I was reading an article from my buddy the other day and he had an interesting trend. 14.1% of all searches on Google are in the form of a question. Here’s the breakdown within the United States: How – 8.07% What – 3.4% Where – .88% Why – .82% Who – .6% Which – .33% …
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Getting a loan to buy and existing business is a somewhat different animal than getting a regular business loan. There are plenty of options, but it can take some careful consideration and research to figure out which option will work best for you. What’s your best option for a business loan to buy a business?
It’s also important to know that, even if your credit isn’t the best, you can still get a business loan to buy a business. It may not be the traditional term loan you probably expect, but you can most likely still get the fund you need. Sometimes, it takes combining a couple of options to get the best funding for your specific needs.
Traditional loans are a decent first stop when you are trying to figure out how to get a loan to buy a business. If you have good personal credit, you’ll have no problem here. Furthermore, if your credit is good, you will get the best interest rates and loan terms from a traditional loan.
Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.
These are loans that are secured by some asset that you own. Rates are lower, and your personal credit doesn’t have as much of an impact. The bank is taking on less risk due to the fact they can take possession of the asset if you default. The business you are purchasing can be used as collateral for the loan. However, there are other, outside of the box options, that you can use if needed. We’ll talk about this more later.
Here’s another idea if you do not have or want to use assets as security for a loan, but your personal credit score isn’t quite up to par. Ask a friend or family member who has these kinds of assets or a good credit score. They may let you leverage their asset in exchange for a percent of your business. They usually want less of a percent of your company than a venture capitalist would.
If you are going to get help from friends and family to buy a business, asking them to sign on as a guarantor may be a better option than borrowing from them directly. That can cause a lot of drama.
Qualified borrowers may be eligible for SBA loans. These are loans guaranteed by the federal government. Yet, funds are distributed through banks. The application process is more involved. However, interest rates are often better. Typically, minimum credit score requirements are lower than what banks would offer without the government guarantee as well.
This program offers federally funded term loans up to $5 million. Banks, credit unions, and other specialized institutions, in partnership with the SBA, process these loans and disburse the funds.
The minimum credit score to qualify is 680. There is also a required down payment of at least 10% for the purchase of a business, commercial real estate, or equipment. The minimum time in business is 2 years. In the case of startups, business experience equivalent to two years will suffice.
These loans are also available up to $5 million. Terms range from 10 to 20 years. Funding can take from 30 to 90 days. They require a minimum credit score of 680. The asset you are financing is the collateral for the loan. In addition, there is a down payment requirement of 10%. This can increase to 15% for a new business.
There is also a 2 years in business requirement, or management must have equivalent experience if the business is a startup.
Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.
Alternative lenders are lenders that are not traditional banks or credit unions. These are typically private or peer-to-peer lenders that operate online, though not all operate online. They work better than banks for some because they will usually use other information besides credit score. As a result, they will often approve loans to borrowers with a lower minimum credit score if they meet other criteria.
These other criteria could include annual revenue, time in business, average balance in business bank account, and more.
One popular online lender that works well for funding to buy a business is Lending Club. You can get a quote in less than 5 minutes, and funds are available in as little as 48 hours if approved. There are no prepayment penalties. Loans go up to $300,000 and you need a minimum credit score of 620. Of course, details like this change frequently, so be sure to check with any lender directly for the most up-to-date information on rates and fees.
Lending Club is only one option. There are many out there, but you have to be careful. There are some great lenders, but there are also some predatory lenders in this industry. It can be hard to tell the difference. To ensure you are working with a reputable lender, consider working with a business credit expert. They can help you find the best lender with the best products for your needs. They can also help you figure out what you can improve to get the best rates and terms possible. This may include building business credit, or improving fundability some other way.
This is a form of collateralized business loan to buy a business that uses your existing 401(k) or IRA. This program uses IRS proven strategies. You will pay no tax penalties, and you still earn interest on your 401(k). Rates are low, and this option usually has a quick closing and funding process as well.
Credit Suite offers excellent options for this type of 401(k) financing. You can get up to 100% of current retirement
account value that’s “rollable” from a previous employer. Terms can be up to 5 years, and rates as low as 5.25% (Prime + 2) + $1995 rolled in lender fee.
There are no credit requirements. If bad credit is blocking you from getting the funding you need to buy a business, this is your chance.
For the retirement account to qualify, you must no longer be contributing, no longer be employed by the issuing company, and you must have a minimum of $35,000 in the account. Typically all that is required is a copy of the retirement account statement.
If you have trouble getting all the funding you need to purchase a business, you may be able to get help from the seller. Some sellers are willing to help buyers by bridging the gap with seller financing. Sometimes a seller will sell a business solely on seller financing.
Typically in these transactions, you pay at least one-third of the sale price up front. Then, the buyer makes payments for the rest directly to the seller, plus interest. Sometimes, a bank may be willing to lend this lesser amount, the amount of the down payment only, when they will not lend the entire selling price.
The reason for this is twofold. First, the lower amount means less risk for the bank. However, banks also see that if a seller is willing to finance, then they have faith that the business will continue to produce a profit into the future. This is seen as a positive.
Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.
That said, here is another option to get funding to buy a business. The Credit Line Hybrid offers no-doc, unsecured business financing. You can get up to $150,000. In some circumstances, interest rates can be as low 0% for a limited amount of time. This can be used as some or all of the down payment required for an SBA loan or seller financing. The interest rate could be substantially lower than using a bank loan. Furthermore, you can take on a credit partner. This is helpful if you do not meet the 680 minimum credit score or some of the other requirements. Even better, the Credit Line Hybrid reports to the business credit reporting agencies. That means you build business credit and fund your business purchase at the same time. A business credit expert can walk you through the process.
Borrowers who have a minimum credit score of at least 620 and at least 20% equity in their home can usually get a home equity loan (HEL) or home equity line of credit (HELOC). You can use funds from this type of loan to buy a business, but your house will be on the line. If you have the option of 401(k) financing or seller financing combined with the Credit Line Hybrid, that may be better.
If you have great credit you probably are not worried about how to get a business loan to buy a business. However, if your credit is less than desirable, you have probably been wondering how you could ever make it work. The fact is, there are options, and Credit Suite can help.
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U.S. stocks struggled to right themselves, a day after a sharp selloff in technology stocks amplified fears that equity valuations got overheated.
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FindHotel / REMOTE / Product Data Analyst, Head of Customer Support, Senior Frontend Engineer, Engineering Lead – FE/FS, Data Analyst (Performance marketing), Senior Data Scientist, Senior DevOps Engineer, Data Engineer, Technical Product Owner, Software Test Automation Engineer (Frontend), Senior Elixir Engineer
FindHotel dares take the path no other consumer travel company dared since the founding days of Booking.com & Skyscanner: Build a global travel disrupter without huge financing.
Having grown our bookings by +100% in each of the past 2 years, we helped over 1.5M travellers in the year through July 2020 book great accommodation deals, anywhere in the world. Now we are looking to rapidly grow that figure in 2020 despite the challenges of the Coronavirus.
Built with passion in Amsterdam & and now increasingly remotely (with team members living in PL, RU, ES, BR, PT, IL, US, PH)
We are looking for the best and brightest who share our passion for travelers, data and product.
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You already know your credit scores, both personal and business, affect fundability. But did you know that there is one business credit score that uses not only both business and personal credit history, but other information as well. It gives lenders a much broader picture when it comes to fundability. You need to understand how your SBSS score can affect the fundability of your business.
There are many factors to consider when it comes to small business financing. You need your credit in order, you have to have complete financial statements, and beyond that there are many other things that affect the fundability of your business.
The business credit score is what often causes issues. Sometimes the business credit score is bad, but just as often it is nonexistent. No credit score is pretty much the same as a bad credit score. That isn’t the end of the story for most borrowers however. This is why the FICO SBSS has become so popular.
Keep your business protected with our professional business credit monitoring.
The FICO SBSS is the business version of your personal FICO credit score. It is becoming more common for lenders to use this score, rather than the Experian business credit score or even the D&B PAYDEX. It stands for FICO Liquid Credit Small Business Scoring Service.
Unlike your personal FICO, the SBSS reports on a scale of 0 to 300. The higher the score the better. But most lenders demand a score of at least 160.
The scoring model for this score is very different than other business credit scoring models. Honestly, it actually gives a better picture of overall fundability in some ways. This is because it uses your business and personal credit scores. Also, financial information like business assets and revenue come into play. The point of the SBSS sore is to give a picture of total fundability in one score.
Business owners cannot access this score themselves. The formula for calculations is proprietary and well-guarded by FICO. They do not make the information public. When you go to a lender, you go in blind about what your score may be. In contrast, with the other credit agencies you can actually get a copy of your credit report and know where you stand.
The reason this does not work the same way is surprising to many. The truth is, you could have a different score from lender to lender. This is because of how lenders request your score.
The process starts when you turn in your application. It will include all the financial information the lender requires. Then the lender will process the information and send it to FICO with a request for your SBSS score. At this point, the lender can ask for certain factors in the score to carry more weight than others. For example, they can put more weight on your personal credit than your business credit. They could choose to weigh annual revenue as more important than payment history. It is their choice. This is why your FICO business score could vary between lenders.
First, they get the request from the lender. They then search business credit information from business CRAs. These include D&B, Experian, and Equifax. If they cannot pull enough scoring information from one, they move onto the next. If there is not enough data from any of them, then it uses personal credit and business financials only.
With the lender’s weighting preferences, personal credit, business credit, and business financial data, they calculate the score. The information is specific to that lender.
These days, the SBSS score is becoming more and more popular among lenders that lend to businesses. It is more comprehensive and complete than the other scoring models. This is because it considers more than past payment information from the business.
Lenders know that there is more to fundability than credit score alone. With SBSS, FICO does the work of piecing together the whole picture for them. This isn’t always a bad thing, unless you are counting on your bad personal credit not being an issue when applying for a business loan. In fact, it can actually help you if you have no business credit. Other than the fact that the highest score possible with no business credit is 140. That is far below the 160 most lenders require.
For now, you need to know that many lenders use this score, and the number is growing. In addition, the Small Business Administration uses it as a pre-screener for its popular 7 (a) loans. The SBA does not itself lend money, but rather it backs certain loans through select lenders. It sets a minimum SBSS score of 140 to be eligible for a 7(a) loan.
That means if you want this type of loan, you must have a minimum SBSS of 140 before you are even eligible to apply. It is possible to get this type of loan with a score above 140 but lower than the typically required 160. The backing of the SBA reduces the lender’s risk.
While this score gives a more complete picture of overall fundability than other business credit scores, it still doesn’t necessarily tell the whole story. Here is how each element of fundability comes into play for your SBSS score.
These are the credit reports, much like your consumer credit report, that detail the credit history of your business. It is a tool to help lenders determine how credit worthy your business is.
These come from a number of agencies, but the main three are Dun & Bradstreet, Experian, Equifax. FICO searches business credit information from these agencies when compiling your score for SBSS. That means, you need to ensure your information with these companies is as complete and accurate as possible. Business credit monitoring is essential. Another key point here is to ensure your business is set up to be fundable in the first place. If not, there won’t be a lot for FICO to get from these agencies anyway.
Keep your business protected with our professional business credit monitoring.
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 these agencies have on your business, you can ensure that any new information they receive is positive. Enough positive information can help counteract any negative information from the past.
Since these agencies indirectly affect reports that FICO uses when calculating your SBSS score, they make a difference.
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 exist. 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. If you don’t have a score with D&B, you might as well not have a business credit score. As already mentioned, FICO uses D&B information as well as information from other business credit agencies.
Your credit history is the crux of what makes up your business credit score, and your business credit score is a big part of your score from FICO SBSS, though how much it matters depends on how the lender requests it be weighted.
Your credit history consists of a number of things including:
The more accounts you have reporting on-time payments, the stronger your credit score will be.
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? Monitoring is key for this factor as well.
This is one of those elements of fundability that lenders may use in conjunction with a credit score. It doesn’t necessarily affect the score itself, but if can definitely affect whether or not you get approval.
While the FICO formula is proprietary, many sources state that, if available, information from financial statements is used in the calculation of your SBSS score. 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.
Regardless of whether they are used in the calculation of the score however, the information on these statements definitely affects your fundability.
There are several other agencies that hold information related to your personal finances that you need to know about. The data these bureaus hold affects fundability.
Take ChexSystems for example. In the simplest terms, they keep up with bad check activity that affects 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.
While these factors are unlikely to figure into your FICO SBSS directly, they do, along with your credit score, affect fundability.
Keep your business protected with our professional business credit monitoring.
Your personal credit score from Experian, Equifax, and Transunion definitely directly affect your SBSS score. If there is a problem somewhere, 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 ensure mistakes are corrected and that there are no fraudulent accounts being reported.
The loan application process itself can affect fundability also. First, consider the timing of the application. Is there any part of overall fundability you need to work on before you apply? Next, ensure that your business name, business address, and ownership status are all verifiable. Lenders will check this. 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? If you are applying for a product that won’t serve your purpose, it doesn’t matter if you get it or not.
The fact is, you do not and cannot know what your score from FICO SBSS will be. There are too many variables in play. What you can do though, is get a good overall idea of your fundability based on what you know about the factors that affect it. Once you have this, you can be sure your score from FICO SBSS will reflect it accurately.
The post SBSS Score and Fundability: When Two Worlds Collide appeared first on Credit Suite.
Experian is one of the big three credit reporting agencies. Equifax and Dun & Bradstreet are the other two. In fact, Experian keeps business credit profiles on 99.9% of all American companies. Furthermore, it boasts the most in-depth information on small and midsize businesses. Knowing this, it is easy to see why your Experian business credit score is important.
Obviously, the score is important. As a result, it is necessary to know how Experian gets their data on your business. How do they calculate your Experian business credit score? What does their report tell lenders? More than that, can you improve your score if it isn’t great?
Keep your business protected with our professional business credit monitoring.
According to Experian, all their information comes from third parties. This means you cannot add any information to your company credit profile. That said, you can still review your report for mistakes.
You still have to ensure your business is set up properly. If it isn’t, third parties will not recognize your company as a business. You have to establish your business as an entity separate from yourself. Otherwise, your business transactions will get mixed up with personal transactions. They may show up on your personal credit report. This will cause a huge tangle of a mess.
To separate your business from yourself, make sure your business has the following.
You have to set up your business to be separate from yourself so your business accounts will report to the business CRAs. With Experian, the main business credit score and report is the Intelliscore Plus. Along with your Experian business credit score, the report contains the following:
First, there is the standard identifying information. This includes company name and address, in addition to any ownership information. This part also lists important personnel and the type of company you have. Time in business, number of employees, and the amount of yearly sales are also in this section.
After this, there is a section that lists how delinquent payments are, along with how many days late they are. It also provides an overall trend. For example, the lowest and highest balance for the past six months. Current balance is also shown. So it shows the credit limit available to your business. And this is how the report gives an idea of the credit utilization rate for your company.
In addition, this part lists the number of tradelines your business holds. It also includes how many times a company has checked your credit and any UCC filings.
It also shows the percent of businesses doing worse than yours as well. The number of bankruptcies, liens, and judgments are in this section too.
The credit summary shows your business’s Experian credit score. Also, it links to information on what goes into the score and tips on the best ways to improve it.
Next, you see the payment summary. There are line graphs for monthly and quarterly payment trends. Conveniently, it also shows where the numbers come from. There is even a graph that shows the monthly payment trend in relation to the what is average for the industry.
Below this, there are three bar charts showing payment trends for the past 6 months. This is as reported from the tradelines.
The next part is about how your business has done with its payments, broken down by type of account.
Next up are inquiries into your small business’s credit. The list names companies making inquiries and the month the inquiry was made.
If your company has any collection filings, the listing is here by date. It includes collection agency name, status, amounts, and the close date, if appropriate.
The summary is relatively self-explanatory. It is just below the collection filings portion.
Keep your business protected with our professional business credit monitoring.
Here, Experian lists all the data it has on your business relationships. Specifically, this includes relationships with insurance, commercial banking, and leasing companies. For example, how much credit was extended? When did the loan start? What is the remaining balance, if any?
Next is the report on legal information. It includes the court where a judgment was filed, the date, and how much it was for.
Tax lien filing information is similar to judgment filings. The only difference is there is a listing for a filing location instead of court.
In this section you will see the following information related to UCC filings:
Just beneath is the UCC filings summary, broken down by filing period and type of filing.
Experian will also include an entrepreneur profile for smaller companies. The purpose is to show the relationships between you, the person, and your business. This automatically links the credit history of more than 5 million business owners to their business credit report.
It makes it much easier for your creditors to access your personal credit. This aids them in determining your overall creditworthiness. That’s important. It means that you can do the work to establish separate business credit. But your personal credit still matters. But this is in some cases.
The Intelliscore Plus credit score is a credit-risk evaluation based on statistics. The goal is to help businesses, investors, and prospective lenders make decisions about creditworthiness.
It’s similar to how lenders use your personal credit score. Before they decide to lend money to you, they check your credit score. The Intelliscore Plus can provide an idea of the credit risk associated with a specific business.
The scores range from 1 to 100. The higher your score, the lower your risk class. Alternatively, the lower your score, the higher your risk class. The chart below describes each range and what it means to lenders.
Score Range Risk Class
76 – 100 Low
51 – 752 Low – Medium
26 – 503 Medium
11 – 254 High – Medium
1 – 105 High
In the credit world, Intelliscore Plus is one of the best tools for predicting risk. One reason is that they identify key factors that show how likely a business is to pay their debt.
There are over 800 of these factors. However, they can all fit into the following general categories.
Not surprisingly, this is how well you are making payments. It includes the number of times your accounts become delinquent. It also shows the percent of accounts that are currently late. Your overall trade balance is listed too.
Frequency refers to the amount of times your accounts have been sent to collections. It includes the number of liens and judgments you may have. Any bankruptcies related to your business or personal accounts also show up here.
In addition, frequency has to do with your payment patterns. Were you regularly slow or late with payment? Did you start off paying bills late but get better over time?
This specific factor focuses on how you use credit. For example, how much of your available credit is currently in use? Do you have a high ratio of delinquent balances in relation to your credit limits?
If you are about to start a business or are somewhat new to this game, the list above may seem a bit overwhelming. But what if your business is not yet in operation? Or you do not have a long history of business transactions? Then how will they rate you?
In this case, a blended model is used to establish your score. That means they consider your personal consumer credit score with your business’s credit score.
Experian offers a number of other products as well. These include reports designed to help you as the owner monitor your business credit.
This one is currently $149 monthly and contains mobile-friendly alerts and score improvement tips.
This report is currently priced at $49.95. It features comprehensive financial payment data and predictive information on payment behavior.
This is the least expensive of the reports, currently priced at $39.95. Basically, it includes comprehensive business and credit information. Also, there is a summary of financial payment data.
This report sells for $99 right now. It shows the value of your company and contains Key Performance Indicators. Additionally, it shows your business’s fair market value.
Keep your business protected with our professional business credit monitoring.
Experian also furnishes premium corporate profiles at an addition cost. The enhanced profiles contain even more detail including:
This is in addition to the data supplied in their basic corporate profiles. They also have information on credit inquiries made in the past nine months.
Not surprisingly, you can subscribe to business credit alerts. Experian’s Business Credit Advantage program serves as a self-monitoring service. You get unlimited access to your business’s business credit report and score. You can make use of this tool for proactively handling your business credit. Alerts are sent for:
There are ways to monitor your Experian business credit score for a fraction of the cost. Be sure to do your research.
If your Experian business credit score isn’t the best, there are a few things you can do to improve it. It takes time, but it is possible.
Paying your bills on time will help establish your small business as one that meets financial obligations. This will eventually help push your score up. As a result, lenders will view your business as low risk.
Keep your debt low. That’s good advice. Still, opening business credit accounts can help raise your credit score. The key is to use all credit responsibly.
By now, you’re aware that your personal credit is fair game when it comes to your Intelliscore Plus score. Running a business is hard work. However, don’t let your personal finances suffer. See to it you stay on top of your personal debt. Steer clear of credit checks that are not necessary. Basically, do not compromise your personal credit for business needs.
Your credit score from all of the business credit reporting agencies is important. Each one can affect your ability to get funding. One isn’t more important than the other. This is because you never know which agency a lender may use.
However, credit score isn’t the only thing that matters. Business credit scores are just one piece of overall business fundability. There is so much more to it. Fundability as a whole is much more complicated than just business credit. The bigger picture is just as important.
What makes up this bigger picture? There are a number of things that go into fundability. For example, you have to have all of the licenses necessary to run your business. In addition, there has to be consistency in your business information across all platforms. Of course, your business has to be set up to be fundable as well. All of this and more comes together to form the complete fundability of your business. Are you wondering if your business is fundable? Take a minute and do an analysis of fundability and see what you find out.
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