All Things Credit and Collections

Credit Suite Business Credit

Our partners at Credit Suite recently surveyed a number of their clients and users and one of the most difficult parts about building business credit and getting money for your business is knowing where to start.

That's why they have agreed to provide free consultations to any business owner that’s part of the Professional Debt Collectors Cooperative family that wants to get started buildi ng business credit or even if you've already started and just want to move fast, or get unstuck.

Their Business Credit Consultants are ready to help you by reviewing your business credit reports with you, answering your questions, and giving you actionable next steps.

Find a time that works best for you here...

They look forward to helping you,

Choosing the Right Financing

There are a lot of different financing options available today. There are so many options that you might not be sure where to start. Let’s dive into some of the available options you have to see what works best.

Most business owners try to first apply for financing at their bank but according to the Department of Revenue, only about 1.1% of all business funding comes from conventional banks such as SBA loans. Your bank can help you with credit lines and loans, but you MUST have financials and good credit for approval.

Google “SBA loan approval checklist” to find this page This list is all that you will need for conventional loan approval.

MOST business financing that happens today comes from alternative lenders, NOT the big banks. These are lenders who have carved out “niches” in the business funding world.

They typically focus on only one aspect of your business to make a lending decision. If that one area of your business is strong, you can get approved even if you are weak in other areas. This is very different from SBA loans that look at the whole picture.

Alternative lending is much easier to secure than conventional loans and you can usually get approved and funded much faster also. The terms typically aren’t as favorable as conventional financing, but you can often get approved when your bank would tell you “no”.

I group alternative lending into 3 categories, credit, collateral, and cash flow.

We have discussed several funding types that are available based on your credit. Some use your business credit for approval while others use your personal credit for approval.

You can’t go into your bank and get multiple business or personal cards. But there are lenders who focus on this type of financing only, and can get you multiple high-limit business credit cards that report to the business reporting agencies and have great incentives such as low intro rates. Remember, you must have good personal or business credit to be approved and you can be approved even if you are a startup.

Collateral based lenders are also called asset based lenders. They can approve you for money even if you have bad credit, and in many cases if you just opened your business. The key is you need acceptable collateral to get approved.

Acceptable collateral includes 401k and stocks, inventory, equipment, real estate, a book-of-business (insurance agents only), a car lot inventory, purchase orders and account receivables (if from another business), commercial signs and graphic wraps, and other viable types of business collateral.

Vehicles are depreciating assets and typically won’t qualify. Rates and terms on collateral based funding are VERY good, sometimes better than conventional loans.

It’s not uncommon to get rates of 5% or less, even with bad credit. If you default, the lender just takes your collateral, so the risk isn’t as high as with other types of business funding.

Most advances are forms of cash flow based financing. This is the fastest and easiest money you can get your hands on and you can get approved with bad credit and no collateral.

But you will need to show bank statements that prove you have over $10,000 in monthly deposits and at least six monthly transactions. You can usually get as much as 12% of your annual revenues advanced to you.

These are cash advances so the rates are not great, ranging from 8-45% depending on risk and you will usually be approved for a 6-18 month payback.

Once you prove yourself with your first advance, terms get MUCH better on future advances. This is why we find that over 70% of those who get their first advance come back and get more money ongoing.

There is A LOT of money available for business owners, more now than there has ever been in the past. You just need to know what type of financing to go after, once you know that you can more easily find what you need.

EVERY highly successful business in this country has business credit. Most of these companies used their business credit to get as big as they are today.

But contrary to what many believe, business credit is NOT only for big companies. ANY company can build business credit!

Big companies are typically the ones who enjoy the benefits of business credit the most because they have CFOs who know how to obtain and use business credit, where most small businesses don’t.

But YOU absolutely CAN get your hands on the exact same credit these larger companies have… if you know the formula to obtain it…

Step 1… A business credit report can be started much the same as a consumer report commonly is, with small credit cards.

The business can be approved for small credit cards to help them build an initial credit profile. These types of initial cards in the business world are commonly referred to as “vendor credit”.

Net 30 terms are common with most vendor credit sources. This means they will give you credit on “net 30” terms, giving you 30 days to pay the bill you owe in it’s entirely.

Some companies will require you buy their products while others won’t.

Some companies will have you pay for your first couple of orders, others won’t.

Some companies report your credit very quickly and it reports quickly, some don’t.

Look out for all of these things when applying with vendors.

Some of the most popular vendor sources include: Uline, Laughlin & Associates, Quill Office Supplies, and Reliable Office Supplies.

Step 2… You will need a total of five payment experiences reported to start getting revolving store credit. Don’t apply for store credit with no payment experience, no score, and no profile, or you WILL get denied.

Most major retailers do offer revolving business credit.

To get approved they will want to see that you do have: established payment experiences, an established credit profile with at least one preferably two reporting agencies and positive credit scores with the reporting agencies that your credit is being reported.

Some starter revolving accounts include: Radio Shack, Lowes, Home Depot, Staples, and Office Depot.

Most major stores do offer business credit even though they don’t promote that they do.

So once you have followed the steps outlined here, you can start getting credit with these major retailers: BP, Chevron, Walmart, and Target.

These stores also offer business credit:, Best Buy, Nordstrom's, Sam’s Club, Costco, and many more. Check out who are some stores that offer business credit.

Step 3… Once you have a total of 10 payment experiences you can then start getting approved for cash credit sources.

It’s also recommended that you have at least one account with a $10,000 high credit limit so your cash limits are as high as possible.

Revenue financing is NOT a loan; it’s an advance off of your revenue.

It’s very similar to a cash advance in the consumer world where:

1. Your current pay is analyzed

2. You are then lent money based on the stability and amount of your pay

3. Then you have a short time to pay back what has been borrowed

With revenue financing the lender will look at two main forms of documentation: your bank statements, and your merchant statements, if you have a merchant account.

They’ll also want to see a driver’s license which is usually required, rent, lease, or ownership information for the property is also verified.

You can qualify even if you have a home-based business.

Lenders are looking for very specific requirements when qualifying you.

The bank statement is analyzed for consistent deposits 8-30 per month. Lenders do NOT want to see only a few big deposits. Instead they want to see many smaller deposits, such as a retail store would have not a real estate agent.

Positive ending bank balances are also important. If you don’t have money left over each month now, lenders know it will be tough for you to pay them back so they are looking for positive cash flow each month.

They want to see that the bank account is managed responsibly, with little to no NSF charges. They also don’t want to see a lot of charge-backs which could reflect unexpected future expenses.

The longer time you have been in business the better your chances of being approved.

Most lenders require you to be in business for 12 months or more. There are some lenders who will lend you money if you have been in business for only six months.

But in those cases they usually want to see compensating factors.

Personal credit is not a big factor of approval, but will tie into the terms you will pay.

Lenders often approve business owners with scores as low as 500. Lenders are most concerned with you being in current trouble such as an immanent bankruptcy or very recent liens and judgments.

If you don’t have those types of issues you can get approved, even with recent collection accounts and late payments. This is one of the best types of financing to secure with credit issues.

Monthly Cash flow of $10,000 or More Equals…

Many people think that nobody can get credit without a personal guarantee.

But in reality, it’s just not feasible, or logical. Companies have to get business credit to obtain the capital they need for growth.

A business owner’s personal credit just can’t sustain the growth of the business; the business WILL outgrow the credit of its owner thus being the need for business credit.

But the reason this belief, or myth exists, is because of a few common mistakes that business owners often make that end up with them getting declined when they apply.

The most common mistake that’s made when applying for business credit is applying for credit in the wrong order.

Stores and lenders will NOT approve you for no personal guarantee credit until you’re business credit is established. So you can’t start getting credit there, or you’ll get denied.

You also can’t put your SSN on the application. If you do this, they will pull your personal credit, and you will be guaranteeing the debt.

Many people think they have business credit because they have a credit card with their business name.

But if SSN was supplied to get that card, that’s not usually real business credit as personal liability is involved and the account might very well report to the personal bureaus not the business bureaus, so leave your SSN off of the application when applying.

Also, keep in mind, many front-line people you speak with who work for credit issuers, don’t know about business credit.

Even business bankers aren’t trained on business credit. So they’ll often tell you that SSN must be supplied because they don’t know any better.

Also remember, you must ensure your credibility is in check to get approved, and if it’s not, you’ll be seen as unestablished and will get denied.

Having a professional website and email address, having a business phone and fax number, and being properly licensed as your industry requires are all essentials to be seen as credible by credit issuers.

Once you know your business is set up credibly, it’s time to apply for new business credit!

Contact us today to learn more about getting credit for your business!


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