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Five Steps to Business Credit

Operating without loans can have significant impacts on your cash flow and working capital and does nothing extra to build your business credit. Five Steps to Business Credit

Maintaining good business credit is essential, as a bad credit rating may severely hinder your business growth and expansion. Without good business credit, banks can be less likely to accept your loan applications. Operating without loans can have significant impacts on your cash flow and working capital and does nothing extra to build your business credit.

 

In addition, if you skirt your financial responsibilities, it’s unlikely that suppliers will extend your business a trade or credit account. That means that you may lose the ability to leverage the 30-, 60-, and 90-day terms of invoices as short-term loans. In addition, many businesses enjoy discounts provided by suppliers to encourage prompt payment; cash customers usually do not get such discounts.

 

If your business does not have good credit, you can take steps to repair it. The first step to building your business credit is to contact your creditors to set up payment schedules. Such schedules should be reasonable and fair to both your business and the creditor. If you have some history of paying bills promptly, you may find that creditors are willing to set up alternative payment schedules. In addition, successful completion of a payment schedule often leads to a continuing relationship between businesses and creditors.

 

Late payments or unpaid invoices can often be traced back to housekeeping or paperwork issues rather than cash flow problems. Even these types of mistakes can affect your business credit.

To determine the root cause of the problems ask yourself:

  • Are your creditors sending invoices to the correct address and person?
  • Are your payment checks being sent to and received by the correct department and person?
  • Are all parties clear on when payments must be made?

 

Additionally, listed below are steps you can take to improve your business’s creditworthiness:

  • Always pay on time. The ability to repay loans promptly has a great impact on business credit scores. You should endeavor to always pay within the terms you have with your suppliers. On-time payments are the most direct way to improve a business credit rating.
  • Pay your biggest bills first. Some business credit scores are dollar weighted, such as the PAYDEX ® Score. Therefore, if you are consistently paying all of your smaller bills but neglecting your largest, your Paydex score can suffer.
  • If timely payments to suppliers and lenders are not included in your business credit profile, your business may not get the credit it deserves for paying your bills on time. You should monitor your business credit profile at least twice per year to ensure that vendor payment relationships are included.
  • Stay on top of your business credit profile. You must ensure that your business credit profile information is complete and accurate. Address any inaccuracies immediately. Certain business credit companies offer customer services and online tools that can help you update and manage such details.
  • Contribute to your company’s credit profile. You can communicate to the credit bureaus as well. The more information you give to credit bureaus like D&B, the more robust your business credit profile will be. In addition, try to choose suppliers and vendors that report their experiences to credit bureaus, which can also boost your profile.

Many businesses are feeling the pressure of tightened credit requirements. However, by carefully planning and executing your plan, you can help fix and improve your business credit.

February 8, 2014 Today's Business, , , , , , , , , , , , , , , , , , 0 Read more >

How Much To Ask When Applying For A Small Business Loan

How Much To Ask When Applying For A Small Business LoanHow Much To Ask When Applying For A Small Business Loan

It’s a question that besets many small business owners when applying for business loans: how much should I ask for? More so than deciding on which lender to approach, not having a sound estimate of how much capital you need to borrow could lead to cash flow problems—which could lead to your business shutting down. How Much To Ask When Applying For A Small Business Loan

How then can small business owners determine how much financing they need when approaching lenders? What factors should they take into account when calculating the ideal sum of their business loan?

Be clear on the reason for the loan

Are you launching a startup? Or do you need the loan as additional working capital to make improvements in your business? Answering yes to either question is critical when deciding on how much you need.

Denise Beeson, a small business-funding consultant who previously lent her services to a local SBA-administered Small Business Development Center, a provider of mostly free resources and training to small business entrepreneurs, in Santa Rosa, California, always asks her small business clients the previous questions whenever they come to her about wanting to apply for loans. For those with startups, she does issue a caveat: “If this is a start-up, I remind them that an SBA preferred lender does not fund startups,” says Beeson “We then discuss where they may find funding, such as peer-to-peer lending options, tapping into their personal resources, or asking family and friends.”

If the small business owner is seeking to buy a business from another, Beeson notes that the seller may fund the loan. How Much To Ask When Applying For A Small Business Loan

 

Also, if the small business owner is seeking working capital for myriad reasons, which might include increasing the marketing budget, making renovations, or paying off debt, Beeson says she will ask clients if they can produce documentation verifying that the debt was accrued as a result of the business.

 

Without providing the necessary paper trail needed to accompany a loan application, small business owners could hurt their chances of getting financing from a lender, insists Beeson. To prove her point, she offers the following anecdote:

 

“Recently a restaurant client was interested in an SBA loan to consolidate debt based on improvements to the premises,” she recalls. “They had almost $100,000 in debt including credit card debt that was claimed as accumulated to the business during the recession. However, when we looked at the statements, the entries were not clear when and what had been done. In addition they could not produce any paid invoices from contractors or suppliers linked to the credit card statements. Unfortunately, we could not move forward because the borrower could not provide the needed documentation to the preferred SBA lender.” How Much To Ask When Applying For A Small Business Loan

Consult trusted financial professionals

If you are unsure or confused about how much you should ask for when applying for a business loan, it might behoove you to visit a financial expert such as a reliable bookkeeper or a CPA that regularly deals with small business clients. By reviewing your financials, he or she can then approximate how much financing you will need, taking into account existing debt obligations and operating revenue. And a word of caution: don’t be lax or lazy when it comes to understanding your financials. Sloppy bookkeeping or a lack of knowledge about your books or tax returns will prevent you from acquiring a loan.

Take into account your other non-related business expenses

To determine how much you’ll be able to repay and the length of the loan’s duration, small business owners need to do a cash flow analysis of all their expenses, including mortgage payments or auto loan payments. By doing so, a business owner will be able to develop a more viable estimate of how much they’ll need to borrow from a lender.

 

Rohit Arora, CEO of the six-year-old Biz2Credit.com, feels this is an imperative step for all small business owners to take when deciding on how much of a loan they should apply for.

 

“A lot of business owners don’t take [their miscellaneous non-business expenses into account when deciding how much money they should borrow,” he says. “Everything boils down to your repayment capacity. So if you feel that you can borrow some money and there’s some good opportunity that will help you make money off it, that’s good. But that calculation is not a certainty.” How Much To Ask When Applying For A Small Business Loan

Carefully consider payment terms

After you analyze your financial situation, both on a personal and business level, you will also need to decide on how long you want to pay off your loan. By following this best practice, you will be able to produce a rational figure as opposed to an amount that you will never be able to discharge in light of your finances and debts.

Arora agrees, offering a hypothetical scenario: “Let’s say a business owner is borrowing $100,000 and they have to pay back everything in one year,” he explains. “Then the amount of repayment they have to make in terms of speed is pretty steep. Typically for small businesses, the cash flow is their bloodline.”

Similarly, Arora says small business owners need to exercise extreme caution, particularly if they’re planning on borrowing from alternative lenders. “A lot of times they want their money back pretty quickly,” he warns.

Know the lender

When figuring out how much money you need to borrow, it’s vital that you research your lending options. Which banks or lenders are amenable to small business owners in your sector? Just conjuring up a random number for a loan will not help you if the lender is not open to your industry, says Beeson, who advises business owners to also explore nontraditional lending options.

If you need to figure out how much of a business loan you should ask for, you will need to know offhand all of your business and non-business expenses. Not only is this information essential for maintaining good credit—a prerequisite for getting a loan—but it will help you come up with a realistic number that will allow you to comfortably fulfill repayment terms and not disrupt your cash flow. How Much To Ask When Applying For A Small Business Loan

November 19, 2013 Today's Business, , , , , , , , , , , , , , , , , , , 0 Read more >

Building a Credit Repair Business

Building a Credit Repair Business

Building a Credit Repair Business.Building a Credit Repair Business.
If you are looking to start a credit repair business, one of the first things you will need to do is find people who need their credit repaired.

Thanks to the internet, this shouldn’t be very hard. All you need to do is find a legitimate credit repair lead company to start sending you some leads. Building a Credit Repair Business.

The beauty of buying credit repair leads is that the potential client has committed to having their credit repaired by a professional such as yourself.

These people are not merely playing with the idea of having their credit repaired, or just gathering information for research. They are committed.  Otherwise, they never would have gone on line and filled out the on line form.

By filling out the on line form, the potential customer is saying, “I need help with my credit,” “I need my credit repaired,” and they are seeking out a company or individual to help them out with their credit issues. Building a Credit Repair Business.

Unfortunately, there are a lot of people out there that need help with their credit, so the credit repair business is not at all a bad niche to get into. Building a Credit Repair Business.

Once your business becomes functional, take serious consideration into buying internet credit repair leads. Building a Credit Repair Business.

Building a Credit Repair Business: Business Credit Will Help Your Business Succeed

The old adage that it “takes money to make money” is true. Unfortunately, many business owners also find that it “takes credit to get credit.” With the B2B Credit Builder™ program, this is not the case. Our credit building program can help you to…

  • Separate your business and personal credit. You’ll get a business credit profile that is strictly under your business name, separate from the personal credit report of the owners or officers of the business.
  • Reduce your personal liability and risk. Establishing separate business credit will reduce your personal liability for your company’s financial commitments. A business failure does not have to result in a personal bankruptcy!
  • Build business credit reports and scores. As a result of our program, your business will be listed with all of the top business credit bureaus.
  • Create credibility for your business. Having business credit makes your organization a better candidate for business loans, leases, partnerships and government contracts.
  • Save thousands of dollars in funding costs. Your solid business credit will help qualify you for lower interest rates on business loans.

The benefit to buying internet credit repair leads is that you can buy them relatively cheap, and if your working with the right company, you can get them fresh or in real time. Best of luck.

January 30, 2013 Today's Business, , , , , , , , , , , , 0 Read more >

Tips to Avoid Telephone Fraud by Tim Jacquet

Tips to Avoid Telephone Fraud by Tim Jacquet

Tips to Avoid Telephone Fraud by Tim Jacquet. Fraudulent schemes range from peddling water purifiers, vitamins, and make-up kits to stock investments and abusive “900” numbers. According to the Alliance Against Fraud in Telemarketing (AAFT), Americans lose an estimated $40 billion each year to telemarketing fraud. Con artists and swindlers use the telephone more and more as their “weapon” to hold up victims. Tips to Avoid Telephone Fraud by Tim Jacquet

If a sales pitch sounds too good to be true, just hang up. If you don’t, you may become the next victim of telephone fraud.

Top Phone Scams

While some of the following products and services can be and are legitimately sold by reputable telemarketers, the Division of Consumer Protection has identified seven areas where fraud can occur and does the most damage to the consumer’s wallet:

Free Prize Offers: If you receive a phone call that you have won a free prize, be cautious! Usually there are conditions to securing those offers such as substantial handling fees, shipping charges, membership fees and/or the purchase of other merchandise.
Ask the telephone solicitor what the prize is worth. It may be of little value, and it may not be worth the money you will have to spend to receive it. A “contest” or an offer of a “free” prize or gift is only a sales tactic. No one is in business to give things away. Look for strings attached. Telemarketers must be registered with the Division of Consumer Protection. Call the Division to verify current registration. Tips to Avoid Telephone Fraud by Tim Jacquet

Charitable Solicitations: Telephone solicitation is one method used by charitable organizations to raise funds from generous consumers. Unfortunately, fraudulent charitable operators may call you, too. State law requires charities to inform donors if they are registered with the state, what the permit number is and what percentage of your donation will actually go to the charity. Call the Division of Consumer Protection to verify the information they give you. Tips to Avoid Telephone Fraud by Tim Jacquet

When you make a donation, it is a good idea to pay by check and make the check out to the organization, not the person collecting the donation. Be cautious of organizations that pressure you to pledge money on the spot or tell you they will send a representative immediately to your home to pick up your donation. A legitimate charity will gladly accept your donation today, tomorrow, or a month from now.

Travel Offers: It can be quite tempting to purchase a bargain-priced travel package over the telephone, but be careful. Many of these scams operate by enticing people to join “vacation clubs” or offering consumers “free trips.” Often the vacation club or free trip has many hidden costs or conditions attached. Your bargain or free trip could end up costing you a lot of money. Tips to Avoid Telephone Fraud by Tim Jacquet
Investment Fraud: Many unsound investment opportunities are peddled over the telephone. Fraudulent sales pitches usually involve such statements as “you must act now,” “there is no risk” or “this must be kept a secret.” Promoters will often try to make you feel guilty or silly for asking questions or exhibiting doubt. Stop and think before you quickly turn your money over to an investment promoter calling on the phone. Ask for written information. And, if you are receiving undue or uncomfortable pressure, or if other “warning flags” arise during the conversation, hang up.

“900” Numbers: When you call a “900” number, you are charged either a fee for the number of minutes you are on the phone or a flat fee for the entire call. These fees can add up rather quickly after you have spent more than a few minutes on the telephone.

Some services will keep you on the line for an extended length of time before you get all of the information you called for, making it a very expensive phone call. Find out the costs of the call before you make it, and never call any “900” numbers that doesn’t disclose the costs up front. Tips to Avoid Telephone Fraud by Tim Jacquet

Recently, unscrupulous telemarketers began transferring calls made to toll-free “800” numbers over to “900” numbers. This improper practice makes it more important today then ever before to know who you are calling. You should also listen carefully to any recorded information at the beginning of the call.

Advance-Fee Loan Scams: These scams often target people who are out of work or have poor credit ratings. Con artists promise “guaranteed” loans, no matter what your credit rating is, in exchange for an up-front processing or application fee. You may wait weeks or months to find out credit has been denied and the processing fee is not, as promised, refunded. Or, you may never hear from the company again, and may even find the company is withdrawing from your credit card or checking accounts using information you disclosed over the phone. Tips to Avoid Telephone Fraud by Tim Jacquet

Credit Repair Schemes: If you are having a problem getting credit, you may be tempted to listen to telephone solicitors who advertise quick and easy solutions to credit problems. Unfortunately, in many cases, these companies take your money and do little or nothing to improve your credit history. Credit repair companies cannot remove bad credit information from your files. If there are genuine mistakes on your credit file, you can remove them yourself–for free. Credit repair companies must be registered with the Division of Consumer Protection. Call the Division to verify their registration. Tips to Avoid Telephone Fraud by Tim Jacquet

First Line of Defense

Your best defense is yourself. Follow some basic rules, and arm yourself with the tools to safeguard your hard-earned money from telephone con artists. Tips to Avoid Telephone Fraud by Tim Jacquet

 

January 10, 2013 Today's Business, , , , , , , , , , , 2 Read more >

3 Tips For Choosing A Payment Gateway: Collecting Money Online

3 Tips For Choosing A Payment Gateway: Collecting Money Online

3 Tips For Choosing A Payment Gateway: Collecting Money Online.
As a consumer, when you check out of your local convenience store, you may swipe your credit card through a point-of-sale device and your gas, coffee, and donut are paid. But what if you are the retailer and your business is online? It’s not like you have a card-swiping device at every customer’s PC! There must be a way for you to process that information. Essentially, that is the job that a payment gateway does for online retailers. Roy Banks, president of http://Authorize.net, a leader in the payment gateway industry, describes his company’s function as “the digital version of a hardware point of sale terminal.”

What is a Payment Gateway?
Payment gateways allow online merchants such as eStore owners or auction sellers to accept credit card payments over the internet. They authorize the cardholder’s credit—that is, they check to ensure that the customer has enough money on their credit card to cover the charges. They then place a hold on that amount so the buyer can’t turn around and spend that same money elsewhere before it gets transferred to the retailer’s merchant account. Banks describes this as “the technology…necessary to consummate a payment transaction.”

A Payment Gateway is NOT a Merchant Account.
Many people confuse merchant accounts with payment gateways but they are not the same. Merchant account services act, for the most part, as a liaison between your business bank account and the payment gateway. When a customer orders a product from your online business their card is processed via the payment gateway. The money is then moved over to the merchant account service. The merchant account service then moves those newly captured funds to your business bank account.

3 Tips for choosing a Payment Gateway:

1. Is it PCI-compliant? That means that the company’s security has been audited by a third party and found to be up to industry standards. Since payment gateways store all your customers’ credit card information (sparing you the stress), it also means you can sleep better at night, knowing your customers’ valuable information is safe and sound.

2. Good customer support. ‘Nuf said.

3.Lastly, it is important that the payment gateway you choose be integrated to the third-party solutions you are planning to use. That means things like store front platforms and shopping carts—you want them to be compatible with your gateway.

Payment gateways will not only allow you to collect the monies from your sales, many also offer an array of security features, some of which will help you avoid becoming a victim of fraudulent orders! In the end, they will make your ecommerce business a less-stressful, more pleasant experience—for both you and your customers.

November 21, 2012 Today's Business, , , , , , , , , , , , 1 Read more >

Credit Where It’s Due: Five Simple Steps Toward Better Business Credit

By Sherron Lumley.Sesame3.jpg

Delicious old-fashioned donuts are on display behind Nasima Rahman, who stands at the counter of Sesame Donuts, greeting her morning rush of customers with a warm smile. “My wife throws in extra donut holes,” says Mohammed Rahman, her husband, “because making people happy is very important to us.” This emphasis on customer service has led to a quickly growing small business, and recently Rahman has been courted with offers for ample new credit lines, far more than the business needs. In fact, Rahman completely self-financed the business, so how did the credit for Sesame Donuts get to be so good?

Small businesses have credit scores apart from the personal credit ratings of the owners based on as many as 150 different factors in addition to information that is submitted voluntarily. The score can vary vastly from the personal credit rating of the principal, something that can come as a bit of a shock to the small business owner who has worked hard to guard a sterling personal credit rating, but gets denied business credit seemingly without cause. The business credit score will influence things such as credit approval, financing costs, credit card interest rates, insurance premiums, rental terms, and terms from suppliers.

The business credit score works in a similar way to the personal credit score system, but with a range of 0 to 100 points instead of 350 to 850. On that scale, 75 is considered good. Understanding how business credit is established and tracked is the first step to improving your business credit rating. Let’s take a look at five simple ways to build business credit.

1. Establish a business credit history

One way to establish a credit history is to set up a commercial bank account to pay bills. Put expenses, such as the business telephone line, in the name of the company and use the business checking account to pay the bill each month.

Callout.png“A company is only as strong as its banking relationships,” says business consultant and author Martin O’Neill in his book Building Business Value. Getting started with a business bank account helps to build an important foundation for future conversations. Don’t wait until the business needs money to build a banking relationship.

One of the first things that Rahman did as a small business owner was get an employer identification number (EIN) from the Internal Revenue Service. “It was very easy, I went to the website and filled out a form,” he says. He also registered his business and “doing business as” (DBA) name with the state of Oregon and paid for the business license. He then opened a business bank account for Sesame Donuts.

2. Register your company with business credit bureaus.

With an EIN and a business bank account, a business credit profile that’s separate from personal debts is established. However, if the business is a sole proprietorship or partnership, the business owner is personally liable for the debts of the business and all personal assets are at risk in the event of litigation. Because of this, as a sole proprietor or partner, personal credit information could still be included on the business credit report and vice-versa.

Dun & Bradstreet, Experian, and Equifax USA are three of the major credit reporting agencies that compile business credit reports. Register online, for example, by getting a D-U-N-S number with Dun & Bradstreet, which will help to quickly establish a business credit file.
3. Pay bills on time

In addition to an EIN, separate bank account, separate phone number, and a D-U-N-S number, vendor accounts and a credit card will help to establish the credit for the business separately from the individual.

Rahman uses a Costco business credit card to purchase supplies and holds two other business credit cards. The best way to build or improve commercial credit scores is positive payment history, which means making regular payments on time.
4. Monitor the business credit file and keep it up to date

Payment history is important, but credit ratings are based on multiple factors such as the industry the business is in, company revenues, and number of employees. Actively manage the file by keeping financial records and updating the credit profile to reflect any changes that occur. Maintaining a file that is current and accurate will help to guard against identity theft as well. According to Dun & Bradstreet, 15 to 30 percent of all commercial credit losses are due to fraudulent activity.

5. Comply with the business credit provider requirements.

The business credit market has its own set of requirements and businesses seeking credit approval must be in compliance. Overlooking simple things such as obtaining a business license or failure to have a telephone line can raise red flags with credit bureaus, so take the necessary steps to set up the company properly in compliance with local, state, and federal regulations. The list of business credit market requirements can be found online at iBank.com.

At this point, Rahman says, Sesame Donuts is making a small profit and they are happy with that, not wanting more. The customers are happy and they enjoy a good reputation in the community. Knowing that his business credit is good is a feather in his cap, and a sign of success won through hard work and careful financial management.

Resources

Books:

Building Business Value, by Martin O’Neill, 2009

Guide to Credit and Bankruptcy, The American Bar Association, 2009

Legal Guide for Small Business, The American Bar Association, 2010

Web:

Dun & Bradstreet

http://smallbusiness.dnb.com/

Entrepreneur.com: “The ABC’s of Business Credit,” by David Gass

http://www.entrepreneur.com/article/76886

Equifax USA: http://www.equifax.com/home/en_us

Experian.com: http://www.experian.com/small-business/understanding-business-credit.jsp

Federal Trade Commission: “Getting Business Credit” http://business.ftc.gov/documents/alt043-getting-business-credit

Internal Revenue Service: Employer ID Numbers http://www.irs.gov/businesses/small/article/0,,id=98350,00.html

U.S. Small Business Administration: “Why small businesses should manage their business credit” http://www.sba.gov/sites/default/files/oee_5_simplesteps_brochure_managing_your_credit.pdf

December 7, 2011 Today's Business, , , , , , , , 2 Read more >