First, to be clear, minority small business grants, and any grants for that matter, are totally free money that you do not have to pay back. As such, those awarding grants typically do not consider your ability to repay a grant in the selection process. That doesn’t mean that fundability doesn’t matter though. It does. … Continue reading How Fundability and Minority Small Business Grants Can Build Off Each Other
Tag: Fundability
How Fundability and Minority Small Business Grants Can Build Off Each Other
First, to be clear, minority small business grants, and any grants for that matter, are totally free money that you do not have to pay back. As such, those awarding grants typically do not consider your ability to repay a grant in the selection process. That doesn’t mean that fundability doesn’t matter though. It does.
Your Level of Fundability Can Affect Your Ability to Win Grants, and Winning Minority Small Business Grants Can Help You Build Fundability
How does this work? How does the fundability of your business affect your ability to get grants, and how can getting small business grants help you build fundability? Think about it. Of course, the main thing that grantors are looking for is a business that can be successful. That means having a winning business idea. That being the case, applicants focus on that piece. They present a fabulous pitch and a winning business plan, then they execute a flawless presentation and hope those that make the decisions love it.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
However, if the competition is a close one, and there are any red flags out there on any applicant, it could mean the difference between winning, and not. Winning is important, because grants can be a great option for supplementing your funding.
The Bare Minimum: Do I Need Fundability to Get Minority Small Business Grants?
Most likely, those offering grants are not going to check credit. They probably do not even really care about your personal financials. Those pieces of fundability are not likely to come into play. You can find out more about those and the other parts of the fundability puzzle here.
However, the foundation of fundability needs to be in place. This is what can make a difference when it comes to winning minority small business grants. What is a foundation of fundability and why does it matter? It matters because it is what sets your business apart as legitimate. These are the things that separate your business from yourself, and it shows that you have all of your proverbial ducks in a row. It may never come into play, but if it does, you want to be ready. What are the building blocks of the foundation of fundability?
Contact Information
The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address. Now don’t panic. That doesn’t mean you have to get a separate phone line, or even a separate location. You can still run your business from your home or on your computer if that is what you are doing. You do not even have to have a fax machine.
In fact, you can get a business phone number and fax number pretty easily that will work over the internet instead of phone lines. In addition, the phone number will forward to any phone you want it too so you can simply use your personal cell phone or landline if you want. Whenever someone calls your business number it will ring straight to you.
Faxes can be sent to an online fax service, if anyone ever happens to actually fax you. This part may seem outdated, but it does help your business appear legitimate to lenders.
You can use a virtual office for a business address. How do you get a virtual office? What is that? It’s not what you may think. This is a business that offers a physical address for a fee, and sometimes they even offer mail service and life receptionist services. In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person.
EIN
The next thing you need to do is get an EIN for your business. This is an identifying number for your business that works in a way similar to how your SSN works for you personally. Some business owners use their SSN for their business. This is what a lot of sole proprietorships and partnerships do. However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up. When you are looking to increase fundability, you need to apply for and use an EIN. You can get one for free from the IRS.
Incorporate
This is the most important step in fundability thus far. Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability. It lends credence to your business as one that is legitimate. It also offers some protection from liability.
Which option you choose does not matter as much for fundability as it does for you budget and needs for liability protection. The best thing to do is talk to your attorney or a tax professional. What is going to happen is that you are going to lose the time in business that you have. When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated.
This is why you have to incorporate as soon as possible. Not only is it necessary for fundability and for building business credit, but so is time in business. The longer you have been in business the more fundable you appear to be. That starts on the date of incorporation, regardless of when you actually started doing business.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
Business Bank Account
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help when it comes time to do taxes by keeping your personal finances separate from your business finances..
There’s more to it however. There are several types of funding that are not available without a business bank account. Many lenders and credit cards want to see a business account with a minimum average balance. In addition, you a merchant account is not an option without a business account at a bank. That means, you cannot take credit cards payments. Studies show that consumers usually spend more when credit card payment is available.
Licenses
For a business to be legitimate, it has to have all of the necessary licenses it needs to run. If it doesn’t, warning lights are going to flash all over the place. Research what you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels.
Website
In these times, you do not exist if you do not have a website. Having a poorly put together website can be even worse though. It is the first impression you make on most. As a result, if it appears to be unprofessional, your business will look bad before the customer even gives it a chance.
Spend the time and money necessary to ensure your website is professionally designed and works well. Pay for hosting too. Don’t use a free hosting service. Along these same lines, your business needs a dedicated business email address. Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.
If you are a new business applying for minority small business grants to help get you off of you feet, you may not be ready for all of this yet. Much of it can be does at square one however, and it is infinitely easier to do so. For example, just go ahead and get a business number and address and use it on your grant applications. Get a professional website, or at least a prototype, up and running so you have something to show. It could make all the difference.
How Can Minority Small Business Grants Help Build Fundability?
It’s pretty easy to see how fundability can affect your ability to get minority small business grants. How is the reverse true though? How can minority small business grants help you build fundability, especially when you don’t have to pay them back so there are no payments to report to business credit.
Here’s how. When you get minority small business grants, you have free money to grow and expand your business. This can help you be more profitable without the debt typically associated with growth. This, in turn, makes it easier to pay back any debt you do have to get in the process of starting and running a business, which will help to build fundability.
The only question now is, where do you get minority small business grants? Many private and government agencies offer them, including some corporations. Some are offered annually, while others are available for one time only. It would be impossible to list all available grants, but here are a few to start with. Remember to do your research, as all of them have different eligibility requirements and application processes.
Options for Minority Small Business Grants
If you qualify, there are many grant options available. There are not as many specifically for minorities, but there are some. Here is just a sample of what is out there.
First Nations Development Institute Grants
With a mission to offer grants that help Alaska Natives, Native Hawaiians, and Native Americans, this group is at the top of the list. They also offer assistance in the application process.
Not only that, but there are a wide range of other opportunities from the First Nations Development Institute. Get on the mailing list to receive information about new opportunities as they become available.
National Black MBA Association Scale-Up Pitch Challenge
Also known as NBMBAA, the Scale-Up Pitch Challenge has cash prizes ranging from $1,000 to $50,000. The associate states its purpose is to help newer businesses that have an African founder that maintains equal ownership.
A business must be a member of the NBMBAA to compete. There is a $10 monthly membership fee. After that, there is an online application. If chosen, you must submit a three-minute pitch. Then, finalists go on to compete at the NBMBAA annual conference.
Non-Minority Specific Options
There are grants options that can work well even though they are not exclusively for minorities. Some examples include the following.
FedEx Small Business Grant
This grant is the company’s way of working to strengthen small business innovation. There are 10 grants the company awards each year. They range from $15,000 to $50,000, and if you’re a minority owned business with a cutting-edge product, this could be the grant for you.
A business must use the FedEx website to submit entries. There are a few questions to answer about your business. In addition, there is a requirement for an elevator pitch about what makes your business special. Also, you have to explain how you would use the grant funds. A 90 second video submission is optional.
NASE Growth Grants
The National Association for the Self-Employed (NASE) has small business Growth Grants of up to $4,000. They are for micro-businesses, and proceeds can be used for a number of things including marketing, advertising, expansion, and even to hire employees. Anyone can apply, but you do have to be an NASE member. Membership fees vary based on the level of membership you choose.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
USDA Value Added Producer Grant
The USDA’s Value-Added Producer Grant (VAPG) program offers grants for small businesses. It includes minority owned business. Grants range up to $250,000. These grants are designed specifically to help agricultural producers with activities that add value to their products. As a result, grants are open to those in rural areas. They must be operating as one of the following:
- Cooperative
- Farmer
- Rancher
- an independent agricultural producer
- or an agricultural producer group
Minority Small Business Loans and Fundability: It Goes Both Ways
While neither directly affects the other, the two do affect each other indirectly. Having a strong, fundable foundation can help the pendulum swing your way when it comes time to make a grant decision. By the same token, if you win a grant, the funds could help you build strong fundability if used properly. The two together make a winning team for your business.
The post How Fundability and Minority Small Business Grants Can Build Off Each Other appeared first on Credit Suite.
Fundability and Credibility Go Hand in Hand
Fundability is like a huge ball of yarn, full of layers and twists and turns that all touch each other. At its core, it is how a lender views a business in relation to whether or not it will repay debt. If a lender views a business as one that is fundable, that means that they feel the business is willing and able to repay any debt that may be extended. However, the fundability of your business can affect so much more than your ability to get a business loan. It can affect your credibility with virtually everyone you do business with.
How Your Fundability Can Affect your Credibility with More than Just Lenders
It sounds unlikely on the surface because most people associate fundability with credit score. However, when you consider that credit score is only one small slice part of what makes a business fundable, your perspective will change.
There are literally hundreds of things that can affect fundability. Before you can understand how fundability affects credibility with more than just lenders, you have to understand how all the pieces of that makes a business fundable fit together and affect each other.
Keep your business protected with our professional business credit monitoring.
A Fundable Foundation
Fundability starts with how your business is set up. It has to appear to be a fundable entity separate from you, the owner. This is necessary for a few reasons. First, it protects you personally. Second, it allows you to build separate business credit, which is also a huge part of fundability.
How do you accomplish this? Well, like any foundation, it is best to start at the beginning. It will be faster and easier if you do. However, if your business is already up and running, you may not have that option. It’s never too late to start, but start now. The longer you wait the harder it will be.
Contact Information
The first step in setting up your business to be fundable is to ensure your business has its own phone number, fax number, and address. That’s not to say you have to get a separate phone line, or even a separate location. You can have a dedicated number forwarded to your current phone. You can even still run your business from your home or on your computer. A fax machine is not even necessary. Find out more about how all of this works here.
EIN
The next thing you need to do is get an EIN. This is an identifying number for your business that works similar to how your SSN works for you personally. Some business owners use their SSN for their business transactions such as opening credit accounts. This is what a lot of sole proprietorships and partnerships do. However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up. To be fundable, you need to apply for and use an EIN. You can get one for free from the IRS.
Incorporate
Incorporating is absolutely necessary to set up your business to be fundable. It lends credibility to your business as one that is legitimate. In addition, offers some protection from liability.
Which option you choose does not matter as much for being fundable as it does for you budget and needs for liability protection. The best thing to do is talk to your attorney or a tax professional. If you do not do this from the beginning, there will be some issues to work through. When you incorporate, you become a new entity. This means you lose any time in business you already have. You basically have to start over. You’ll also lose any positive payment history.
This is why you have to incorporate as soon as possible. Not only is it necessary for fundability and for building business credit, but so is time in business. The longer you have been in business the more fundable you appear to be. That starts on the date of incorporation, regardless of when you actually started doing business.
Business Bank Account
A separate, dedicated business bank account is also a must. There are a few reasons for this. First, it will help you keep business finances separate. This is good for a lot of reasons, but the big one is tax purposes.
However, there are also several types of funding you cannot get without a business bank account. Many lenders and credit cards want to see one with a minimum average balance. In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments. Studies show consumers spend more when they can pay by credit card.
Licenses
If anyone were to check to see if your business has all of the licenses is needs to operate and finds that you do not, it will cause a massive hit to your credibility with that person. For a business to be legitimate, it has to have all of the necessary licenses it needs to run. If it doesn’t, warning flags are going to start waving. Research what licenses you need to ensure you have all of those necessary to legitimately run your business at the federal, state, and local levels.
Website
I am sure you are wondering how a business website can affect your ability to get funding. Here’s the thing. These days, you do not exist if you do not have a website. However, having a poorly put together website can be even worse. It is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders.
Spend the time and money necessary to ensure your website is professionally designed and works well. Pay for hosting too. Don’t use a free hosting service. Also, your business needs a business email address that is different from your personal one. Make sure it has the same URL as your website. A free service such as Yahoo or Gmail will not work as well.
Business Credit Reports
The next link is the fundability chain is business credit. Much like your consumer credit report details your personal credit history, this details the credit history of your business. It is a tool to help lenders determine how credit worthy your business is.
The main sources of business credit reports include Dun & Bradstreet, Experian, Equifax, and FICO SBSS. Since you have no way of knowing which one your lender will use, you need to make sure all of these reports are up to date and accurate.
Keep your business protected with our professional business credit monitoring.
Other Business Data Agencies
Other agencies can also impact how fundable your business is. Two examples include LexisNexus and The Small Business Finance Exchange. They gather data from a variety of sources, including public records. This is where things can get a little sticky. These records include information on everything from arrest records to automobile accidents. You cannot access their data or change the information they have on you or your business. What you can do is ensure that any new information they receive is positive. Enough positive information can help negate any negative information from the past.
Identification Numbers: Another Piece of the Fundability Puzzle
In addition to the EIN, there are identifying numbers that go along with your business credit reports. You should be aware that these numbers exist. Some of them are simply assigned, but one of them you have to apply to get.
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. To have a credit file in their database, you have to have a D-U-N-S number. Apply for one through the D&B website.
Business Credit History Matters When It Comes to Fundability
Your credit history has everything to do with all that is related to your credit score.
It consists of a number of things including:
- How many accounts are reporting payments?
- How long have you had each account?
- What type of accounts are they?
- How much credit are you using on each account versus how much is available?
- Are you making your payments on these accounts consistently on-time?
The more accounts you have reporting on-time payments, the stronger your credit score will be.
Consistency in Business Information Affects Fundability
Inconsistency in information across records can cause major problems with being fundable. It makes your business look bad. It’s unprofessional. When you start changing things up like adding a business phone number and address and incorporating, you may find that some things slip through the cracks.
Since a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up, this is a problem. Maybe your business licenses have your personal address but now you have a business address. You have to change it. Maybe some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Is all of your information up to date with your insurance agencies?
The key to this piece of fundability is to stay on top you all of your reports, both business and personal. Save money on business credit monitoring here.
Fundability and Financial Statements
Both your personal and business tax returns need to be in order. Not only that, but you have to pay your taxes, both business and personal.
Business Financials
It is best to have an accounting professional prepare regular financial statements. Having an accountant’s name on financial statements helps your business look more legitimate. If you cannot afford this monthly or quarterly, then at least have professional statements prepared once a year.
Personal Financials
You need to be filing your personal taxes, and the information has to be consistent and legitimate. Lenders will want to see it, of course, but it can affect your credibility in other ways if they are not available or correct.
Bureaus
There are several other agencies that hold information related to your personal finances that you need to know about. Everyone knows about FICO. Your personal FICO score needs to be as strong as possible. It really can affect how fundable your business appears, and almost all traditional lenders will look at personal credit in addition to business credit.
Another bureau that many do not consider is ChexSystems. They keep up with bad check activity, and it makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a bank account. That will cause major fundability issues.
For this point, everything comes into play. Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record? How about UCC filings or liens?
Personal Credit History
Your personal credit score from Experian, Equifax, and Transunion can also affect how fundable your business is. If you need to increase your personal credit score, now is the time. The number one way to do this is to start making payments on-time, consistently.
Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported.
Fundability: The Application Process
This piece of the puzzle affects credibility the least. It mostly affects your ability to get funding, but it is still important to understanding the entire concept of fundability. So much plays into this that you may not even think about. First, consider the timing of the application. Is your business currently fundable? Are your business name, business address, and ownership status are all verifiable? This also includes choosing the right loan product for your specific business and needs.
How Fundability Affects Credibility
If a business is considered to not be credible, it will fail. It must be credible not only to lenders, but also to customer, grantors if applying for grants, and potential investors. If any of these sense that a business isn’t 100 percent on the up and up, it will not survive.
Fundability Affects Credibility with Customers
I know. You’re thinking that no customer checks a business credit score. It’s true. I wouldn’t check on the credit score of a restaurant before going to eat there. However, I might check online reviews. If I saw something negative, I might check to see if they have a business license. I might also check for a report from the Better Business Bureau.
If there is something off somewhere, it’s going to throw up a red flag to customers. While it may not deter them completely, it could certainly make them think before frequenting your business.
Keep your business protected with our professional business credit monitoring.
Credibility with Grantors
The same is true of those awarding business grants. While they are likely not to check your credit score when you apply for a grant, there are other aspects of fundability that can make a difference. For example, it they take a look at the grant application and it your personal address, phone number, and social security number are on there, it may cause them to pause. If they compare with a business that, all other things equal, has an EIN and a separate business phone number, that business is going to appear more legitimate.
Credibility with Potential Investors
This can get tricky. If you are looking for investors for a new business, you may not have any of the foundation laid yet because you are first looking for investors. However, consider that investors can check on a number of the fundability pieces, though they may not yet be considering it as such, to determine whether or not they want to take a chance with your business.
Fundability: How it Really Works
In truth, it isn’t so much that fundability affects all of these things, as it is that some of the same things affect your credibility with these groups and as well as how fundable your business appears to be. It’s just further proof that the sooner you begin to make your business fundable, the better off you and your business will be.
The post Fundability and Credibility Go Hand in Hand appeared first on Credit Suite.
Business Loans and Fundability: What You Need to Know
What you eat affects your health. How much you study affects how well you do on a test. How well you listen affects your understanding. Our actions have consequences. It’s just a fact. Similarly, the fundability of your business affects your ability to get business loans.
Everything You Need to Know About How Fundability and Business Loans Go Together
Think about it. Getting business loans can be tricky. How could you possibly get funding if your business isn’t fundable? You may be thinking to yourself, what is fundability? It’s simple really. A fundable business is a business that lenders perceive as legitimate and able to pay back their debts.
Lenders Don’t Give Business Loans to Businesses That Lack Fundability
It’s true. Lenders are in it for the money. Therefore, if they see anything that makes them think that lending to your business is a high credit risk, they will not approve business loans. If they feel like you will not repay the loan, they will fear a bad return on investment. They want their money, plain and simple. If it looks like you won’t pay, you are out of luck. Your business has to be fundable to get business loans.
Find out why so many companies use our proven methods to get business loans.
How to Achieve Fundability
Fundability itself is a giant. Honestly, most business owners equate fundability, and thus the ability to get business loans, with a strong credit score and solid profits. However, there is so much more to it. In fact, it starts with the way your business is set up. We call that the foundation of fundability.
Everything related to the foundation of your business can affect your ability to get business loans. Many of the elements you would never dream make a difference to lenders, actually do. Sometimes the data doesn’t take a direct line to lenders, but weaves its way through the maze of public records, data agencies, and credit reporting agencies until a dozen tiny red flags culminate to set off blaring alarms in a lender’s ears.
How do you get a fundability? Start with the foundation.
Business Loans and Fundability: Building a Fundable Foundation
The elements of a foundation of fundability include the following.
Contact Information
The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address. Now don’t panic. That doesn’t mean you have to get a separate phone line, or even a separate location. Truthfully, you can still run your business from your home or on your computer if that is what you want. You do not even have to have a fax machine. Find out how here and here.
EIN
The next thing you need to do is get an EIN for your business. If you don’t know, this is an identifying number for your business that works similarly to how your SSN works for you personally. You can get one for free from the IRS.
Incorporate
This is the most important step in fundability thus far. Incorporating your business as an LLC, S-corp, or corporation is necessary to be fundable. The reason is, makes your business appear to be legitimate. Additionally, it offers some protection from liability.
Which option you choose does not matter as much for fundability as it does for what you actually need. The best thing to do is talk to your attorney or a tax professional. You need to know that you are going to lose all of your time in business and any credit history you may have accumulated. That’s because, when you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated.
This is why you have to incorporate as soon as possible. Not only is it necessary for fundability and for building business credit, but time in business is important as well. The longer you have been in business the more fundable you appear to be. That starts on the date of incorporation, regardless of when you actually started doing business. The best thing to do is to incorporate from day one if that is an option.
Business Bank Account
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help you keep them separate from personal finances for tax purposes. Not only that, but certain types of funding will not be available to you in the future without a business bank account.
Licenses
For a business to be legitimate it has to have all of the necessary licenses it needs to run. If it doesn’t, red flags are going to fly up all over the place. Make sure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels.
Website
These days, you do not exist if you do not have a website. Still, having a poorly put together website can be even worse. For many, this is the first they see of your business. If it appears to be unprofessional, it will not bode well for you with consumers or potential lenders. Have a website that is professionally designed. It’s worth the money it takes to hire a designer. Make sure your email address has the same URL as your website also. Do not use a free email service like Yahoo or Gmail.
Business Loans and Fundability: Business Credit Reports
Your business credit reports, much like your consumer credit reports, detail the credit history of your business. As a result, they help lenders determine the creditworthiness of your business.
They come from a number of sources, known as credit reporting agencies, or CRAs. The main ones are Dun & Bradstreet, Experian, Equifax. Of course, there are others. They are used less often however. Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate.
Other Business Data Agencies
In addition to the business credit reporting agencies that directly calculate and issue your credit reports, there are other business data agencies that affect those reports indirectly. Two examples of this are LexisNexus and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records. Consequently, they could have access to information relating to automobile accidents and liens, among other things. Unfortunately, you can’t change the information they already have. What you can do, however, is ensure any further information they have access to going forward is positive.
Find out why so many companies use our proven methods to get business loans.
Identification Numbers
Other than the EIN, there are identifying numbers that go along with your business credit reports. You need to be aware that these numbers exist. Some are simply assigned by the agency. One, however, you need to take action to get. That’s the D-U-N-S number.
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you have to apply for one through the D&B website.
Business Credit History
Credit history is the largest factor relating to your credit score. In return, credit score is a huge factor in the fundability of your business.
Credit history involves several factors.
- How many accounts are reporting payments?
- How long have you had each account?
- What type of accounts are they?
- How much credit are you using on each account versus how much is available?
- Are you making your payments on these accounts consistently on-time?
The more accounts you have reporting on-time payments, the stronger your credit score will be.
Business Information
On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it. However, when you start changing things up like adding a business phone number and address and incorporating, you may find that some things slip through the cracks.
Since a ton of loan applications are turned down each year because of fraud concerns, this is a problem. Maybe your business licenses have your personal address but now you have a business address. You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information? Your business information needs to be consistent across all platforms and records.
Business Loans and Fundability: Financial Statements
Both your personal and business tax returns need to be in order. Not only that, but you need to be paying your taxes, both business and personal. Additionally, have financial statements professionally prepared for your business. It’s also a good idea to do the same for your personal financials.
Bureaus
There are several other agencies that hold information related to your personal finances that you need to know about. Everyone knows about FICO. Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit. Records from other agencies such as ChexSystems can come into play as well.
Personal Credit History
Your personal credit score from Experian, Equifax, and Transunion does matter. You have to have your personal credit in order. It will definitely affect the fundability of your business. The number one way to get a strong personal credit score or improve a weak one is to make payments consistently on time.
Monitor your personal credit to ensure all the information is correct.
Business Loans and Fundability: The Application Process
First, consider the timing of the application. Is your business currently fundable? If not, do some work to increase fundability before applying for business loans. Next, make sure that your business name, business address, and ownership status are all verifiable. Lastly, make sure you choose the right business loans for your needs. Choosing the right product to apply for can make all the difference.
Business Loans and Fundability: How Do You Know Which Type of Lender to Use?
There are so many options it can be hard to figure out which ones will work best for you. First, you need to decide between traditional and non-traditional lenders. If your business is fundable, a traditional lender will work and offer the best rates and terms. If not, you may need to start with a non-traditional, private lender.
Maybe you are somewhere in between. If so, an SBA loan may be perfect. Traditional lenders work with The Small Business Administration to offer loans through their programs.
Business Loans: Options that Can Help Build Fundability
If traditional lenders are not an option, you can look at private lenders. You know business credit is a large piece of fundability. If your business credit is lacking when you are looking for business loans, it can be helpful to find loans that can help build your business credit and thus, your fundability. Some private lenders do this by reporting your on-time payments to business credit reporting agencies. Here are few.
Business Loans from Fundation
Fundation offers an automated process that is super-fast. Originally, they only had invoice financing. Later, they added the line of credit service. Repayments happen automatically. They draft them electronically, and this occurs on a weekly basis. One thing to remember is that you could have a repayment as high as 5 to 7% of the amount you have drawn currently, as the repayment period is relatively short.
You can get loans for as little as $100 and as high as up to $100,000, but the max initial draw is $50,000. They do have some products that go up to $500,000. Though there is no minimum credit score requirement, they do require at least 3 months in business, $50,000 or more in annual revenue, and a business checking account with a minimum balance of $500.
Fundation reports to Dun & Bradstreet, Equifax SBFE, PayNet, and Experian, making them a great option if you are looking to increase fundability by building business credit.
BlueVine
As you find with many alternative small business loans, lenders often offer options more similar to invoice factoring and lines of credit. The reason is, these present less risk than straight term loans. This is true of BlueVine as well as Fundbox.
The minimum loan amount available from BlueVine is $5,000 and the maximum is $100,000. Annual revenue must be $120,000 or more and the borrower must be in business for at least 6 months. Personal credit score has to be 600 or above. Also, BlueVine does not offer a line of credit in all states. You can find out more in our review here.
They report to Experian. They are one of the few invoice factoring companies that will report to the business credit bureaus.
Business Loans from OnDeck
With OnDeck, applying for financing is quick and easy. Apply online, and you will receive your decision once application processing is complete. Loan funds will go directly to your bank account. The minimum loan amount is $5,000 and the maximum is $500,000.
There is a personal credit score requirement of 600 or more. Also, you must be in business for at least one year. There is an annual revenue requirement of at least $100,000 as well. In addition, there can be no bankruptcy on file in the past 2 years and no unresolved liens or judgements.
OnDeck reports to the standard business credit bureaus.
Find out why so many companies use our proven methods to get business loans.
The Business Backer
These guys offer a product they call FlexFund Line of Credit. Funds range in amounts from $5,000 to $240,000. Draws can be repaid on either a daily or weekly basis.
They report to Dun & Bradstreet and Equifax.
Business Loans and Fundability: Now You Know
Of course, it would be impossible to list all of the different types of lenders and loans available to your business. These are a great starting point however. Start with taking a close look at your fundability. Apply for loans that you can get approved for based on that. Then, if you need to work on your fundability, the sooner the better. The longer you wait, the more tangles you will have to work through.
The post Business Loans and Fundability: What You Need to Know appeared first on Credit Suite.
What is Fundability? An In-Depth Look
As a business owner, you may be beginning to hear the word fundability a lot. It may come from lenders, various media platforms, or your own current creditors. What is fundability? Fundability, in the simplest terms, is the ability of your business to get funding. When lenders consider funding your business, does it appear to them to be a good idea to make the loan? What do they look at to make that determination?
What is Fundability and How Does a Business Become Fundable?
Okay, so if you know that fundability is the ability to get funding for your business, what does that actually mean. Furthermore, how does a business become fundable? First, what it means to have the ability to get funding is this. When a lender considers lending to your business, do they feel that you are high risk? Do you appear to be a business that can and will pay back the debt? Lenders are in it for the money, and they need to feel they will get a return on their investment. A high credit risk is not a wise lending choice.
The question of what is fundability is fairly easy to answer. The harder question is how does a business get fundability? Put another way, how does a business become fundable? What makes this answer more complicated is that there is so much the answer must encompass. Sure, a great business credit score is important. In addition, many of the aspects necessary for a strong business credit score are necessary for fundability as well. There are many more layers to peel back however.
A potential creditor needs to see that your business is legitimate and profitable. Many loan applications are denied approval due to fraud concerns. Others, simply because something didn’t match up and threw up a red flag. Maybe the addresses or phone numbers didn’t match on a couple of reports and it just looks unprofessional.
Keep your business protected with our professional business credit monitoring.
If you understand what fundability is and how to get it, you can shut down any such red flags before they cause you problems.
What Is Fundability? The Foundation of Fundability
The foundation of fundability is in how your business is set up. It has to be set up to appear to be a fundable entity separate from you, the owner. How do you accomplish this? Well, like any foundation, it is best to start at the beginning. It will be faster and easier if you do. However, if your business is already up and running, then you may not have that option. That’s okay, it’s never too late to start, but start now. For several reasons, the longer you wait the harder it will be.
Contact Information
The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address. Now don’t panic. That doesn’t mean you have to get a separate phone line, or even a separate location. You can still run your business from your home or on your computer if that is what you want. You do not even have to have a fax machine.
In fact, you can get a business phone number and fax number pretty easily that will work over the internet instead of phone lines. In addition, the phone number will forward to any phone you want it too so you can simply use your personal cell phone or landline if you want. Whenever someone calls your business number it will ring straight to you.
Faxes can be sent to an online fax service, if anyone ever happens to actually fax you. This part may seem outdated, but it does help your business appear legitimate to lenders.
You can use a virtual office for a business address. How do you get a virtual office? What is that? It’s not what you may think. This is a business that offers a physical address for a fee, and sometimes they even offer mail service and live receptionist services. In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person.
EIN
The next thing you need to do is get an EIN for your business. This is an identifying number for your business that works in a way similar to how your SSN works for you personally. Some business owners used their SSN for their business. This is what a lot of sole proprietorships and partnerships do. However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up. When you are looking to increase fundability, you need to apply for and use an EIN. You can get one for free from the IRS.
Incorporate
This is the most important step in fundability thus far. Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability. It lends credence to your business as one that is legitimate. It also offers some protection from liability.
Which option you choose does not matter as much for fundability as it does for your budget and needs for liability protection. The best thing to do is talk to your attorney or a tax professional. What is going to happen is that you are going to lose the time in business that you have. When you incorporate, you become a new entity. You basically have to start over. You’ll also lose any positive payment history you may have accumulated as well.
This is why you have to incorporate as soon as possible. Not only is it necessary for fundability and for building business credit, but so is time in business. The longer you have been in business the more fundable you appear to be. That starts on the date of incorporation, regardless of when you actually started doing business.
Business Bank Account
You have to open a separate, dedicated business bank account. There are a few reasons for this. First, it will help you keep track of business finances. It will also help you keep them separate from personal finances for tax purposes.
There’s more to it however. There are several types of funding you cannot get without a business bank account. Many lenders and credit cards want to see one with a minimum average balance. In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments. Studies show consumers tend to spend more when they can pay by credit card.
Licenses
What is fundability? Among other things, it is being a legitimate business. For a business to be legitimate it has to have all of the necessary licenses it needs to run. If it doesn’t, red flags are going to fly up all over the place. Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels.
Keep your business protected with our professional business credit monitoring.
Website
I am sure you are wondering how a business website can affect you ability to get funding. Here’s the thing. These days, you do not exist if you do not have a website. However, having a poorly put together website can be even worse. It is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders.
Spend the time and money necessary to ensure your website is professionally designed and works well. Pay for hosting too. Don’t use a free hosting service. Along these same lines, your business needs a dedicated business email address. Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.
What is Fundability? Business Credit Reports
The next step in answering the question of what is fundability is to consider your business credit report. What is that you ask? That is the credit report, much like your consumer credit report, that details the credit history of your business. It is a tool to help lenders determine how credit worthy your business is.
Where do business credit reports come from? There are a lot of different places, but the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS. Since you have no way of knowing which one your lender will choose, you need to make sure all of these reports are up to date and accurate.
Other Business Data Agencies
In addition to the business credit reporting agencies that directly calculate and issue credit reports, there are other business data agencies that affect those reports indirectly. Two examples of this are LexisNexis and The Small Business Finance Exchange. These two agencies gather data from a variety of sources, including public records. This means they could even have access to information relating to automobile accidents and liens. While you may not be able to access or change the data the agencies have on your business, you can ensure that any new information they receive is positive. Enough positive information can help counteract any negative information from the past.
Identification Numbers
In addition to the EIN, there are identifying numbers that go along with your business credit reports. When considering what is fundability, you need to be aware that these numbers exists. Some of them are simply assigned by the agency, like the Experian BIN. One, however, you have to apply to get. It is absolutely necessary that you do this.
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Every credit file in their database has a D-U-N-S number. To get a D-U-N-S number, you have to apply for one through the D&B website.
What is Fundability: Business Credit History
This is where the rubber meets the road when it comes to credit reports. Your credit history has everything to do with everything related to your credit score, which is a huge factor in the fundability of your business.
Your credit history consists of a number of things including:
- How many accounts are reporting payments?
- How long have you had each account?
- What type of accounts are they?
- How much credit are you using on each account versus how much is available?
- Are you making your payments on these accounts consistently on-time?
The more accounts you have reporting on-time payments, the stronger your credit score will be.
Business Information
On the surface, it seems obvious that all of your business information should be the same across the board everywhere you use it. However, when you start changing things up like adding a business phone number and address or incorporating, you may find that some things slip through the cracks.
This is a problem because a ton of loan applications are turned down each year due to fraud concerns simply because things do not match up. Maybe your business licenses have your personal address but now you have a business address. You have to change it. Perhaps some of your credit accounts have a slightly different name or a different phone number listed than what is on your loan application. Do your insurances all have the correct information?
The key to this piece of the business fundability is to monitor your reports frequently. When it comes to business credit reports, you can monitor through the reporting agencies directly, or save money by going here.
What is Fundability? Financial Statements
This encompasses a broad spectrum of things. First, there is the obvious. Both your personal and business tax returns need to be in order. Not only that, but you need to be paying your taxes, both business and personal. However, there is yet another layer.
Business Financials
It is best to have an accounting professional prepare regular financial statements for your business. Having an accountant’s name on financial statements lends credence to the legitimacy of your business. If you cannot afford this monthly or quarterly, at least have professional statements prepared annually. Then, they are at the ready whenever you need to apply for a loan.
Personal Financials
Often tax returns for the previous three years will suffice. Get a tax professional to prepare them. This is the bare minimum you will need. Other information lenders may ask for include check stubs and bank statements, among other things.
Bureaus
There are several other agencies that hold information related to your personal finances that you need to know about. Everyone knows about FICO. Your personal FICO score needs to be as strong as possible. It really can affect business fundability and almost all traditional lenders will look at personal credit in addition to business credit.
In addition to FICO reporting personal credit, you have ChexSystems. In the simplest terms, this keeps up with bad check activity and makes a difference when it comes to your bank score. If you have too many bad checks, you will not be able to open a bank account. That will cause serious fundability issues.
For this point, everything comes into play. Have you ever been convicted of a crime? Do you have a bankruptcy or short sell on your record? How about liens or UCC filings? All of this can and will play into the fundability of your business.
Keep your business protected with our professional business credit monitoring.
Personal Credit History
Your personal credit score from Experian, Equifax, and Transunion all make a difference. You have to have your personal credit in order because it will definitely affect the fundability of your business. If it isn’t great right now, get to work on it. The number one way to get a strong personal credit score or improve a week one is to make payments consistently on time.
Also, make sure you monitor your personal credit regularly to ensure mistakes are corrected and that there are no fraudulent accounts being reported.
What is Fundability: the Application Process
So much plays into this that you may not even think about. First, consider the timing of the application. Is your business currently fundable? If not, do some work first to increase fundability. Next, ensure that your business name, business address, and ownership status are all verifiable. Lenders will check into it. Lastly, make sure you choose the right lending product for your business and your needs. Do you need a traditional loan or a line of credit? Would a working capital loan or expansion loan work best for your needs? Choosing the right product to apply for can make all the difference.
What is Fundability? It’s Everything!
The quick answer to what is fundability is simple. However, when you dig a little deeper there are so many layers that crisscross it can take some time to unravel.It’s more like a ball of yarn than an onion really. Everything is connected, everything matters, and one kink in the wires can mess up a lot of stuff. Now is the time to take a closer look at the fundability of your business do whatever you can to increase it.
The post What is Fundability? An In-Depth Look appeared first on Credit Suite.
How Your Experian Financial Profile Can Affect Business Fundability
There are so many factors that affect the fundability of your business. Truthfully, your Experian profile is just one link in a very long fundability chain. However, that does not mean it isn’t important. As you know, it only takes one weak link to break a chain. As a business owner, it is important to understand your Experian financial profile.
Your Experian Financial Profile Can Affect the Fundability of Your Business
What does your Experian profile have to do with the fundability of your business? A lot actually. In fact, not only does your Experian business profile impact fundability, but your personal Experian profile does as well.
Experian Financial Profile and Fundability: What is Fundability?
Simply put, fundability is the ability to get funding for your business. If you are fundable, lenders see your business as one that can and will pay its debt. Since lenders are in it to make money, they see a fundable business as one that will offer a return on investment. That part is easy. The real question is, how does a business become fundable?
Keep your business protected with our professional business credit monitoring.
Sadly, the answer to that question is not quite as simple. Sure, a great business credit score is important. In addition, many of the things that are important for a strong business credit score are necessary for fundability as well.
The thing is, there is a lot more to fundability than credit score. You can find out more about that here. For now, let’s talk about the role the Experian plays in the fundability of your business.
Experian Financial Profile: What Does it Have to Do with Fundability? 
First, you should know that Experian keeps files on both your personal and your business finances. Consequently, if you own a business, you have a business profile with them as well as a personal profile. In most cases, a personal and business credit profile is totally separate. However, with Experian, that isn’t always the case. While they do keep the two separates if you set things up that way, they also issue a combined report that incorporates your personal credit as a piece of business credit for lenders making decisions.
For you, that means that at least as far as your Experian profile is concerned, your personal credit history can actually affect the fundability of your business.
You can see your personal Experian financial profile here.
Experian Financial Profile: What about Business Credit?
Of course, it’s pretty obvious how Experian business credit can affect fundability. The big questions still remain however. What do you Experian reports tell lenders? Where do they get their information? How do they calculate their business credit score, and what does it mean?
Experian keeps business credit profiles on 99.9% of all United States companies. In addition, it claims to have the credit industry’s most broad data on small and mid-sized businesses. That’s why, if you own a business, it likely has a business Experian file.
According to Experian, all their information stems from third party sources. That means you cannot add anything to your profile. Still, you can check your profile and let them know about any inaccuracies. As a result, you have to know what that report is telling lenders about you and your business to stay ahead of the game. Also, you need to know where the information comes from, and what you can do about it.
Business Experian Financial Profile: What’s on there?
First, there isn’t just one score. On the contrary, your complete business Experian profile consists of 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. Meaning, the lower your score, the higher your risk class.
Score Range Risk Class
76 — 100 Low
51 — 75 Low — Medium
26 — 50 Medium
11 — 25 High — Medium
1 — 10 High
How Do They 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. Additionally, it shows how many accounts are currently delinquent and overall trade balance.
Keep your business protected with our professional business credit monitoring.
Frequency
The frequency factor shows how many times your accounts have been sent to collections. It also notes the number of liens and judgments you may have. Any bankruptcies related to your business or personal accounts are in the part as well.
In addition, frequency includes data regarding your payment patterns. Were you regularly slow or late with payment? Did you decrease the number of late payments over time? As you can imagine, those things make a difference.
Monetary
This specific factor focuses on how you use your 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 only or consumer only model. Blended scores have been found to outperform consumer or business alone by 10 – 20%.
Business Experian Financial Profile: How to Know What Yours Is Telling Lenders
Experian sells a number of products which can be used to monitor your business’s credit with them.
Business Credit Advantage Plan
This option is $149 per month and incorporates mobile-friendly alerts and score improvement recommendations.
Profile Plus Report
This report costs $49.95 and includes in-depth financial payment details. Also, it offers predictive information on payment behavior.
Credit Score Report
A cheaper option at $39.95, this report contains details on the company, credit information, and a summary of financial payment information.
Valuation Report
The valuation report costs $99. It shows 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 extra information. For example, sales figures, size, contact details, products and operations, credit summary, and any Uniform Commercial Code (UCC) filings will show up here. This report also includes fictitious business names, payment history, and collections history.
In addition, you can 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.
Despite all that business Experian credit monitoring offers, it is pricey. Monitor your business credit at Experian and Dun & Bradstreet here for much less.
Keep your business protected with our professional business credit monitoring.
Experian Financial Profile: How to Make a Positive Change
Since both your personal and your business Experian profiles affect the fundability of your business, it is important to understand how to make positive changes if you need to.
While you may not be able to do anything to make a big score increase happen all at once, you can definitely do some things that will make a positive difference over time.
Make On-time, Consistent Payments
This is number one. Over time, paying your bills on time will help establish your company as one that pays their debts. This will definitely help push your score up and show other firms that you are a low credit risk.
Handle Your Credit Responsibly
The more debt you have, the more monthly bills you have. As a result, you have less of your income available to spend. If your overall debt is close to or even over your income, it will look like you are a high credit risk.
Keep your debts in check and consistently pay them down or off to keep a good balance between what you make and what you owe.
You Have to Use Credit to Increase Your Credit Score
Keeping your debts low is good advice, but you have to use the business credit accounts you have. You make payments on accounts for your score to grow. Having a ton of credit and not using it at all doesn’t really help. Again, balance is key.
There is no need to buy things you do not need however. Even if you can pay cash, use credit for the things you would be buying regularly for your business regardless. Then, use the cash to pay the credit account.
Pay Attention to Both Business and Personal Credit
By now, you’re aware that personal credit is fair game when it comes to your Intelliscore Plus score. But don’t fall into the trap of thinking your personal credit doesn’t matter. If it is bad, there are options for working around it. However, it is much better to just keep it strong. Making certain you stay on top of your monthly bills is the number one way to keep your personal score healthy. Avoid unneeded credit inquiries, and refrain from compromising your personal credit for business needs.
This means setting things up in a way to actually have separate personal and business credit. Find more about how to do that here.
Make Use of Monitoring Options
No matter what your credit score is, it is crucial that you continue to be diligent and review your personal and business credit reports. This can help you spot possible errors and stay on top of your Experian financial profile.
For personal credit this is easy and free. Not only can you get a free copy of your personal credit reports annually, but there are a number of free services that offer you a peek at your personal credit score throughout the year.
As mentioned above, keeping track of your business credit will cost you. The good thing is, there are options to fit most budgets.
Experian Financial Profile: It Definitely Matters
Experian is well known in the personal credit world, but when it comes to business credit, Dun & Bradstreet often gets all the glory. Your business Experian financial profile can definitely affect fundability however. Throw in the fact that Intelliscore has a personal credit aspect, and you can see just how much your Experian reports can matter.
Keep monitoring all your credit reports and make changes when needed. Work hard to ensure only positive information is reported to all credit reporting agencies. Also, take the time to do a fundability analysis on your business. So take action where needed. If you do these things, you should be able to get funding for your business whenever you need it. Whether you want credit cards, loans, lines of credit, or some combination, you shouldn’t have a problem.
The post How Your Experian Financial Profile Can Affect Business Fundability appeared first on Credit Suite.
Is Your Business Fundable: An Analysis of Fundability
Many of us analyze ourselves mercilessly in the mirror. We pick apart every flaw and consider how we might change or improve each one. While that may or may not be a positive activity, in the same way, you can improve the success of your business by reflecting on what is working and what is … Continue reading Is Your Business Fundable: An Analysis of Fundability
Fundability and How it Helps With Small Business Loan Risk Factors
Small business loan risk factors abound. But you can fix a lot of them with assuring fundability. The easiest way to do this is via building business credit. but first, let’s look at what a bank is going to want to know. they want to assess what sorts of small business loan risk factors you bring to the table.
Answer Lender Questions and Address Small Business Loan Risk Factors With Fundability
Fundability – or, not just the ability to become funded but how desirable a company is for funding – means different things to banks, venture capitalists, angel investors, and informal investors. That being said, they all agree on a few fundamental principles.
1. Do You Have Positive Cash Flow?
Lenders aren’t in the business of giving you gifts. Instead, they would like to see a profit on their investment. For that reason, if you are bleeding funds, they are not going to want to pay for a piece of what, to their minds, is an unsatisfactory financial commitment.
How do you turn it around? Do some economic triage. Perhaps your firm will not need to have an alternative site. Perhaps you don’t need to have a full-time assistant when part-time will do. Maybe you should be leaning harder on your customers with pending invoices. This is one of the biggest small business loan risk factors.
Start-ups will get a different question – see # 2.
2. Do You Have a Great Product or Service?
For startup companies, the concern is more like: do you have a fantastic product or service? A concept in itself is not going to be sufficient, so you also will want to have a comprehensive business system in place. Investors are going to want to see what you can do with your amazing idea, and how it can be successfully monetized.
For a brand-new company this is the biggest of the small business loan risk factors. Otherwise, why bother making a company at all?
3. What Will You Use the Cash For?
If your reply is an unclear, “general fund”, investors are not going to be showing an interest. First of all, they want you to demonstrate you will be responsible with their money. In addition, they also want to know that your business is organized. You can be the most innovative and the very least business-oriented man or woman out there, so long as anyone in your organization is dealing with the financial heavy lifting. Somebody must make sure that the taxes are paid and the invoices go out to your clients.
Investors don’t actually want to see you using the funds for daily operations. If your business is functioning profitably (see # 1), then investors will expect that you can manage those expenses. Rather, they want to see if you are going to employ their funding for something new and different. In general, this implies you must be using their funds for improvement – a new piece of essential machinery; a new shop; a second facility; a new product line – these are just a few plans which would fit the bill for progress.
See # 4 for the similar question for startups. This is another one of the bigger small business loan risk factors. Lenders want to know their money isn’t being thrown away. After all, they make a lot more money if you pay your loan off and pay interest. Getting their money back through collections is a lot less profitable for them.
4. How Much Funding Do You Need to Reach Positive Cash Flow?
For startups, a similar question is: just how much funding will you need to get to positive cash flow and profitability? In this case, your use for the money is still a distinct one – it’s to bring your new business to profitability.
5. How Much Revenue Yearly Can Your Business Generate After Three Years?
This question is the same whether you are presently in business or you are aiming to get a startup business funded. This will separate the lifestyle businesses (designed to make their owners glad but not develop into bigger players) from the scalable businesses. A lifestyle business normally won’t get this sort of funding. Instead, it will be funded by virtue of secured debt or bootstrapping or secured debt.
A scalable business can still be modest and not expect explosive growth, but still be fundable. Your new widget warehouse might begin small. Investors would expect it to have more moderate funding needs.
6. What Number of Your Existing Clients, Channels, and Partners Will Support Your New Business Growth and Volume?
Introducing new markets (or going for new customers or trying to market new products) will be viewed as riskier, unless you have an established history of financial success via pioneering. See # 7 for the semi-comparable question for startup ventures.
7. How Do You Know That Anybody Will Buy Your Product or Service?
If you do not know your market, then you will not know how to target to those customers. If your clients are middle-aged women, they will most likely respond to different techniques than if your customers are teen boys. Merely making a product and flinging it out to the ether, praying someone will buy it, is not going to sit well with investors. Instead, they want you to have scouted out your prospective clientele prior to you coming knocking and asking for funding.
The rest of the questions are only for startups.
8. How Much Funding Can You Get From Friends and Family to Launch Your Business?
Oftentimes these are your most important investors, or they might be your only investors. Treat them well.
9. How Much Funding Can You Personally Add?
Investors would like to know this amount because it indicates a commitment to the startup. If you want to keep your life savings, you’ll be a lot more careful with funds than if you’re just playing around with other people’s money.
10. Who Comprises Your Team?
Your team does not have to be employees of your business. It can also be consultants and mentors. Contact your school. There might be an educator interested in your new business, even if you never took a class with that person. Not a college alum? Try your nearby community college just the same. A professor might even want to use your company experience and story in a lecture.
Learn more here and get started with building business credit with your company’s EIN and not your SSN.
But How Do You Best Address These Small Business Loan Risk Factors? Build Business Credit!
Small business credit is credit in a business’s name. It doesn’t connect to an entrepreneur’s consumer credit, not even if the owner is a sole proprietor and the only employee of the business.
Because of this, a business owner’s business and personal credit scores can be very different.
Consumer credit scores depend upon payments but also other elements like credit usage percentages.
But for small business credit, the scores truly only hinge on whether a business pays its debts promptly.
The Process
Building company credit is a process. It does not occur automatically. A company has to proactively work to develop small business credit.
Having said that, it can be done readily and quickly, and it is much quicker than building personal credit scores.
Vendors are a big component of this process.
Doing the steps out of order leads to repetitive denials. Nobody can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.
Company Fundability
A business needs to be fundable to credit issuers and vendors. This is the best way to address any small business loan risk factors.
Hence, a business needs a professional-looking website and e-mail address. And it needs to have site hosting bought from a vendor like GoDaddy.
Additionally, company telephone and fax numbers need to have a listing on 411. You can do that here: http://www.listyourself.net.
In addition, the business phone number should be toll-free (800 exchange or similar).
A business also needs a bank account dedicated solely to it, and it has to have all of the licenses essential for running.
Licenses and Reducing Small Business Loan Risk Factors
These licenses all must be in the perfect, accurate name of the company. And they need to have the same small business address and phone numbers.
So note, that this means not just state licenses, but possibly also city licenses.
Learn more here and get started with building business credit with your company’s EIN and not your SSN.
Working with the Internal Revenue Service
Visit the IRS web site and get an EIN for the business. They’re totally free. Choose a business entity like corporation, LLC, etc.
A company can start off as a sole proprietor. But they more than likely want to change to a variety of corporation or an LLC.
This is to decrease risk. And it will make best use of tax benefits.
A business entity matters when it pertains to taxes and liability in case of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and taxes. Nobody else is responsible.
Incorporating is a great way to address small business loan risk factors.
Kicking Off the Business Credit Reporting Process
Begin at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.
In this manner, Experian and Equifax have something to report on.
Vendor Credit Tier
First you ought to build trade lines that report. This is also called the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can begin to get credit in the retail and cash credit tiers.
These kinds of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor workwear, ink and toner, and office furniture.
But to start with, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are commonly Net 30, rather than revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, like within 30 days on a Net 30 account.
Details
Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. Compared to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.
To start your business credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then make use of the credit.
Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than one time to these vendors. So, this is to validate you are responsible and pay punctually. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
Retail Credit Tier
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are companies which include Office Depot and Staples.
Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.
One example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or higher.
Fleet Credit Tier
Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and take care of vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.
One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or higher and a 411 company telephone listing.
Shell might claim they want a certain amount of time in business or revenue. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get approval.
Learn more here and get started with building business credit with your company’s EIN and not your SSN.
Cash Credit Tier
Have you been sensibly managing the credit you’ve up to this point? Then move onto the cash credit tier. These are service providers like Visa and MasterCard. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.
One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or higher. And they also want you to have 10 trade lines reporting on your D&B report.
Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).
Also, they want you to have an established business.
These are commonly MasterCard credit cards. If you have 14 trade accounts reporting, then these are attainable.
Monitor Your Business Credit and Directly Address Small Business Loan Risk Factors
Know what is happening with your credit. Make certain it is being reported and address any mistakes as soon as possible. Get in the practice of checking credit reports and digging into the particulars, and not just the scores.
We can help you monitor business credit at Experian and D&B for only $24/month. See: www.creditsuite.com/monitoring.
At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. That will cost about $19.99.
Update Your Information to Address Small Business Loan Risk Factors
Update the details if there are inaccuracies or the details is incomplete.
Fix Your Business Credit to Reduce Your Small Business Loan Risk Factors
So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.
Disputes and How They Help Reduce Small Business Loan Risk Factors
Disputing credit report inaccuracies typically means you send a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always mail copies and retain the original copies.
Fixing credit report inaccuracies also means you specifically spell out any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail to have proof that you sent in your dispute.
Taking the initiative and handling any errors as fast as possible will also help address any small business loan risk factors.
A Word about Building Business Credit and Small Business Loan Risk Factors
Always use credit sensibly! Don’t borrow beyond what you can pay back. Track balances and deadlines for payments. Paying off promptly and completely does more to boost business credit scores than just about anything else. And beyond that, responsible account management will counter any small business loan risk factors.
Establishing company credit pays. Great business credit scores help a small business get loans. Your loan provider knows the business can pay its debts. They know the business is for real.
The company’s EIN links to high scores and lending institutions won’t feel the need to call for a personal guarantee.
Addressing Small Business Loan Risk Factors: Takeaways
Business credit is an asset which can help your business in years to come. Learn more here and get started toward establishing company credit.
The post Fundability and How it Helps With Small Business Loan Risk Factors appeared first on Credit Suite.
Is Your Business Fundable: An Analysis of Fundability
Many of us analyze ourselves mercilessly in the mirror. We pick apart every flaw and consider how we might change or improve each one. While that may or may not be a positive activity, in the same way, you can improve the success of your business by reflecting on what is working and what is not. An analysis of fundability is one way to do this.
How to Analyze the Fundability of Your Business and Make Positive Changes
Take a step back and look at your business in terms of fundability. Does your business appear fundable to lenders? What does that even mean? It means your business appears to lenders to be one that they can lend to with little risk. Risk of what? The risk of you not paying back your debt. They don’t make money if you don’t pay, and they are definitely in it for the money.
How do you make sure that’s the case for you? You need to analyze the fundability of your business. There are hundreds of factors that can affect fundability. The fact that they all interconnect and affect each other further complicates things. As with all things, the best place to start is at the beginning, the foundation, if you will.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
The Foundation of Fundability
The first thing you need to look at during this analysis is how your business is set up. It makes a difference. In fact, it makes a big difference.
Dedicated Contact Information
For example, you cannot share a phone number and address with your business. A business has to have a dedicated business phone number and address.
This can happen in a couple of ways. First, you can get a separate phone line and have a separate business location. This is pretty standard. However, it can cause issues if you run your business online out of your home.
In this case, you can get a virtual office address and a VoIP (Voice over Internet Protocol) business phone number. Basically, it allows you to speak on the phone via the internet instead of phone lines. A virtual address service will often offer other services as well, such as live receptionists. VoIP phone numbers can typically be forwarded to any number you want, meaning you do not have to get a dedicated line to have a dedicated number.
Why does your business contact information need to be separate from your own? There are a number of reasons, but for fundability there are two. First, it makes your business seem more professional. In a lender’s eyes, this lends itself to appearing more fundable.
Next, it creates the separation needed between business and owner to ensure the business can build credit separate from the owner’s personal credit. While this isn’t the only step necessary for separation, it is a necessary step.
EIN
Another thing to look at in your analysis of fundability is whether your business has an EIN. A lot of business owners, especially those running their business as a sole proprietorship, tend to use their social security number on business documents. However, an EIN is a much better option.
This not only further separates the business from the owner, but appears more professional, and therefore fundable, to lenders as well. In addition, it helps ensure that business credit accounts stay off your personal credit report.
You can get an EIN for free from the IRS. The process is fast and easy.
Incorporation
As mentioned before, many small businesses run as a sole proprietorship because it is easiest and cheapest. However, when this comes up in your fundability analysis, you are going to need to change it. Incorporation is a vital part of fundability.
There are several reasons for this. Again, incorporating creates the separation from owner necessary for building business credit and appearing fundable to lenders. However, it also helps protect your personal assets should the business struggle.
What does not matter, is which option for incorporation you choose. Whether you incorporate as an LLC, an S-corp, or a corporation does not make a difference when it comes to creating separation and fundability.
Each option comes at a different cost and with varying levels of liability protection. Choose which one is best for you based on your budget and the level of liability protection you need. Usually, it is best to talk to an attorney or tax professional, when making this determination.
Note that it is abundantly better to incorporate from the first day of operations. This is because, whenever you do incorporate, you lose time in business and payment history from when you were in operation as a sole proprietorship or a partnership. This means the longer you wait, the more backtracking you will have to do. Not incorporated yet? Now is definitely the time.
Separate Business Bank Account
The next step in your analysis of fundability is to take stock of your business bank account. Is it the same as your personal account? That won’t work. You need a separate, dedicated business bank account.
For one thing, this again creates the separation necessary to build business credit, which is a huge piece of being fundable. However, there are also a few different types of financing that are only available if you have a business bank account.
For example, you cannot get a merchant cash advance without a business bank account, and you cannot get a merchant account to accept credit card payments. Studies show that customers spend more when they can pay with a credit card. Also, several business credit cards want to see a business bank account. These are both in addition to lenders that may want to see a business bank account with a minimum average balance before approving a loan.
Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.
Analysis of Fundability: Consistent and Professional Public Presence
This part of fundability can get pretty complicated because it has so many interconnecting pieces. The consistency part can be especially daunting because it goes all the way back to the start of your business. If it has been in operation for a while, you can see how that could be an issue.
The thing is, most business financing applications are denied due to fraud concerns. This can be an issue for you if you have different information across various records. All names, contact information, etc. needs to be consistent when it comes to public records, accounts, websites, social media, licenses, and anything else you can think of.
In addition, you need to pay careful attention to your online reputation. If you have poor reviews or a ton of complaints, you could run into fundability problems. This includes both online review sites and the Better Business Bureau.
Another important piece here is your company website. First, you have to have one. However, it can’t just be something you throw together. It needs to be professionally designed, and you need to pay for hosting. Your business email address needs to have the same URL as your website also. You shouldn’t use a free email service such as Yahoo or Gmail.
Analysis of Fundability: Business Credit
The next thing you have to consider when you do an analysis of fundability for your business is your business credit score. First, do you even have one? If your business isn’t set up to be fundable as discussed above, probably not. That’s your first step. Once that is done, you have to get accounts reporting to the business credit reporting agencies to start building your credit score.
Get a D-U-N-S Number
Dun & Bradstreet is the largest and most commonly used business credit reporting agency. Each business in their database has a D-U-N-S number. If you do not have one, they will not recognize you and any accounts reporting will be discarded. You must have this number. You can get one for free on their website here.
Experian has a similar number known as the BIN. Find out more about that here.
Other Agencies
Other agencies can affect your fundability as well. For example, there are two other main business credit reporting agencies. They are Experian and Equifax. Your record with these and other agencies can affect your ability to get funding.
Other credit agencies do exist and some lenders do use them. CreditSafe and FICO SBSS are just a couple of examples. In addition, your file with LexisNexis and The Small Business Finance Exchange can affect your business credit score, and thus your fundability.
Work with Starter Vendors in the Vendor Credit Tier
The vendor credit tier is the best place to get started when it comes to building business credit. Many of the vendors in this tier will extend net terms and report payments, without doing a credit check. Instead, they will rely on length of time in business and income to determine eligibility.
Monitor Your Business Credit
The last step in building business credit for fundability is to monitor your business credit. This should be an ongoing step in your analysis of fundability as well. You need to stay on top of which accounts are being reported for one thing. This is how you will know you can move on to the next tier. Even after this though, you need to know where things stand.
If you find mistakes, you can contact the reporting agency in writing and have them corrected. Be sure to send copies of backup documentation, not originals.
We can help you monitor your business credit for a fraction of what it will cost with the CRAs.
Analysis of Fundability: Your Financials Matter, Both Business and Personal
If you are a very small business, you may not give much thought to your financial statements. When you are doing an analysis of fundability, you have to however. You need to know how to read them, and how to understand what they are telling you.
Details such as whether you are turning a profit and what assets you have available for collateral will make a difference to lenders when they are making fundability decisions. They will need to see that your business is able to pay back the funds they lend.
In truth, any reports on your personal finances can make a difference as well. For example, if you are flagged in the ChexSystems system for bad checks, that could come back to haunt you.
Pay Your Bills, Both Business and Personal
This is the single most important thing when it comes to an analysis of fundability. Are you paying your bills consistently and on-time? If so, can you continue to do so into the future? If not, what’s the problem? What changes can you make to ensure that you get back on track with making payments?
It all boils down to making good decisions. This is especially true when building business credit by working through the credit tiers. During that process, you are adding a lot of new accounts in an effort to move on to the next tier. Be sure to keep tabs on what you can pay, and do not over do it. Also, only buy thing you can actually use for your business. There is no need to buy things you do not need to build credit.
Analysis of Fundability: The Application Process
This is where all the pieces come together. The lender will look at your foundation closely. Your business name, address, and ownership information has to be verifiable. You also have to make sure the timing is right for borrowing, and that you have selected a lending product that is a good fit for your business.
This is where issues with consistency will come to light. Any red flags due to identity can cause problems. This is also where any liens or judgements can begin to hinder your chances.
If you make sure your have a foundation for fundability, work on making sure you have strong business credit, and keep your finances in order, the application process should be pretty smooth.
Mirror Mirror On the Wall, How To Become the Most Fundable Business of All
You need to know if your business is fundable. If it isn’t, you need to fix it. The only way to find out is to do an analysis of fundability. Take stock. What do your foundation, business credit, and financial situation look like? Figure out what you are doing well and what you need to work on to ensure your business can get the funding it needs to grow and thrive long into the future.
The post Is Your Business Fundable: An Analysis of Fundability appeared first on Credit Suite.