Tag: Matters

Why Your Business Address Matters

It matters for a lot of reasons. However, most are surprised to find your business address can actually affect your ability to get funding for your business. You always have to put your business mailing address on funding applications, right?

Your Business Address Can Affect Credit Decisions

Still, what most do not realize is that underwriters and credit providers actually take the business address into consideration when it comes to approval decisions. It’s not just about where your business is located.

For example, if your business mailing address is the same as your personal address, they are going to ask a few questions. It’s not necessarily a bad thing to use your home address, especially if it is a physical street address. But, be prepared for them to look deeper if this is the case.

What Works and What Doesn’t?

The really big issue is if your business address is a P.O. Box or something similar. A business mailing address needs to be a physical address, as in a real street address, where you can receive mail.

For most credit providers, a virtual business address can serve this purpose, though there are some that do not like a virtual office address. That’s something to consider before you choose to use a virtual mailing address.

It’s also important that your business address is consistently listed the same everywhere. It has to match exactly on all documents, right down to every last period and ampersand.

That’s one of many reasons it’s good to choose the right business address option in the beginning. The less you have to change it, the fewer chances there are for mistakes.

Let’s dig into this topic a little deeper.

How Do You Build Business Credit With a Business Mailing Address?

Your business address can affect your ability to build business credit. It starts with the business name, as of course that is a part of the business address. Make sure the name you pick does not indicate a risky business.

If you are in a business that some lenders consider to be risky, just leave that out of the name. Just name it “Bob’s” instead of “Bob’s Gas Station.” 

Also, the company has to be a corporation. This can be one of those red flags a home address can throw up. Many sole proprietors and partnerships use a home address, so they are likely to look more closely at your business entity.

Your business address is about more than location and getting postal mail. The right address adds credibility and separation of the business from the owner. These are things that lenders and credit providers take into consideration when it comes to extending business credit.

Why Can’t a PO Box or Mail Box from the UPS Store Work as a Physical Address?

While you can receive postal mail and packages at a local post office box or other similar address, it’s not enough. Just receiving mail doesn’t turn PO boxes into physical space. It’s got to be an actual physical address.

Some lenders and credit providers will disqualify you as soon as they see anything other than a real street address on an application.

Considerations When Using a Home Address for a Business Address

Of course your home address is a physical space that has a real street address. Your business can receive postal mail and packages there. However, here are some drawbacks to consider before you use your personal address as your business address.

For one thing, home based business owners that use their home address won’t be able to keep that address private. Of course, it isn’t hard to find someone’s address anyway. But, you should still take this into consideration if you are trying to decide whether to use your home address as your business address.

Furthermore, while a business owner might not often use their home office for anything more than work, there is always the chance that you may need to have a face to face meeting. A kitchen table probably won’t project much of a professional image.

There is a value to having a separate business address. Depending on the type of business, you are likely to have to move out of your home as you start to grow and expand anyway.

Can a Virtual Business Address Work?

It is possible to run a business out of your home, have an actual physical business address, and not use your home address. The solution is a virtual business address.

A virtual address for your business does count as an actual mailing address. When you use a virtual business address, you have access to a virtual mailbox. It is a real mailbox at a location other than the post office.

Virtual business addresses with access to a virtual mailbox can offer more benefits as well. For example, a virtual office address service may offer access to both work space and meeting spaces. This will avoid having to meet with clients or customers in your home.

Receiving packages and important documents in a virtual mailbox such as this may be more secure that having them delivered to your home as well. Not only is there usually someone there during the day, but some virtual address services have 24-hour security.

It’s also more secure and professional looking to have clients meet you in this type of space, even if it is a shared space in a virtual business address building, than to have them at your home.

In addition to mailbox services and workspace options, sometimes a virtual business address service will offer receptionist and message services. That means, if needed, you can have them take calls and messages for your business and pass them on to you.

Downsides to Using a Virtual Address as Your Business Address

One big issue is that a corporation or a limited liability company will need a registered agent. While fine for receiving business mail, virtual offices do not work well as a registered agent address.

In addition, there can (and often are) multiple business addresses on the same site with a virtual office address. Depending on how much mail you get there, you may find you need to chase down your business mail if it ends up in the wrong hands. This type of set up makes it super easy for the post office to make a mistake in delivery.

When it comes to funding, we know of at least one credit provider that will not accept a virtual business address. So, while in some cases the benefits outweigh the drawbacks, it is possible this type of mailing address could prevent you from getting funding in some cases.

Virtual Business Address Providers

Different areas have various options when it comes to a virtual business address. You’ll have to choose based on what is available that offers what you need. Do you just need to keep your home address private? Are you looking for office space to use to meet with business contacts? Do you want the option of having them forward mail to your home?

Here are three virtual office providers we love:

What is the Right Type of Business Address for Your Small Business?

The fact is, your business address is about more than a place to receive packages and other mail. It’s about more than the location of your business. The address listed as your business address can make a big difference when it comes to getting funding and building business credit.

Consistency is Key

Whether you are a new business or just have a new address for your business, make certain it is listed exactly the same everywhere. That means on every document, every piece of marketing material, your website, and all applications.

A Separate Physical Location is Best

If you have a business location that is separate from your home, use that address. That is the preferable option. If you have a home based business, virtual offices can work well in most cases, though there may be a few cases where a lender or credit provider will not accept it.

Your Home Address CAN Work in a Pinch

Using your home address can work as well, if you are not worried about privacy issues, do not need to hold meetings, and do not think you will outgrow the space.

A Post Office Box Is Not an Option

What is absolutely not an option is a P.O. box number or something similar. Though they are easy access and seem like an easy solution for home based businesses or new business without a location yet, and they work well for personal use, they are not an option for a business address if you ever intend to build business credit and access funding. 

The post Why Your Business Address Matters appeared first on Credit Suite.

How to Qualify for a Business Loan: What Matters and What Doesn’t

Most agree, when you start wondering how to qualify for a business loan, the waters can become muddied with things that do not really matter.  As a result, it can be hard to distinguish between what really matters, and what doesn’t. In fact, many factors affect whether or not you qualify for a business loan.

How to Qualify for a Business Loan: What Really Matters?

Truly, there is a lot of conflicting information out there on how to qualify for a business loan.  Is it business credit? Is it personal credit? What else makes a difference? Can you get a loan without business credit?  Do you really need a business plan? What reports are they looking at? Let’s clear some of this up. 

How to Qualify for a Business Loan: What You Don’t Know Can Hurt You

First, you need to know that there are probably a lot of things that make a difference in how to qualify for a business loan that you don’t even realize.  At first glance, a lender is going to consider fundability. Usually, most borrowers think this has only to do with your credit score. However, there are many layers to fundability.  Together, they can all make a difference in whether or not you are approved. 

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

How to Qualify for a Business Loan: Understanding Fundability

Not surprisingly, one of the main things about fundability that most business owners do not realize is that it actually starts with how your business is set up.  For example, even the address and telephone number you use for your business can affect fundability. 

Set Your Business Up to Be Fundable

 To help, here are some things to consider when setting up your business to appear fundable. 

  • Contact Information

It has to be separate from your personal contact information. 

  • EIN

If you don’t know, this is the equivalent of an SSN for your business. 

  • Incorporate

It’s true, you have to incorporate as either an LLC, and S-corp, or a corporation.  

  • Business Bank Account

A dedicated business bank account is vital to fundability. 

  • Licenses

Make sure you have all the licenses you need to operate your business. 

  • Website

You need a professionally designed website and an email address with the same URL. 

Honestly, this is a super simple summary.  Get more details on how to set up your business to be fundable here.

Other Things that Affect Fundability

In addition to how your business is set up, there are about a million other things that can affect the fundability of your business.  They can all be broken down into the following categories. 

Business Credit Report

This 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. Still, the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Consequently, you have no way of knowing which one your lender will choose. As a result, you have to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

There are other business data agencies that affect those reports indirectly.  This is in addition to the business credit reporting agencies that directly calculate and issue your credit reports.  Two examples of other agencies include LexisNexus and The Small Business Finance Exchange. They gather data from a variety of sources, including public records.  What does this mean for you? It may surprise you, but they could have access to information relating to automobile accidents and liens, among other things. You cannot access or change the data the agencies have on your business.  However, 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.  You need to be aware that these numbers exists. Some of them are simply assigned by the agency. 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. 

Business Credit History

Your credit history has everything to do with all things related to your credit score.  Of course, this is a huge factor in the fundability of your business.  

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?

Of course, 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 get missed. 

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

This is a problem.  A lot of loan applications are turned down each year due to fraud concerns simply because things don’t match up.  For example, maybe your business licenses have your personal address but now you have a business address. That needs to be changed.  Maybe 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 often.   When it comes to business credit reports, you can monitor through the reporting agencies directly, or save money here. 

Financial Statements

First, both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, but business and personal.  

Business Financials

Typically, 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 credible and legitimate. If you cannot afford it monthly or quarterly, then at least have professional statements prepared annually. Then, they will be there whenever you need them. 

Personal Financials

Usually, this is just tax returns for the previous three years.  That is the bare minimum you will need. Other information lenders may ask for include check stubs and bank statements. 

Bureaus

There are 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. 

Other than that, there is also ChexSystems.  They monitor bad check activity, and that can affect 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? This all affects fundability. 

Personal Credit Historyhow to qualify for a business loan Credit Suite

Your personal credit score from Experian, Equifax, and Transunion affects fundability as well.  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 weak one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to make sure mistakes get corrected and that there are no fraudulent accounts reporting. 

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 that. 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?   

How to Qualify for a Business Loan: Choose the Right Product and the Right Lender

This  falls into that application process section of fundability.  You have to know what you need, what you are eligible for, and what type of lender will work best for your needs.  This will help you know where to apply and what to apply for, so that you can have the best possible chance of qualifying. 

How to Qualify for a Business Loan: Choose the Right Type Business Loan

When it comes to business loans, these are the general types of products available. 

Traditional Loans

These are the standard loans that disperse as a set amount of funds, with the borrower repaying with equal payments over a certain period of time.  These can be secured or unsecured.

Line of Credit 

This is revolving debt similar to credit cards.  Borrowers are given a maximum limit of the amount of funds they can use, but only pay back the amount that they actually use.  

Invoice Factoring

Factoring invoices is an option if you have receivables.   The lender basically buys unpaid invoices from you at a premium, meaning you do not get full value.  However, you do get fast cash.

Merchant Cash Advance

If you accept credit card payments, a merchant cash advance can help you out in a cash pinch.  It is basically just what is says. It’s a cash advance on predicted credit card sales. They base the amount of the loan on average daily credit card sales, and then take payment from future credit card sales. 

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

How to Qualify for a Business Loan: Choose the Right Type of Lender

 A lot of business owners think that a bank is their only option.  There are a few different types of lenders to consider however. 

  • Large Commercial Banks

  • Community Banks

  • Credit Unions

  • Private Lenders

Of course, which one of these you use will depend on your specific needs and qualifications.

How to Qualify for a Business Loan: You Need an Awesome Business Plan

While there are forms available from most lenders for you to simply write in information related to your business plan, that’s not the best way to do it.  A professionally written, complete business plan makes a far better impression on a lender. This is true even if you are an established business applying for a loan.  The only difference is, you will write a plan for how you will use the funds in relation to your current business rather than a business you intend to start. In general, a complete and professional business plan contains the following. 

Opening 

First comes the opening. It includes an executive summary, a more detailed description of the business, and your strategy for getting started.  

Market Research 

Next, there is a section for market research.  As you might guess, this section consists of market analyses including an analysis of your audience and an analysis of any existing competition. It will tell what need exists, how you will fill it, and how you will fill it better than the competition.

How to Qualify for a Business Loan: The Plan 

This can also be broken down into two parts. 

Plan for Design and Development

This is your plan from start to finish.  It discusses what steps are you going to take. In comparison, this is more detailed than your strategies section.

Plan for Operation and Management

This is where a number of questions are answered in relation to the management of the business.  For example, who will own or does own the business? Furthermore, who will run or currently runs it from day to day? It could be as easy as stating that you are the sole owner and operator.  In contrast, it could be as complicated as laying out a complete partnership plan or board or directors’ format. Truthfully, it just depends on your specific business. 

Financials

Lastly, this section includes current financials, projections, and a budget plan for the loan funds you are applying for.  As you can imagine, lenders want to see that you know how to handle and funds you get. Furthermore, they want to know that you have a plan for paying them back.

Take note, if you are not a great writer, you may need to hire a writer to help you with this.  If you have no clue how to do market research, you may need to outsource that piece as well. Thankfully, most small business development centers offer help with business plans also.  Go here to find an SBDC near you. 

How to Qualify for a Business Loan: Wrap Up

Hands down, the absolute first step in the process has to be to do an analysis of fundability. Then, you will know where you stand. As a result, you will have a better idea of what you may need to do to increase fundability.  Also, you will have a better understanding of what type of lender you need to go with and which type of product will best fit your needs.  Then, you can get to work on your business plan. Remember, while nothing is guaranteed, following these steps can help increase your chances of loan approval immensely. 

The post How to Qualify for a Business Loan: What Matters and What Doesn’t appeared first on Credit Suite.

How to Qualify for a Business Loan: What Matters and What Doesn’t

Most agree, when you start wondering how to qualify for a business loan, the waters can become muddied with things that do not really matter.  As a result, it can be hard to distinguish between what really matters, and what doesn’t. In fact, many factors affect whether or not you qualify for a business loan.

How to Qualify for a Business Loan: What Really Matters?

Truly, there is a lot of conflicting information out there on how to qualify for a business loan.  Is it business credit? Is it personal credit? What else makes a difference? Can you get a loan without business credit?  Do you really need a business plan? What reports are they looking at? Let’s clear some of this up. 

How to Qualify for a Business Loan: What You Don’t Know Can Hurt You

First, you need to know that there are probably a lot of things that make a difference in how to qualify for a business loan that you don’t even realize.  At first glance, a lender is going to consider fundability. Usually, most borrowers think this has only to do with your credit score. However, there are many layers to fundability.  Together, they can all make a difference in whether or not you are approved. 

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

How to Qualify for a Business Loan: Understanding Fundability

Not surprisingly, one of the main things about fundability that most business owners do not realize is that it actually starts with how your business is set up.  For example, even the address and telephone number you use for your business can affect fundability. 

Set Your Business Up to Be Fundable

 To help, here are some things to consider when setting up your business to appear fundable. 

  • Contact Information

It has to be separate from your personal contact information. 

  • EIN

If you don’t know, this is the equivalent of an SSN for your business. 

  • Incorporate

It’s true, you have to incorporate as either an LLC, and S-corp, or a corporation.  

  • Business Bank Account

A dedicated business bank account is vital to fundability. 

  • Licenses

Make sure you have all the licenses you need to operate your business. 

  • Website

You need a professionally designed website and an email address with the same URL. 

Honestly, this is a super simple summary.  Get more details on how to set up your business to be fundable here.

Other Things that Affect Fundability

In addition to how your business is set up, there are about a million other things that can affect the fundability of your business.  They can all be broken down into the following categories. 

Business Credit Report

This 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. Still, the main ones are Dun & Bradstreet, Experian, Equifax, and FICO SBSS.  Consequently, you have no way of knowing which one your lender will choose. As a result, you have to make sure all of these reports are up to date and accurate. 

Other Business Data Agencies 

There are other business data agencies that affect those reports indirectly.  This is in addition to the business credit reporting agencies that directly calculate and issue your credit reports.  Two examples of other agencies include LexisNexus and The Small Business Finance Exchange. They gather data from a variety of sources, including public records.  What does this mean for you? It may surprise you, but they could have access to information relating to automobile accidents and liens, among other things. You cannot access or change the data the agencies have on your business.  However, 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.  You need to be aware that these numbers exists. Some of them are simply assigned by the agency. 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. 

Business Credit History

Your credit history has everything to do with all things related to your credit score.  Of course, this is a huge factor in the fundability of your business.  

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?

Of course, 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 get missed. 

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

This is a problem.  A lot of loan applications are turned down each year due to fraud concerns simply because things don’t match up.  For example, maybe your business licenses have your personal address but now you have a business address. That needs to be changed.  Maybe 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 often.   When it comes to business credit reports, you can monitor through the reporting agencies directly, or save money here. 

Financial Statements

First, both your personal and business tax returns need to be in order.  Not only that, but you need to be paying your taxes, but business and personal.  

Business Financials

Typically, 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 credible and legitimate. If you cannot afford it monthly or quarterly, then at least have professional statements prepared annually. Then, they will be there whenever you need them. 

Personal Financials

Usually, this is just tax returns for the previous three years.  That is the bare minimum you will need. Other information lenders may ask for include check stubs and bank statements. 

Bureaus

There are 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. 

Other than that, there is also ChexSystems.  They monitor bad check activity, and that can affect 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? This all affects fundability. 

Personal Credit History

Your personal credit score from Experian, Equifax, and Transunion affects fundability as well.  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 weak one is to make payments consistently on time. 

Also, make sure you monitor your personal credit regularly to make sure mistakes get corrected and that there are no fraudulent accounts reporting. 

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 that. 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?   

How to Qualify for a Business Loan: Choose the Right Product and the Right Lender

This  falls into that application process section of fundability.  You have to know what you need, what you are eligible for, and what type of lender will work best for your needs.  This will help you know where to apply and what to apply for, so that you can have the best possible chance of qualifying. 

How to Qualify for a Business Loan: Choose the Right Type Business Loan

When it comes to business loans, these are the general types of products available. 

Traditional Loans

These are the standard loans that disperse as a set amount of funds, with the borrower repaying with equal payments over a certain period of time.  These can be secured or unsecured.

Line of Credit 

This is revolving debt similar to credit cards.  Borrowers are given a maximum limit of the amount of funds they can use, but only pay back the amount that they actually use.  

Invoice Factoring

Factoring invoices is an option if you have receivables.   The lender basically buys unpaid invoices from you at a premium, meaning you do not get full value.  However, you do get fast cash.

Merchant Cash Advance

If you accept credit card payments, a merchant cash advance can help you out in a cash pinch.  It is basically just what is says. It’s a cash advance on predicted credit card sales. They base the amount of the loan on average daily credit card sales, and then take payment from future credit card sales. 

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

How to Qualify for a Business Loan: Choose the Right Type of Lender

 A lot of business owners think that a bank is their only option.  There are a few different types of lenders to consider however. 

  • Large Commercial Banks

  • Community Banks

  • Credit Unions

  • Private Lenders

Of course, which one of these you use will depend on your specific needs and qualifications.

How to Qualify for a Business Loan: You Need an Awesome Business Plan

While there are forms available from most lenders for you to simply write in information related to your business plan, that’s not the best way to do it.  A professionally written, complete business plan makes a far better impression on a lender. This is true even if you are an established business applying for a loan.  The only difference is, you will write a plan for how you will use the funds in relation to your current business rather than a business you intend to start. In general, a complete and professional business plan contains the following. 

Opening 

First comes the opening. It includes an executive summary, a more detailed description of the business, and your strategy for getting started.  

Market Research 

Next, there is a section for market research.  As you might guess, this section consists of market analyses including an analysis of your audience and an analysis of any existing competition. It will tell what need exists, how you will fill it, and how you will fill it better than the competition.

How to Qualify for a Business Loan: The Plan 

This can also be broken down into two parts. 

Plan for Design and Development

This is your plan from start to finish.  It discusses what steps are you going to take. In comparison, this is more detailed than your strategies section.

Plan for Operation and Management

This is where a number of questions are answered in relation to the management of the business.  For example, who will own or does own the business? Furthermore, who will run or currently runs it from day to day? It could be as easy as stating that you are the sole owner and operator.  In contrast, it could be as complicated as laying out a complete partnership plan or board or directors’ format. Truthfully, it just depends on your specific business. 

Financials

Lastly, this section includes current financials, projections, and a budget plan for the loan funds you are applying for.  As you can imagine, lenders want to see that you know how to handle and funds you get. Furthermore, they want to know that you have a plan for paying them back.

Take note, if you are not a great writer, you may need to hire a writer to help you with this.  If you have no clue how to do market research, you may need to outsource that piece as well. Thankfully, most small business development centers offer help with business plans also.  Go here to find an SBDC near you. 

How to Qualify for a Business Loan: Wrap Up

Hands down, the absolute first step in the process has to be to do an analysis of fundability. Then, you will know where you stand. As a result, you will have a better idea of what you may need to do to increase fundability.  Also, you will have a better understanding of what type of lender you need to go with and which type of product will best fit your needs.  Then, you can get to work on your business plan. Remember, while nothing is guaranteed, following these steps can help increase your chances of loan approval immensely. 

The post How to Qualify for a Business Loan: What Matters and What Doesn’t appeared first on Credit Suite.

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Starting Business Credit – Why Your Business Address Matters

Did you know that your business address matters when it comes to starting business credit?  Your address matters. And there are other things that can make a difference. Here’s how you can start off on the right foot when it comes to business credit. Your Business Address, and  5 Other Things You Didn’t Know Make … Continue reading Starting Business Credit – Why Your Business Address Matters

Starting Business Credit – Why Your Business Address Matters

Did you know that your business address matters when it comes to starting business credit?  Your address matters. And there are other things that can make a difference. Here’s how you can start off on the right foot when it comes to business credit.

Your Business Address, and  5 Other Things You Didn’t Know Make a Difference When Starting Business Credit

When you first start a business, you may not be thinking about anything other than how to pay for it  and how to get customers. Many businesses start small from home. They operate in either an extremely intimate area, or they work mostly online.  Social media-based businesses have exploded in recent years. 

That being the case, new business owners often simply use their home address as their business address.  It’s the easiest thing to do, and makes sense after all. I mean, if you are running your business out of your house, why wouldn’t you use your home address? 

What frustrates you the most about funding your business? Check out how our free guide can help. 

Looking into the future however, you are going to need to build business credit.  For that, your business needs its own address, separate from your personal address. 

Why Is Starting Business Credit Important? 

If you have great personal credit, business credit probably never even crossed your mind.  You just figure you can get all the funding you need based on the merits of your personal credit score. If your personal score isn’t the best, you may have explored other options and realize that business credit is a thing. 

Here is what you may not know, either way.  You cannot just apply for credit in your business name and assume that any credit you get is business credit.  Unless you set up your business in a very specific way and follow a very intentional process, those accounts are going to report to your personal credit.  This is true even if you apply with your business name. 

Why does this matter?  There are a few reasons actually.  First, personal credit simply cannot handle the spending necessary to run a business.  You will either exceed your limits continually or consistently hover near them. Even if you pay off your cards each month, staying near limits can affect your score negatively.  It results in a high debt-to-credit ratio, and that will cause your personal score to drop.

Conversely, cards obtained on the merits of your business credit will usually have higher limits.  That means more spending power. Not only that, but if there is and issue with your business debt, your personal credit will be protected because those accounts will not be on your personal credit report.

How to Get a Business Address

Now that you know why you need business credit, you need to know how to get it.  Like I said, there is more to it than just applying for credit using your business name.  Your business has to be set up a certain way. You also have to be intentional about getting accounts that report to business credit rather than personal credit.

For your business to be set up in a way that is conducive to building business credit, it needs to be easily recognizable as a fundable entity separate from the owner.  One of the first steps toward accomplishing that is for the business to have an address different than the owner’s personal address.

The question that most business owners ask about this is, how do you get a business address that isn’t your home address if your business is in your house?  Well, the obvious first option is to get a P.O. Box. That works for some things, but some lenders want to see a physical address. 

Of course, if you are running a business online or from your home, you are wondering how you can do that.  The answer is a virtual office.

What frustrates you the most about funding your business? Check out how our free guide can help. 

What is a Virtual Office and How Does it Work?

According to Investopedia, “A virtual office gives businesses a physical address and office-related services without the overhead of a long lease and administrative staff. With a virtual office, employees can work from anywhere but still have things like a mailing address, phone answering services, meeting rooms, and videoconferencing.”  

Basically, virtual offices operate as a single unit.  Sometimes there is a physical location that has meeting rooms and such available as needed. However, more often it is operated solely online with a physical mailing address and other services you can use, as mentioned above. These services are ideal for those that need a physical address but do not need an actual office. 

3 Stellar Options for Virtual Offices

If You think a virtual office space is best for your business, here are three top options to help get you started. 

Davinci

Davinci offers a prime business address with options to hire a receptionist, book meeting space, and live chat.  Prices are variable. Call for a quote or go here to learn more. 

Alliance Virtual Offices

Alliance offers a physical address, office space, mail services, and phone answering services starting at $125.  Go here to learn more. 

Regus

In addition to virtual office services, Regus has options for meeting rooms and more.  Find out more here. 

What Else Matters: 5 Other Things You Didn’t Know Make a different When Starting Business Credit

Separating your business from yourself for the purpose of starting business credit takes more than having a separate business address. Here are some other steps that you must take to make your business appear fundable on its own to lenders. 

Startup Biz Credit Suite

You Need a Business Phone Number Before Starting Business Credit

This is for pretty much the same reason that you need a business address that is different from your own.  Your address and phone number are both identifying factors that point back to your personal credit report. If you associate them with your business, you run the risk of business accounts reporting on personal credit. 

Your business phone number should be toll-free, and it needs to be listed in the business directories.  You can handle this at: http://www.listyourself.net/ListYourself/

You Need a Professional Business Website Before Starting Business Credit

Think about it.  In today’s world, if you aren’t online do you really even exist?  The first place anyone looks for anything is online. Having a business website is a must.  You can’t just throw something together though. It is essential that the website be user friendly and well put together.  It is almost always worth it to pay a professional to handle this. Oh, and don’t use a free hosting service. That does not look professional.  Pay for hosting through a service like GoDaddy.

You Need a Dedicated Business Email Address Before Starting Business Credit 

This goes along with the other separate business contact information.  Don’t use your personal email address as your business email. Also, make sure your business email has the same URL as your website.  A free email service such as Yahoo or Gmail will not serve you as well. 

Your Business Needs to Formally Incorporate Before Building Business Credit

If you operate as a sole proprietor or a partnership, there will never be enough separation between you and your business to build separate business credit.  You need to formally incorporate as either a corporation, an S-corp, or an LLC. Here is a little more information about each of these options.

Corporation

 This is the most expensive option, but it also offers the most protection from liability. There is a double taxation caveat with this option that is a turn off for most. Owners pay tax at both the business level and the shareholder level. In some cases, this is the best option anyway. 

 S-Corp

 S-Corps are very similar to corporations, but double taxation isn’t an issue. There are also limits on the number of shareholders allowed among other restrictions set forth by the IRS. 

 LLC

 An LLC, or a limited liability corporation, is the least expensive option. It still offers some liability protection, and has fewer restrictions than an S-corp. 

Each of these options serves the purpose of further separating the business from the owner when you are looking to start a business credit profile. The option you choose should be the one that best suits your needs for tax purposes. 

You Need a Business Bank Account to Start Business Credit Building

Another common practice of small business owners is to use their personal bank account for business funds.  While in the beginning this seems like the best option simply because it is easy, it further mingles your personal information with your business information.  Not only that, but it makes separating business expenses from personal expenses at tax time very hard. 

You need a separate business account.  When it comes to starting business credit, this helps in two ways.  First, it helps to separate the business from the owner. Also, so lenders want to see a certain balance in a business bank account before approving credit.  

Other Things You Need to Know Before Starting Business Credit

In addition to the things mentioned above, there are a few other steps you need to take to set up your business for starting business credit. 

The EIN Wins in the Battle of EIN vs. SSN When Starting Business Credit

And EIN is the business equivalent of a social security number. If you use your SSN to apply for credit for your business, your personal credit will get involved. By using a unique identification number specifically for the business, you ensure that your business is separate from your SSN. You can get an EIN for free here. 

You Have to Have a D-U-N-S Number to Have Business Credit

Here’s why.  Dun & Bradstreet is the largest and most commonly used business credit reporting agency.  If you do no have a D-U-N-S number, you cannot have a business credit file with them. You definitely need a business credit profile with D & B.

Choose Creditors that Work with the SBFE

The SBFE is a not-for-profit entity that gathers data on small businesses from its members. The data is then used to compile comprehensive credit information. Lenders that are SBFE members have access to this information.  They use this information to make credit decisions.

The Small Business Finance Exchange does not lend money. It also does not create or distribute credit reports. What is does do is collect information from lender members on their borrowers.  That information is then passed to D&B and Equifax. This means if you are doing business with SBFE members, you know your credit information is being reported, at least to those lenders that are members of the SBFE. Find out more about the SBFE here. 

What frustrates you the most about funding your business? Check out how our free guide can help. 

Other Ways to Get Accounts Reporting To Your Business Credit Report

Once you have your business set up properly, you can start to build business credit.  If you do not already have strong business credit, you will have to start at the bottom credit tier, known as the vendor credit tier.  These are starter vendors that will offer net terms on invoices without checking your credit. Then they will report your payments to the credit reporting agencies.   However, they will often want to see an EIN, business bank account, or a listing in the business directories along with a certain amount of time in business or annual revenue.  This is just one reason why setting up your business properly is so important. 

After you get a few of these accounts reporting, you can apply for credit in the next tier, which is the retail credit tier.  These are cards that you can only use in the stores that issue them, like a Best Buy card or an Office Depot card.  

Once you have several of these accounts reporting positive payment history, you can apply for cards in the fleet credit tier.  Those are cards from companies like Shell or Fuelman that can only be used for fuel and auto repair and maintenance.  

Get enough cards from the fleet credit tier, and you can move on up to the cash credit tier.  These are the cards that do not have limits on where you can use them or what types of expenses you can use them to pay.  This is the top tier, and once you hit it you will see your business credit score start to grow like a snowball rolling downhill.  That is, of course, if you handle your credit responsibly.

Not Having a Business Address can Kill Your Chances of Starting Business Credit 

There is so much more to getting business credit than having a separate business address.  However, if you have everything you need and you do not have a business address, that lack could definitely throw a kink in the process. Remember, you don’t have to have a separate location, just a separate address. Then make sure everything else is set up to separate your business from yourself.  After that, you can start building strong business credit. The funding you need to run and grow your business will be right there when you need it.  

 

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