electronically. Most often, the process is automatic.  The draw is that you get the funds fast, and there are usually more flexible options for repayment terms depending on your eligibility.

Small Business Loan Options: The Small Business Administration

No discussion of small business loan options would be complete without mentioning the SBA.  While they do not lend funds themselves, they do administer a number of loan programs that help small businesses get the funds they need through partner lenders.

7(a) Loans

This is the Small Business Administration’s most known program.  It provides federally funded term loans up to $5 million. The funds can be used for a number of purposes.  These include expansion, purchasing equipment, working capital and more. Banks, credit unions, and other specialized institutions, in partnership with the SBA, process these loans and disburse the funds.

504 Loans

504 loans are also available up to $5 million and can buy machinery, facilities, or land. Typically, they are used for expansion.  They work especially well for commercial real estate purchases.

Microloans

These are $50,000 or less. They are good for starting a business, purchasing equipment, buying inventory, or general working capital.

SBA disaster loans

This is a program available to businesses that have fallen victim to natural disasters.  These loans are different because, unlike the others, the SBA actually processes them directly rather than using partner lenders.

SBA Express Loans

The turnaround for express loans is much faster, with the SBA taking up to 36 hours to give a decision. There is less paper work as well, making express loans a great option if you qualify.

SBA CAPLines

There are 4 different CAPLine programs.  They differ mostly in how the funds can be used. The maximum on each is $5 million.  It can take 45 to 90 days for the funding on CAPLines to come through.

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

SBA Community Advantage Loans

This is a pilot program.  It will either expire, or the SBA will extend it in 2020. Its purpose is to promote economic growth in underserved areas and markets. Decision makers look past such things as poor credit or low revenue if the business has the potential to create jobs or promote economic growth in underserved areas.

These are some of their most popular programs. The Small Business Administration does so much more for small businesses in addition to these.  Get more details on the SBA, these loan programs, and additional resources offered by the Small Business Administration here.

5 Specific Small Business Loan Options

Now, you are probably here because you need to know specifically where to go to get a small business loan.  As you have seen, the possibilities are endless.  However, here are some of our favorite online lenders for those that may be having trouble qualifying for loans.

Upstart

Upstart is a fairly new online lender that is using cutting edge technology.  They question whether financial information and FICO alone can really determine the risk associated with a specific borrower.  Instead, they are using a combination of artificial intelligence and machine learning to gather alternative data.  They then use this data in the credit decision making process.

Alternative data includes such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  Software from the company uses this data, then learns and improves on its own.

They offer various types of financing products to fit a broad range of needs. From credit card refinancing to student loans, and pretty much anything in-between, there is something for everyone.  Debt consolidation and personal loans are included, in addition to business loans.

You can get a quote on a loan to start or expand a business.  Quotes are available online in a matter of minutes.  Learn more in this comprehensive review.

StreetShares

StreetShares started as a service to veterans.  Now, they offer term loans, lines of credit, and contract financing. They also offer small business loan investment options. The maximum loan amount is $250,000.  Pre-Approval only takes a few minutes. They use a soft pull on your credit so it doesn’t affect your score.

To be eligible, you must be in business for at least 12 months with annual revenue of $25,000. Exceptions are possible, with loans to companies in business for at least 6 months with higher earnings happening on a case by case basis. The borrower’s credit score must be at least 620. For more on StreetShares, see our in-depth review.

Kabbage

Kabbage is a well know online lender. They offer a small business line of credit that can help businesses accomplish business goals quickly. The minimum loan amount is $500 and the maximum is $250,000. They require you to be in business for at least one year and have $50,000 or more in annual revenue, or $4,200 or more per month in the previous 3 month period.

They are great if you need cash quickly. Also, their non-traditional approach puts less weight on your credit score, so they may work better for some borrowers than other lenders.

Fundation

Fundation provides both term business loans online and lines of credit. It is most known for its working capital funding options. These are funds meant to help cover the day-to-day costs of running a business rather than larger projects. Typically, these funds come in the form of a line-of-credit.

Their minimum loan amount is $20,000 while the maximum loan amount they offer is $500,000. They require you to be in business for at least 12 months and have annual revenue of at least $100,000. To be eligible, your personal credit score must be no less than 600. Additionally, you must have at least 3 full time employees.  That number can include yourself.  Business owners cannot live or operate their business in North Dakota, South Dakota, or Nevada.

SmartBiz

If you want the convenience of online lending but need to look toward products offered by the SBA, then SmartBiz is for you.

With the help of the Small Business Administration, SmartBiz offers loans that are government backed. While SBA loans typically take a lot of time and paperwork, SmartBiz found a way to speed things up.  This makes getting loans through the Small Business Administration easier than ever. The minimum loan amount is $30,000 and the maximum is $5,000,000.

As stated, SBA loans are government-backed business term loans for business owners who’ve had difficulty qualifying for other types of financing.  As such, the requirements are a little stricter. Your credit score has to be 650, and you have to be in business for 2 years or more. In addition, annual revenue has to be $50,000 at least, and there can be no outstanding liens, bankruptcies, or foreclosures in the past 3 years.

Knowing Your Small Business Loan Options Can Help You Make the Best Decisions

Of course, a lot of the choosing will be done for you based on your qualifications.  Your credit score, length of time in business, and annual revenue will make a difference.  Still, knowing where to start based on what you have to work with is a huge first step.

If you are eligible for a loan with a traditional lender, you may find the lowest interest rates there.  They tend to have the most favorable terms and rates.  Their online counterparts typically have higher interest rates, but the loans are easier to qualify for.

However, if you are struggling with credit or just starting out, one of these 5 options for alternative lenders could be great.  In addition, there is the option of traditional loans with the SBA programs, if you fall somewhere in between.  Whatever you do, don’t jump in without doing your research.

Shop around with a variety of lenders to compare what they offer, what their requirements are, and figure out which lenders and loans will work best for your specific business. A little time spent on the front end doing this can save you a lot of time and money after the fact.

 

 

 

The post 5 Small Business Loan Options (Some of Which You’ve Probably Never Heard of)  appeared first on Credit Suite.

Does Your Business Credit Card Show on Your Personal Credit Profile? It Might!

How to Get Your Business Credit Card Off Your Personal Credit Profile

If you have a business credit card, you probably think it isn’t affecting your personal credit profile.  While ideally this would absolutely be the case, the fact it, it could be.  There are ways to keep your business debt off your personal credit report, but it isn’t something that happens automatically.  There is a very specific process that actually takes some time.

It also has to be intentional.  A business owner must be active about building business credit. It doesn’t happen passively. The idea is to set up your business in a way that it easily exists in the eyes of credit reporting agencies (CRAs) and lenders as an entity separate from yourself.  How do you do that?  After you do, how do you get accounts that will report to the CRAs before you have a business credit score?

We can answer all these questions and more.  We can walk you through the process and show you not only how to establish business credit that will not show up on your personal credit profile, but how to build it so that it is strong enough to qualify for any financing you may need.

One Business Credit Misunderstanding

One major misunderstanding when it comes to business credit is that if you have a business credit card, it isn’t on your personal credit profile.  While this can be true, if you haven’t actively built business credit and you did not apply for the credit card with your business information, it likely is not true.  The fact is, that card is a personal credit card that has a few extra perks due to its business designation.  It is not actually a credit card that is based on the merits of your business credit profile. If a business credit card is in the owner’s name, it is on the owner’s personal credit profile.

Share our foolproof business credit building checklist and tell your friends about how you’re building business credit the quick and easy way.

How to Establish Your Business as Separate from Yourself

The question then becomes how do you separate your business from yourself.  Many new small business owners operate as a sole proprietorship because it is just easier.  They simply use their own contact information as their business contact information, and business finances mingle with personal finances.

When it comes to establishing business credit however, this just will not work.  Here is what you need to do.

Get Incorporated

The first step is to incorporate.  There are three options for this.

  • C Corp– This is the most definitive separation, but it is also the most complicated and expensive. Before choosing this option, be certain there are reasons other than establishing business credit that it needs to be done.  If it isn’t necessary for some other reason, there are other, simpler, less expensive options.
  • S Corp– This option basically offers the same separation as the C Corp, but taxes are paid at the personal level, rather than requiring the business to be taxed as well, resulting in double taxation. It is also cheaper than incorporating as a C Corp.  If you aren’t required to file as a C corp, this is a good alternative.
  • LLC– forming a Limited Liability Corporation results in less liability, thus the name, and offers enough separation to serve the purpose of establishing business credit. If you are not required to be a C Corp or S Corp, this is the easiest and most cost-effective way to create the separation of business and personal credit needed.

The option you choose will depend on your specific tax and liability needs, as they each offer different levels of protection and expenses.

Get an EIN to Keep Accounts off Your Personal Credit Profile

You need to apply for an EIN. Stop using your Social Security Number as the identifying number for your business.  Your SSN is a direct link to you personally.  It is virtually guaranteed that anything connected to it credit wise will end up on your personal credit reports.

In fact, even if you follow all the other steps for establishing business credit but skip this one, accounts could end up on both reports.  You don’t want that.

The process of applying for and EIN is easy.  The IRS has an online form, and as soon as they verify all the information, you receive your number.  It typically happens almost immediately.

Don’t Forget to Get a D-U-N-S Number

Dun and Bradstreet (D&B) is the most widely used business credit reporting agency.  They issue each business on file a 9-digit D-U-N-S number.  Application is easy and free, and once you have that number, you will be even closer to establishing credit for your business separate from your own.

personal credit profile Credit Suite2

Get Shiny New Contact Information

Your business needs its own phone number and address.  This way, when you apply for credit, you can enter contact information that is separate from your own.  When information is reported to agencies, sometimes the phone number and address are used as identifying factors.  If you and your business share a number and address, that just decreases the level of separation.

Be sure you get your contact information listed in the directory under your business name.

Get a Dedicated Business Bank Account

If you don’t have one already, you need a dedicated business bank account in the business name.  Make sure all business expenses run through this account.  Not only does this help separate you from your business, but it will keep business expenses separate from personal expenses for tax purposes as well.

Business Website and Email Address

A lot of business owners do not realize how important this is.  Truly, these days if you do not have a website, you do not exist.  However, your business website needs to be professionally built and hosted on a paid service such as GoDaddy.  The email address needs to have the same URL as the website.  Free web hosting and free email services such as Gmail and Yahoo do not work well.

These things make your business look fundable to lenders.  This is the first step to building business credit.

Establish Credit Lines with Vendors

If you are a new business and just starting with vendors, look for those that will extend credit and report to the top credit agencies.  We call this the vendor credit tier.

Share our foolproof business credit building checklist and tell your friends about how you’re building business credit the quick and easy way.

If you have been around for a while and do not have credit with your existing vendors, ask for it.  If they comply, ask if they currently report to the credit agencies, or if they will.  Not all vendors do because it is not required.  Not all are willing either.  If your current vendors do not want to cooperate in this endeavor, consider switching to vendors that will.

Here are some of the starter vendors that are the easiest to get started with.

o Use Quill to order supplies you use every day, including pens, pencils, folders, printer ink, copy paper, and even cleaning supplies.

o Order shipping supplies, janitorial equipment, and more through Uline.

o Grainger offers industrial supplies as well as tools that you will need in the course of regular business.

It may be necessary to place a few initial orders with each of these before you can get net terms. There is no need to order anything you do not need however. They each sell things that business owners need in the everyday operations of a business. Once you make your on-time invoice payments and they begin reporting those payments to the credit agencies, your credit score will start to grow.

Talk to the Utility Companies

Sometimes utility companies are willing to report payments to credit agencies.  However, you almost always have to ask.  The worst they can do is refuse.  If they do, no damage is done.  If they agree, you will only establish your business credit faster.

Talk to them all, including telephone, electric, gas, and even internet.  Before you do this, be certain that all of these utilities are in your business name with your business contact information.

Topsy Turvy: Your Personal Credit Profile Still Matters for Your Business

Taking these steps will help you establish separate credit for your business.  That means your business credit cards and other business credit accounts will not show up on your personal credit profile.  However, it is virtually impossible for the reverse of this to hold true all the time.

It’s true, your personal credit accounts will not show up on your business credit report. However, your personal credit can still affect your ability to get a loan even if you are using business credit.  It doesn’t always, but it can.  Here’s how.

First, some lenders insist on checking personal credit even if you have business credit.  The thing is, if your personal credit isn’t up to par but you have strong business credit, you are more likely to get the loan anyway.  That not so great personal credit score can affect your terms and rates however.

The other way that your personal credit profile can affect your business credit is this.  Some CRAs actually use your personal credit in the calculation of your business credit score.  While not all of them do this, there is really no way to know which of the CRAs your lender will choose to use.

The moral of this story is that you cannot ignore your personal credit profile while you are building business credit.  You have to stay on top of your complete credit history.

Why Does it Matter if Business Credit Cards are on Your Personal Credit Profile?

You may be wondering why it matters.  If your personal credit can affect things anyway, wouldn’t it be easier to just have everything in one place?  The answer is a resounding no.  In the long term, not having separate business credit is a bad idea.

The thing is, even if you make all your payments on time, your personal credit cannot handle the level of spending that running a business requires.  Business credit cards that you get on your business credit have higher spending limits.  These higher limits are designed to handle the larger spending amounts necessary to run a business.

Why does that matter?  Well, when you carry balances at or near your credit limit, your debt-to-credit ratio goes up.  A high debt-to-credit ratio has a negative impact on your personal credit score. With the level of monthly spending that most businesses require regularly, it is all but impossible to keep a low debt-to-credit ratio with business accounts on your personal credit profile, even with an immaculate credit history. This can impede your ability to get personal financing for things such as houses, home renovation, automobiles, and more.

Share our foolproof business credit building checklist and tell your friends about how you’re building business credit the quick and easy way.

Are Your Business Credit Cards Affecting Your Personal Credit Profile?

How can you know if your business cards are affecting your personal credit?  Well, if you have not taken the steps necessary to separate your business credit from your personal credit, you can  bet for sure this is happening.  To know for certain, get a free copy of your personal credit report from each of the main personal credit CRAs.  These include Experian, Equifax, and Transunion.  You should be able to see them on there.

If you have strong business credit, call the credit card company and inquire about shutting down the card on your personal account and switching to a card on your business credit. If you do not yet have strong business credit, start building it now.  When you have a high enough business credit score, take the steps necessary to remove the card that is on your personal credit and open new ones using your business credit.

You Don’t Know What You Don’t Know

If you aren’t sure if this is happening to you, or if you didn’t even know it was possible, find out now.  Get copies of your personal credit profile and see what is on there.  At the same time, start building business credit if you do not have it already.  Then you can access all the funding you need to ensure your business is able to continue to grow and thrive.

 

 

The post Does Your Business Credit Card Show on Your Personal Credit Profile? It Might! appeared first on Credit Suite.

Jumpstart Creativity in Your Business –10 Brilliant Business Tips of the Week

Our research ninjas at Credit Suite smuggled out ten amazing business tips for you! Be fierce and score in business with the best tips around the web. You can use them today and see fast results. You can take that to the bank – these are foolproof! Jumpstart creativity and rev up your content engine. Plus nine more awesome tips to get your business humming all week!

The Hottest and Most Brilliant Business Tips for YOU – Jumpstart Creativity and More

Stop making stupid decisions and start powering up your business. Demolish your business nightmares and start celebrating as your business fulfills its promise.

And these brilliant business tips are all here for free! So settle in and scoop up these tantalizing goodies before your competition does!

#10. Explain it to Me!

Our first jaw-dropping tip is all about creating better explainer videos. Young Upstarts says explainer videos have their own rhythm and rhyme. They aren’t really short cinematic masterpieces. At least, they’re not meant to be.

Our favorite tip was to sell the lifestyle, versus the features. What an interesting premise. The concept behind this is to show how much more convenient, easier, happier, safer, whatever, the prospect’s life will be with your product or service.

For explainer videos, it works well to show the difference between the prospect’s current life and the improvements which are inherent in using your product or service. Talk about how to jumpstart creativity!

Sound, Visual, and Captions

It should probably go without saying that you need to be spot on with all of these. Why captions? Because a good half of your audience is likely to be watching without sound, as they might be in a crowded place without earbuds. Or they might prefer to multitask a bit and listen to a conversation or music.

Or they could be hard of hearing. If your buyer persona is over the age of 40 or so, you should consider this a very real possibility. Beyond that, caption files are the kinds of files Google will crawl – so add them!

And while visuals are certainly vital, please be sure the sound is great. Yes, I just got through telling you how many people aren’t listening to your explainer video. And that’s still true. But at the same time, for the other half, who are listening, give them a good listening experience.

Seriously. People will be a lot more willing to forgive less than stellar visuals than poor sound quality.

#9. We Gotta Hand it to Ya

The next awesome tip is about reliably handing off sales to service. Sales Hacker notes there can be a documented, formal process to this. And a documented process makes a lot of sense. After all, it can be a part of onboarding new employees in either sales or service.

A formal process also gives your customers a sense of what to expect. A great tip is to conduct an introductory phone call.

“It’s been great working with you; now Lisa will be happy to handle your future service needs. Lisa, this is our customer, Steve.”

It sounds kind of like common courtesy, doesn’t it? The beauty of this kind of hand off is it’s an occasion to set expectations. In our example, Lisa can tell Steve the hours she works, or how long it normally takes to deliver replacement parts or whatever. Steve now knows what to expect. And Lisa doesn’t have to contend with Steve calling when she’s off work, or complaining about the speed of delivery of replacement parts.

Pretty neat, huh?

Jumpstart Creativity Credit Suite

If you are as passionate about succeeding in business as we are, please help us spread the word about how to take the plunge and save time and money – and your sanity! Jumpstart creativity today and watch your productivity soar!

#8. Sell With Superlative Skills

Our following life-changing tip concerns the best sales skills. Mail Shake lays it all out for us. For most of us, it’s pretty obvious that a sales person needs to have the gift of gab.

But there are a number of other talents which will juice your sales team’s success percentages.

Curiosity Didn’t Kill the Sale

So, what does curiosity have to do with sales? Quite a bit!

Consider the curious person who learns everything they can about their prospect. A prospect will be a lot happier if they feel like you know them well. Can you anticipate their need, and fill it? Or are you just generally selling in the same way to everyone?

Curiosity also matters in terms of finding better solutions.

No lie, curiosity and laziness drive many inventions. Of course you shouldn’t be lazy! But curiosity is vital.

#7. Don’t Spam, Plus More Email Marketing Mistakes to Avoid

For our next sensational tip, we looked at avoiding email marketing mistakes. Business Knowhow says that your mission is to stay out of prospects’ and customers’ spam folders. Heck, yeah.

Vagueness is Kinda Bad

Get to the point in your from lines. Don’t be overly cute. Name your business and don’t hide. It’s a pretty surefire way to get your emails binned if the reader has no idea who you are.

And to go along with that, make sure your calls to action are clear. Vague calls to action do nothing but confuse people. Should they click? Call? Download? Fill out a form? And, more importantly, what will they get if they perform the correct task? It’s great to jumpstart creativity in this area. Just make sure people know what you’re talking about.

Measure, For the Love of All Things Holy

We’ve beaten this drum before, and it bears repeating. If you don’t measure your efforts, then you have no idea if they’re working. And if you have no clue about success, then why do this or that (or anything, for that matter)?

Now is not the time to jumpstart creativity. Rather, you need to measure what most any company measures. These are verifiable, helpful metrics such as open rates.

Inconsistency Stinks!

Make it so your customers and prospects know what to expect, more or less. This is another area where you don’t want to jumpstart creativity.

Certainly, you need to be creative and interesting enough. But at the same time, it’s the ultimate WYSIWYG. It has to be. Your audience needs to know your messages won’t be NSFW, for example. And they need to know the message will be about widgets, and they’ll be conversational, etc. If you want to say something different (let’s say your business is supporting a charity and you want to get the word out), you’ll need to explain that early in the email. Don’t just spring it on your readers.

#6. Look Past American Borders for Marketing

This tip is so cool, and it works! Startup Professionals tells us all about global marketing challenges.

For purely online companies, it’s important to consider how marketing works in everywhere from the Philippines to Bangladesh to Chile to France to ….

The article provides some great tips and ideas for what you might not have thought of. For example, consider protecting intellectual property. There really isn’t a universal global copyright out there, so you’d need to apply everywhere. And that’s expensive! So consider protecting your intellectual property selectively.

After all, if you don’t have much of a market in New Zealand (if any), then applying for copyright protection there is going to be a waste of money, at least to start.

Talk the Talk

And one more thing – translate your website! Yes, lots of people speak English these days, and that’s terrific. But it’s easier for nearly anyone to read and write in their native tongue. And here’s a pro tip – get a person to do this. While it may be easier and faster (and possibly cheaper) to get this done via machine, don’t.

Just, don’t.

After all, consider the Spanish word, guagua. In Cuba and Puerto Rico, it means bus. But in Argentina, Chile, Colombia, and Peru, it means bus.

Taking a guagua could have a rather different meaning, depending on where you are and what you mean, eh?

#5. Get a Jolt of Mental Caffeine and Jumpstart Creativity

Grab this mind-blowing tip while it’s hot!

Jumpstart creativity today!

Word Stream says a blank page is one of the most daunting things out there for a writer of any sort – and this spoke to us 100%. God, yes.

So, they had a bunch of awesome ideas on how to get something, anything on the page so it doesn’t look like such a void when you sit down to write.

But they didn’t include two things we do – use templates and listen to music in order to speed up typing and really jumpstart creativity. That’s okay; there are still a bunch of great concepts here.

Get creative today Credit SuiteWrite a (Lousy) First Draft

This, oh boy howdy, this. This dovetails well with another tip, which is to free write and not self-edit. But what do they mean by a lousy (er, they used a far earthier adjective here. But this is a family show, so we’re going more PG) first draft?

It’s exactly like in fiction writing, truth be told.

Writing a lousy first draft means you don’t self-edit. You don’t worry about flow, grammar, etc. You just write. This means you’ll need to edit more later. But at least you’re getting started! And that’s a lot easier than going completely from scratch.

You can’t edit a blank piece of paper.

Jumpstart Creativity Credit Suite

If you are as passionate about succeeding in business as we are, please help us spread the word about how to take the plunge and save time and money – and your sanity! Jumpstart creativity today and watch your productivity soar!

#4. Strategize Your Strategy

Check out this spectacular tip, all about executing your strategy better. The Harvard Business Review notes that these tips can work for pretty much any situation. Hence you can use these for your industry and even in your personal life.

Seriously!

Be Specific and Imperative

Vagueness still stinks (see tip #7). A strategy to just get better isn’t much of a strategy. A strategy to get better by 5% in 2 months is a lot easier to work on. It’s easier to measure, too.

The idea of making strategies imperative also puts a lasso around a task. Hence you want to tell people to ‘improve sales’ versus ‘start improving sales’. The former has a specific focus, particularly if you pair it with numbers. But the latter just feels like a continuing process. And while many tasks go on and on, that much should be understood.

The imperative to improve sales by 5% has an end. It should be a no-brainer to see the strategy in the future might be something like ‘improve sales by 10%’.

It may feel the same, but it’s not. You’ve given people a goal to strive for. This way, they know when they’ve won.

#3. Get Your Product or Service Front and Center So Your Customers Fall in Love With It

It’s not your imagination: this winning tip can help you better and more easily cultivate customer buy-in. Succeed As Your Own Boss tells us there are keys to cultivating repeat buyers.

Keep in mind, one of these tips is for products only (to use eye-catching packaging), but the others will work for either products or services.

Listen and Act

Being responsive to feedback will trigger what is essentially love and brand loyalty. But why? One reason is that the customer or prospect will see you care about what they think.

So here’s a fer-instance.

Let’s say your product is marketed to people aged 50 and up. If the print is too small, you’ll probably hear about that. So, what happens if you tell your customers and prospects to get lost and get a magnifying glass?

They’ll get lost. Permanently. And they will be more than happy to do business with a company which listens and changes the size of the font on the package as soon as possible. And if that’s not possible for the time being, that company should be telling its customer base – bigger print is coming, thank you for your patience.

So, listen to customer and prospect complaints. They just might jumpstart creativity to find a solution.

#2. Customer Service Will Save Your Business

Our second to last unbeatable tip can give you a new perspective on customer service. G2 reveals all about how excellent customer service should be every business’s secret weapon.

How and why do customers renew and reup? Service can often have a lot to do with it.

Accentuate the Positive Messaging

We truly adored this tip. Consider the difference in tone between saying, “I can’t do that.” Versus “I can do that in two weeks.”

They might, on balance, mean the exact same thing. But the latter pre-frames everything positively and opens up the relationship with the customer. There’s something to look forward to. But the former feels like a door is slamming shut.

Not a good look.

#1. Be Good to Your Employees, and They’ll Be Good to You

We saved the best for last. For our favorite remarkable tip, we focused on rewarding and engaging employees. Effortless HR says **

So which one of our brilliant business tips was your favorite? And which one will you be implementing now?

Jumpstart Creativity Credit Suite

If you are as passionate about succeeding in business as we are, please help us spread the word about how to take the plunge and save time and money – and your sanity! Jumpstart creativity today and watch your productivity soar!

The post Jumpstart Creativity in Your Business –10 Brilliant Business Tips of the Week appeared first on Credit Suite.

An Unsecured Business Loan Can Help A Startup Grow. Personal Loans Won’t

How an Unsecured Business Loan Can Be the Dynamite that Helps Your Business Explode

When you are trying to grow a business, you have plenty of funding options.  The first one most think of is a loan. What most don’t realize is that there are many different types of loans.  The most basic options are secured loans and unsecured loans.  However, you also have to choose between business loans and personal loans.  For helping a business grow, you are better off to choose business loans every time.  Securing a business loan will help your business grow long term, even if it is an unsecured business loan.  Personal loans do not carry the same advantage.

Here’s why.  Payments on personal loans, whether secured or unsecured, are going to be reported to your personal credit. That is great for your personal finances, but it doesn’t really help your business credit at all.  If you have business loans, even an unsecured business loan, those payments will be reported on your business credit report.  When this happens, your business credit grows, which will absolutely help you grow your business in the future.

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Why Personal Loans Aren’t a Good Idea

If you finance your business on personal loans, a number of things can happen.  The first is that you can completely mess up your debt-to-credit ratio.  This is a problem regardless of whether you are making your payments on time.

The debt-to-credit ratio shows how much of your available credit you are using. As a general rule of thumb, personal credit limits are lower than business credit limits.  Conversely, business expenses are typically much higher than personal expenses.  This is the perfect recipe for balances that stay at or near limits, even when you are making payments.

The other reason it isn’t a good idea to use your personal credit to finance your business is this.  If your business finances hit hard times, your personal finances will go down too.  There would be no protection.

What is an Unsecured Loan?

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Now that we’ve established why you need to use business credit for your business and not personal credit, let’s talk about business financing.  Specifically, let’s talk about an unsecured business loan. It is important to understand what an unsecured business loan is before you can understand how it can help you grow your business.

Basically, this is a loan that you get solely on the merits of your business credit.  There is no collateral or personal security put up to help you get the loan. The only risk mitigation by the lender is the reliance on your business credit score. While some may check your personal credit score also, applying with your business information ensures that the payment history will be on your business credit report.

As you can imagine, this means that you need  a pretty stellar business score to get an unsecured business loan. The thing is, once you are there, you can use the funds to do whatever you need to to grow your business without having to worry about using any part of your business as security.

The question then becomes, how on earth do you get the strong business credit you need to qualify for an unsecured business loan?

How to Get Business Credit

Business credit is vastly different from personal credit in many ways.  Perhaps the most glaring difference is that while personal credit kind of just happens based on your spending and paying habits, business credit has to be initiated and built intentionally.  How do you start?

  • Incorporate your business as a corporation, S-corp, or LLC
  • List separate business contact information in directories
  • Obtain an EIN and a DUNS number
  • Open a bank account in your business’s name and run all business expenses through that account.

These steps will help you establish your business as an entity with finances separate from your own. That means vendors will report credit information in your business name. Thus, your business credit will be born.

What’s the Next Step?

Next, you have to do business with starter vendors from the vendor credit tier.  They are vendors that will offer net 30 or higher invoices and report your payments to the business credit reporting agencies. As this continues, your business credit score will grow to the point that you can apply for credit cards from the retail credit tier.

The retail credit tier includes those credit cards that are linked to a specific retail store.  This might include, for example, Staples, Lowes, or Best Buy credit cards.  You need several of these reporting positive payment history.  When that happens, you can begin to apply for cards in the fleet credit tier.

Fleet cards are those that can be used for fuel and automobile maintenance from companies such as Fuelman and Shell.  After enough of these are reporting you can apply for cards in the retail credit tier.

The retail credit tier is the top tier.  Once you are here, you can apply for those standard Mastercards and Visa cards that are not linked to a specific retail store or fuel company.  Get a few of these reporting and handle the credit responsibly.  Then, you will have a strong business score that should allow you to qualify for an unsecured business loan.  This means, you will not have to put up collateral or personal security, and your personal credit should not be affected by your business credit.

Other Types of Small Business Financing

It’s probably wise at this point to discuss the various types of small business financing available.  There are options between business credit cards and unsecured small business loans.  It isn’t all or nothing, and each one can play a part in helping your business grow.

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Types of Loans

There are various types of loans including:

●        Traditional

These are the standard loans that disperse a set amount of funds, with the borrower repaying over a certain period of time.  The payment is the same each month, and they can be either secured or unsecured.  Unsecured small business loan options usually have higher interest rates.

●        Line of Credit

This is revolving debt similar to credit cards.  Borrowers are given a maximum limit of the amount of funds they can use, but only pay back the amount that they actually use.  For example, a borrower may have a $5,000 line of credit and use $2,000 to buy a new printer.  They will only pay back to $2,000, until the time comes that they choose to use more. Lines of credit can also be secured or unsecured.

●        Invoice Factoring

Factoring invoices is an option if you have receivables.   The lender basically buys unpaid invoices from you at a premium.  This means you do not get full value.  You then have immediate cash however, for those open invoices.  The lender collects from the consumer directly at full value.  The older the invoice, the higher the premium. That’s because the likelihood of collecting on the invoice goes down the older the invoice gets.

●        Merchant Cash Advance

If you accept credit card payments, a merchant cash advance can help you out in a pinch.  It is  just what its name says it is.  It’s a cash advance on predicted credit card sales.  They base the amount of the loan off of average daily credit card sales, and then take payment from future credit card sales. This usually happens electronically. Most often, the process is automatic.  The draw is that you get the funds fast, and there are usually more flexible options for repayment terms depending on your eligibility.

Where Can I Find an Unsecured Business Loan and Other Small Business Financing Options?

It really does no good to discuss small business financing if we don’t tell you where to find it.  Here are a few options to consider.  Remember though, even if you are applying based on business credit, some lenders still want to see your personal credit score. Also, these guys aren’t the only game in town.  Be sure to do your research to find the best lender for your needs.

Upstart

Upstart is a fairly new online lender that is using cutting edge technology.  They question whether financial information and FICO alone can really determine the risk associated with a specific borrower.  Rather, they are using a combination of artificial intelligence and machine learning to gather alternative data.  They then use this data to aid credit decisions.

Alternative data includes such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  Software from the company learns and improves on its own.

They offer various types of financing products to fit a broad range of needs. There is something for everyone.  Debt consolidation and personal loans are included, in addition to business loans.

Quotes are available online in minutes.  Learn more in this comprehensive review.

StreetShares

StreetShares started as a service to veterans.  Now, they offer term loans, lines of credit, and contract financing. They also offer small business loan investment options. The maximum loan amount is $250,000.  Pre Approval only takes a few minutes. They use a soft pull on your credit so it doesn’t affect your score.

To be eligible, you must be in business for at least 12 months with annual revenue of $25,000. Exceptions are possible, with loans to companies in business for at least 6 months but with higher earnings being approved on a case by case basis. The borrower’s credit score must be at least 620. For more on StreetShares, see our in-depth review.

Kabbage

Kabbage is a well know online lender. They offer a small business line of credit that can help businesses accomplish business goals. The minimum loan amount is $500 and the maximum is $250,000. They require you to be in business for at least one year and have $50,000 or more in annual revenue.  They will also accept $4,200 or more in monthly revenue over the most recent three month period.

Kabbage is a great option if you need cash quickly. Also, their non-traditional approach puts less weight on your credit score, so they may work well for borrowers that still have some work to do in that department.

Fundation

Fundation provides both term business loans online and lines of credit. It is most known for its working capital funding options. These are funds meant to help cover the day-to-day costs of running a business rather than larger projects. Typically, funds come in the form of a line-of-credit.

The minimum loan amount is $20,000, while the maximum loan amount they offer is $500,000. They require you to be in business for at least 12 months and have annual revenue of at least $100,000. To be eligible, your personal credit score must be no less than 600. Additionally, you must have at least 3 full time employees, but this can include yourself. Owners that live or operate their business in North Dakota, South Dakota, or Nevada are not eligible.

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Why is an Unsecured Business Loan Better Than a Personal Loan?

When you take out an unsecured business loan, you not only protect your business from the bank in case of default, but you ensure your personal assets are protected as well.  In addition, as you continue to build your business credit score by making payments on-time, you guarantee yourself the ability to access the funding you need to grow in the future.

Whether you need to add equipment, open a new location, or simply buy more inventory to supply the demand, you can rest easy knowing you will be able to get the funding you need.

An Unsecured Business Loan Can Help Your Business Grow

Many businesses are started on the merits of the owner’s personal credit.  It certainly isn’t unheard of, and in fact, it is likely the norm.  Before your business starts, it can’t exactly have credit, can it? However, once you are up and running, it is important to start building business credit.  Then, when the time comes to grow and expand, you are more likely to have access to an unsecured business loan.  This will be much more effective at helping your business grow than a personal loan ever could be.

The post An Unsecured Business Loan Can Help A Startup Grow. Personal Loans Won’t 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.

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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

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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.

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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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