Is Finding Your Business Online Important To Getting Financed?

16. October 2017

You wouldn't think that potential lenders or investors would care much about the online footprint of your business, but more and more they do!

Having your business found on search engines, Facebook, Twitter, LinkedIn, national 411, online directories, mobile map searches, local searches, BBB, and with your State all lead to more credibility for your business which translets into less risk of default.

While having a great business idea is a good thing, lenders and investors are more concerned with the level of risk that your business will fail and therefore default. The more you can do to lower that perceived risk the better chance you have of being funded.

The place to start is with having a professional business website. You do not need to spend a lot of money, but you do need a professional looking website. Whether you do a website tonight from GoDaddy or some other website provider, pick one that compliments your industry and highlights your company's place in it.

Next you will need a professional email account like rather than Nothing against Gmail or any other free email provider. It is simply the lenders have seen a higher rate of default in businesses that use free email accounts, so there again is that whole higher risk thing. Try to stay out of known high risk pools.

Many lenders will do a simple national 411 search and if your business is not found you could be declined. This takes only seconds to fix and remove another high risk item.

When you search locally for your business do you find it? Check Google Maps, run local searches, look on manta and If you are not there, then get there. Again it is easy and only takes a few minutes to complete.

Make sure your business is found on the social media sites. The important ones are Facebook, Twitter, LinkedIn, and YouTube. These too are easy to setup and there are many services that will do it for you.

Go online to all the business credit agencies; Experian, Dun & Bradstreet, CreditSafe, and Equifax. Check to see if your business is listed. If not, get it listed. If it is listed then know what is in your business credit reports before lenders do.

You should also know what lenders and investors are going to find out about the business owners. Pull the personal credit reports of anyone owning 15% or more of the business. There are lots of free and no inquiry services that let you do that. If there are major derogatory items on any one business owner you may consider dialing back their ownership at least until after funding or taking the time to optimize those reports before presenting to lenders or investors.

Business Credit Scores, Lender Compliance Items, Optimize Personal Credit, Pre-Qualify for Business Loans

Market Research is a Vital Aspect of Any Business Financing Plan

15. October 2017

A difficult task for any business is conducting market research. This research can impact a business in many ways including how you brand your products and who you market to. Although market research can aide a lot with your businesses marketing efforts, it also plays a key role when your business is attempting to obtain financing. 

The lenders or investors main objective when evaluating your business is to determine whether or not they will get their money back. Good market research will help set your potential lenders mind at ease, and you will be more apt to obtain the business capital you need. The lender also wants to know things about the market such as the competition and the demand for your product or services. 

To begin the process of researching your market you can start by searching trade associations, trade show websites, and trade magazines. They exist in nearly every industry and can supply a wealth of information related to your market. The best part is that many of the trade related websites provide the information free of charge. The government also provides a number of valuable resources for market research. For example, the Economic Census, released every five years from the U.S. Census Bureau, provides an excellent glimpse at industrial activity including the Industry Series report that offers separate reports for many industries and shows the number of businesses within an industry, sales volume, number of employees, and more. Other good resources for market researching are corporate websites of your competition and press releases from your competition. White papers provide good market research data because they are well-researched documents. 

Magazines and Newspapers are another inexpensive resource for market research. As part of their research for articles journalists often gain access to expensive market research reports which may be mentioned in an article. Additionally, expert sites such as Google Answers provide value in offering direction to someone who seeks information. They don't provide the hard numbers you may be looking for, but you may find the expert opinions useful when putting together your market research. Finally, another inexpensive resource for obtaining market data can be found at Academic Research Centers. 

Market research companies and investment houses are expensive alternatives to market research. The information found with a market research company is generally well researched and contains extensive product/industry metrics and statistics, including forecasts and trend analysis. It is not uncommon to pay well into the thousands of dollars for a report that is only a hundred or so pages long. Since money is typically tight for a business starting out, it's best to go after your market research using the methods above for gathering free and inexpensive research data. 

Although market research is extremely important to your business plan and your business capital search, it is only one piece of the puzzle. Before a lender even looks at your market research they will look at things such as your business management team's experience, your past business successes, and your "lending character " or your ability to repay a loan. It is vital that you not only have a good business plan, but you also need a good business financing plan as well. 

Business Loan Approvals, Pre-Qualify for Business Loans, Small Business Financing

Tired Of All The Bad Small Business Advice Out There?

14. October 2017

If you've taken the time to read the "Small Business Finance" articles in the New York Times, The Wall Street Journal, CNNmoney, or Forbes they are always talking about things like:

  • Planning your IPO for going public
  • Making your pitch to Angel Investors
  • Finding the right Venture Capitalist
  • Creating a business plan that banks will love
  • Attracting more funding to your Series A

While this might be nice titles for their articles, what application do they have to "Small Businesses"? When we are talking about small business we are talking about the bread and butter of America:

  • retails stores
  • hair salons
  • service businesses
  • contractors
  • franchisees
  • auto shops
  • restaurants

None of which are ever going to have an IPO, pitch to angel investors, go after venture capital, or do a series A SEC funding. Come on writers and contributors, let's talk about what small businesses need!

In the wake of the financial collapse of 2008 lending to true small businesses all but disappeared. Banks, Credit Unions, Finance Companies all saw there sources of cash for small business lending dry up and blow away. Now here it is nine years later and small business lending has not returned to where it was. So how does a small business get financing now?

The percentage of small business loan declines is staggering. About 97% of traditional business loan applications get declined. That means you have a 3 in 100 chance of getting approved. That is horrible, but there is a way to greatly improve your odds.

First, you have to know who is lending and what types of loans they are making. For example, banks are fairly aggressive about approving credit cards. Therefore if you have owners or principles in your business that have good personal credit scores then they can each be approved for between $25,000 and $200,000, with the average being around $75,000. This means if you have 3 owners or principles you could be funded $75,000 for each one and have $225,000 available for your business. The upside of these credit cards is that many start out with 0% interest for the first 9 to 12 months.

Next are Credit Unions. They were banned from business lending for 7 years from 2009 through 2016. The banks had no money to lend to small businesses so they pressured congress to make sure that Credit Unions didn't rush in to fill the gap. Credit Unions are now back into small business lending and doing mostly vehicle financing, equipment financing, small term loans, and construction loans. The term loans range from $10,000 to $75,000.

And now for some really useful small business advice. Business Lenders care about the personal credit of the business owners. Your goal should be to have FICO 8 scores that are north of 720, have debt to limit on your revolving accounts at 45% or below. Be able to show a good debt coverage ratio for the amount you are seeking and limit the number of recent inquiries on your credit reports.

If you want an "investor", then create your own. Find a partner with good personal credit scores who is willing to use those scores to get your business approved for financing. It is called a "Credit Partner" and they are much easier to close a deal with than are "Venture Capitalists"! 

Business Loan Approvals, Optimize Personal Credit, Pre-Qualify for Business Loans, Small Business Financing

You Must Separate Your Business Credit From Your Personal Credit

13. October 2017

You must go about financing your business the right way or you will risk losing every personal asset you own if your business happens to fail. Don’t risk it, do business the right way.

1. Where do I begin?

In order for you to not use your personal social security number and not have to personally guarantee every loan, your business must be setup as an "entity" unto itself. Therefore sole proprietorships or partnerships will not work. With a sole proprietorship or partnership, you are in business, but not "a business". Without a separate “business entity", you personally guarantee every debt that is incurred by your company. Simply stated, if you do not want to personally guarantee your company's debt, make sure that your business is an "entity".

2. I have a Business American Express, am I already started?

No! While your business name might be on the card, do not be fooled, that card will only report when you default and then they will come after "you".

3. What is a "Dun & Bradstreet" (D-U-N-S) number and why do I need one?

A Dun and Bradstreet number, sometimes referred to as a D-U-N-S number or a D&B number, is the number that your business's credit rating is reported under for the Dun and Bradstreet business credit reporting agency.

4. Can I get a "Dun & Bradstreet" (D-U-N-S) number for free?

Dun & Bradstreet says that you must pay them or you will never have their business credit score. However, the first time a creditor requests your business credit file, D&B will create it so that they have something to sell them. 

5. How long will the credit building process take me?

The process is not hard, but you must pay attention to the details. Hopefully, you were very serious about going into business and therefore, you should be very serious about building your business credit too! The process normally takes about six months.

6. I have a new company. What can I do to build business credit? 

You can get business credit cards, corporate leases and take advantage of many vendor financing programs available to your business. 

7. Will I be able to get an SBA Loan when I finish?

Getting an SBA Loan when you have poor personal credit is extremely difficult. Most SBA Loans are being denied even to those individuals with good personal credit. Unfortunately the SBA itself reports that 97% of all business loan applications get declined. There are many other sources that you will be able to take advantage of in order to receive creative financing options to help start or build your business. Your new business credit can be utilized to obtain computers, equipment, company credit cards, lines of credit from wholesalers, etc. 

Build Business Credit, Business Credit Scores, Pre-Qualify for Business Loans, Small Business Financing

The Major Mistake All Small Businesses Make

12. October 2017

The major mistake that almost all businesses make is co-mingling their personal credit and finances with their business credit and finances.

Let’s take a look a few examples of this:

Example #1

You start your business, you open a business bank account, and from whatever resources you deposit money into that account. BIG MISTAKE!  

Here is the correct way for this to happen. You start your business, you open a business bank account, and from whatever resources you open a certificate of deposit and then use then CD to secure a business loan for the same amount from your bank.

Why do that? First you checked with your bank to see if they will do this transaction, and later we will provide you with a list of banks that do, and then you make sure that your bank will report your new business loan to the business credit reporting agencies.  When your new business loan reports it does not report as secured and it alerts all other potential business lenders that your business was worthy of getting approval for a bank business loan. Your business is now on other business lenders radar.

Example #2

You personally have good credit scores. You believe you can use those scores to secure business financing and in many cases you are correct. But you haven’t taken the time to know if your business is in lender compliance and you just apply. 

Unfortunately you get declined. You got declined because the address you provided was a residential address and you didn’t know that business lender declines all home based businesses.  

By not being ready to apply you have now damaged both your personal credit and business credit scores.

The solution to this is to know that you and your business are truly pre-qualified and ready to apply before you actually apply.

Example #3 

You are operating your business as a sole proprietor or partnership. While these are viable forms of business, you are in business but you are not “a” business.  What this means is that you do not have a business entity and that everything you do in that business comes back to you personally. 

This means any debt or liability the business might have you are now personally liable for which is a major risk for your personal credit and finances.

The solution is to have a separate business legal entity that can be responsible for the business liabilities and which can develop its own credit scores that are separate from you personally.

Unlike your personal credit, which goes with you when you leave your business, your business credit remains attached only to your business.  Your business having its own strong business credit scores creates an asset.  This asset is valuable because it can be transferred to the new owners and is immediately available for their use.

Building strong business credit scores is all about having reporting trade lines that you use regularly and that you pay on time.  To optimize your business credit scores your business will need at least 10 positive reporting trade lines which show a pattern of month in and month out usage with good payment histories. 

Build Business Credit, Business Credit Scores, Vendor Credit Lines