Small Business Loans | Commercial Credit | Business Credit » Business Credit

Urge Your Vendors to Report Part II

the xbanker — Wed, 08 Oct 2008 16:07:16 +0000

A few months ago, I reported on Experian’s effort to get companies to report business credit accounts to Experian. Now D&B is trying to make it easier for companies to report as well. They have launched a free service companies can use to report their accounts receivables to D&B from Quickbooks.

I can say from experience that in the past, reporting to D&B has been difficult and expensive. While I haven’t given this service a try, it sounds like it could be a very useful tool for business owners who want to report. Business owners who are trying to build business credit may want to urge their lenders and vendors to check it out.

The downside, of course, is the possibility that mistakes and false information may be reported. Without a law that gives business owners the right to view and dispute their credit information for free, it’s possible that one of your vendors or clients is reporting wrong payment info — and you don’t know it.

If you try out this service, I’d love to hear how it works for you!

Improve Your Cash Flow: Collect Debts You Are Owed

the xbanker — Mon, 15 Sep 2008 20:25:27 +0000

Recently a friend called me about a debt she is owed. She operates a small business consulting firm and another small business owner stiffed her for about a grand. It’s not a huge amount of money, but collecting it would make a difference to her. (And since she provided the service, she should be able to collect.)

She was asking for my advice in collecting. An attorney was out of the question (too expensive – and the client is in a different state) and the collection agency she had contacted wasn’t interested in one small debt.

Here’s another option she might consider:

Dun & Bradstreet’s Debt Collection Services
Affordable Debt Collection Services

Their offerings include:

DunsDemand Letter – send a “wake up call” to slow payers

DunsDemand Letter Series – convey the seriousness of the delinquency and escalate the collection process by sending three letters

Contingent Collection – an effective combination of DunsDemand Letters and telephone calls made by a professional collections agent

How it works:

DunsDemand Letters are sent within a 30 day period by Receivable Management Services, a D&B partner, on your behalf. These letters will be sent on RMS letterhead and will have a tear-off remittance included for your customers to mail their payments directly to you

Starting at just $25, these services aren’t expensive and might just do the trick. If your business is owed money, it might be worth a try.

In Credit Crunch, Business Comes First

the xbanker — Mon, 08 Sep 2008 17:58:56 +0000

Business owners are electing to pay business debts at the expense of personal debts, reports Experian(tm). In a comprehensive study covering 2.7 million business owners over the course of a year, the global information services company found that found that business owners with a severe mortgage delinquency were more likely to pay their business obligations instead of their mortgage.

Experian’s research showed that because of deteriorating equity, high mortgage payments and limited refinancing options, business owners chose to ensure the business’ survival, preserving their source of income at the risk of losing their home. That’s the bad news.

Here’s the good news:

Business owners were less likely to experience a 90+ day delinquency on their mortgage than other consumers. In fact, by April 2008, the average home owner was 1.5 times more likely to experience severe mortgage delinquency than the average business owner

Additionally, Experian’s study found that small-business owners are relying on commercial lending options more often than personal financing options, to support their businesses. We think that’s smart business and it may very well allow the business owner to keep their business even if they have to start over personally.

But of course, the downside is that business owners’ personal credit can impact their business financing. Experian, which sells a credit score that blends the business owner’s credit with the credit of the business, points out that consumer scores work great for assessing consumer risk, but their blended score performs nearly twice as well as a consumer score for assessing business risk.

Problems Building Business Credit Part Two

the xbanker — Tue, 02 Sep 2008 18:04:47 +0000

In a previous post, I replied to a reader who is skeptical about building business credit. Here is some more correspondence on this topic:

I appreciate your response to my question. My business is two years old and I have perfect business credit with DNB and an intermediate score with Experian. Additionally, far as personal credit, I did all I could to increase the score.

I have a student loan that will not be paid off any time soon. In the beginning I believed that building perfect business credit would be the perfect solution to my problem. Of course, after I followed the steps I realize ultimately personal credit still plays a factor. I have several trade accounts with small credit lines nothing serious.

But I am looking to obtain a line of credit from $100-$200,000.00 dollars. That is the reason I formed (my corporation) to acquire an existing company. Technically my company is a start up, but through building credit I established creditability of paying on time and my company has matured to the time banks require businesses.

Ms. Detweiler, I’ve been at this for six years with no results. I hired every consultant I can think of. Should I give up? What would you do in this case?

This is a great conversation, because it illustrates some of the myths floating around about business credit. Building a strong business credit profile does not guarantee access to hundreds of thousands of dollars of unsecured credit lines, no matter what the so-called “experts” say. (Those claims remind me of the credit repair companies that say they can remove anything from credit reports, regardless of whether the information is accurate or not.)

A credit line of $100,000 – $200,000 is a good sized line for a bank to extend, unsecured, to a relatively new business or a business without the track record (including tax returns) to demonstrate the ability to pay it back. Unfortunately lenders are not going to just look at credit scores –personal or business — and write such a large blank check.

Realistically, in this environment, a business needs to be doing $750,000 – $1.5 million in revenue as documented by tax returns to get an unsecured line that size.

You mention that you are trying to acquire another business. Do you have the specific business in mind that you want to acquire? Does it have solid financials to back up the loan? If not, then the lenders may be more objectively evaluating the creditworthiness of that business than you are. In other words, you may see the potential but the lenders are looking at the numbers.

If you do not have a particular business in mind that you want to acquire, but are just hoping to get a $100K – $200K line of credit, then find the business you want, then again, I think the consultants you’ve hired have not been honest about the realities of business lending.

You ask whether you should give up. Absolutely not. I don’t like to see anyone give up their dreams of entrepreneurship! But I do think you need to start looking at other ways to make your business happen. They may include:

1. Finding a business you can buy with owner financing (or at least partial owner financing).

2. Getting a partner with good credit to help (this requires some caution and a solid legal agreement. And it doesn’t guarantee you the unsecured line of credit you want either.)

3. Getting investors, starting with friends and family.

Again, I don’t know enough of the specifics of your business, but something doesn’t seem to be clicking here. You’ve done a good job starting to build your business credit, now you’re going to have to look at other ways to take the next step.

And, by the way, I sat on a panel once where one of the most successful business owners in El Paso TX described how he was turned down for financing over 100 times by the banks before he succeeded. But he didn’t let it stop him. He found other ways to get the job done!

Monitoring Your Business Credit

trent — Wed, 30 Jul 2008 18:33:25 +0000

I am currently in the market for a new SUV for my wife. As I’ve researched and shopped around I’ve learned an important lesson: BEFORE you step foot into a dealership, make sure to have previously pulled your personal credit score and know exactly what it contains. This is sound advice, because you never want to be surprised by wrong information on your report when you are ready to use it. Fortunately, my wife and I both have high personal credit scores that we keep a close eye on with a monitoring service that alerts us of any minor or major change.

As I thought about it, I realized, business owners are in the same boat. BEFORE applying for any financing, you should know exactly what business credit scores you have what what your report contains.

Here are 3 simple reasons to monitor your business credit reports:

Avoid Unpleasant Surprises: How much will your business qualify for? What interest rate will be granted? Both of these questions are determined, in part, by what is on your business credit report. Monitoring makes sure that you are not surprised by anything on your business credit report.
Inaccurate Information: I can’t tell you how many times I’ve …

Building Business Credit webcast available now

the xbanker — Mon, 28 Jul 2008 14:10:58 +0000

The Wells Fargo Small Business Webcast Sound Credit Practices for Your Business is now available. I was honored to be chosen to participate in this panel discussion with leading financial industry insiders and business owners as we talked about how to build business credit, and effectively manage business credit and cash flow. The program focuses on financial management principles that support long-term stability and growth.

Sound Credit Practices for Your Business offers tips and strategies to small business owners looking for ways to safeguard and strengthen their businesses. This webcast will provide informative, relevant and timely advice on how to implement and manage sound credit practices.

If you haven’t viewed a webcast before, it is like attending a seminar…from the comfort of your home or office. You simply watch online with both audio and video.

The webcast was moderated by Rich Sloan, co-founder of StartupNation.com. I’ve seen and admired Rich’s work for years, but was even more impressed when I met him in person. He’s both very smart and very funny. And I learned a lot working with the other panelists:

• Michael Billeci, Regional President, Greater Bay Area Region, Wells Fargo
• Scott Anderson, Ph.D. Senior Economist, Wells Fargo
• Jerry L. Mills, CPA, Founder and CEO, B2B CFO
• Sharon Evans, President and CEO, The Business Resource Group

Free registration for this webcast is now available at www.wellsfargo.com/biz/webcast.

About the Wells Fargo Small Business Webcast Series

Wells Fargo’s Small Business Webcast Series of interactive, online sessions is designed to help small business owners meet their business growth and management goals. The series, which launched in 2007, is one of Wells Fargo’s many resources to help small business owners succeed financially.

The latest addition to the library of small business resources in the webcast series is Sound Credit Practices for Your Business. The webcast series library also includes: Financing Strategies for Your Business, Protecting Your Business, Technology and Your Business, and Health Care Options for Your Business.

For more information on the series or to view one of these programs, visit www.wellsfargo.com/biz/webcast.

Want your business to survive and thrive?

the xbanker — Thu, 10 Jul 2008 14:51:58 +0000

You may have heard the statistics that half of small businesses fail in the first year. The Small Business Administration says it’s not quite that bleak. They report that two-thirds of new employer establishments survive at least two years, and 44 percent survive at least four years. (Still that’s 54% that don’t make it four years.) These results were similar for different industries.

Major factors in a firm’s remaining open include an ample supply of capital, being large enough to have employees, the owner’s education level, and the owner’s reason for starting the firm in the first place, such as freedom for family life or wanting to be one’s own boss.

Other studies have pointed to the following causes of failure as…

Lack of experience

Insufficient capital

Poor credit arrangements

Personal use of business funds

Unexpected growth

If you want to be successful, follow those who have been successful. Business credit is key to that success!

Are You Entering The Danger Zone?

the xbanker — Fri, 13 Jun 2008 22:15:11 +0000

Sales are up…things look good, right?

Wrong! warns Jerry Mills CPA in his terrific book, The Danger Zone: Lost in the Growth Transition which I read on a flight to San Francisco last week. I had met Jerry a couple of weeks earlier at a conference in Baltimore, and would be seeing him again, so I knew it was time to learn more about his business.

The Danger Zone proved to be a deceptively easy read (Jerry tells me his second book is even better). I say “deceptive” because the writing style and content kept me engaged throughout the whole book. No CPA-style knuckle-wrapping here. Just solid insight and advice. But the advice he shares should not to be taken lightly. Ignore it, and your business may crash and burn like so many others have.

Jerry Mills is well-qualified to advise owners of growing businesses. He practically invented the “rent a part-time CFO” business long before it was popular. In the past few years, his business B2B CFO has been growing rapidly and he now has more than 80 partners across the country. He also continues, however, to serve as CFO to businesses in the Phoenix AZ area.

In short, he’s worked with a lot of business owners in diverse industries who wonder why the heck they are running out of cash even though business is “booming.” In fact, Jerry says, typically an increase in sales means the company has a decrease in cash, which is the opposite of what most entrepreneurs expect.

There are many more lessons in this book, and I’ll talk about them in future posts. But in the meantime, I want to remind you that sales aren’t the main metric you want to focus on as your business grows. As always, “Cash is King,” or as Jerry would say, “Cash is the lifeblood of your business.” But credit is also essential. Without access to credit when you need it, your business may be unable to move to the next level.

Fast Cash For Your Business!

The XBanker — Tue, 10 Jun 2008 23:28:47 +0000

Do you need fast cash for your business? Want a small business loan with no personal guarantee? Are you looking for immediate business financing? Chances are that you answered “yes” to all three of those questions. We all want cash for our business and we want it as soon as possible. Unfortunately, the financing world doesn’t always tell us what we want to hear. If you are properly prepared and have a proven track record (as demonstrated by your revenues and your credit) you can probably get more money – and faster than you think. If you are not prepared … well, you reap what you sow.

Most people don’t start looking for capital for their business until it is too late. “Too late” can mean a lot of things: damaged credit, out-of-line ratios, too short of a time frame, etc. These oversights, plus the procrastinator’s itch for a quick fix, are two of the most common ailments we deal with. I wish every entrepreneur understood this truth: accessing capital is a process.

First, you start by setting up the right corporate structure. You need a corporation or LLC. Garrett was talking about the benefits of S Corporations, when to use a C Corporation, and the advantages of an LLC. To access capital under the best terms, you need to separate yourself from the business as much as possible. Having a corporation or LLC is a step you cannot afford to skip.

Once you have a corporation, you need to build a business credit profile. Building business credit is a process too many entrepreneurs want to skip or are so busy that they don’t have the time to dedicate to it. But, you need to find a way to establish a business credit score. In the past, banks relied exclusively on personal credit to approve business loans, business credit cards and unsecured lines of credit. The recent credit crunch is changing all of that. We are seeing business credit becoming a factor in most applications now. Even if the business credit score isn’t used, building business credit will help ensure your business is compliant with the numerous legitimacy checks that banks and vendors will use before granting credit. It’s unfortunate to see business owners skip this critical step.

With a business entity and a business credit profile in place, you’re now ready to start acquiring a mix of financing products. Every business owner needs a couple of business credit cards (a form of cash credit). The right business credit card will give you working capital that won’t report your balances on your personal credit report – this is key to keeping your credit ratios in line for future financing.

It is also important to start accessing vendor credit. Just about everything manufactured or sold by a business can be obtained with business credit. Vendor credit comes in many forms, with net terms (30-90 days to pay invoices) and revolving lines being the most popular. You need to get in the habit of preserving your cash and your cash credit.

Once you have a good mix of cash and vendor credit you’ll be better prepared for bank financing: loans, unsecured lines of credit, and equipment leases. You’ll be prepared because you’ll have strong business credit – multiple lines with a positive payment history and with sufficiently high credit – to warrant larger loan limits from the banks.

If you follow the process, you’ll be rewarded; if you wait until the last minute, you’ll get what you deserve.

Join Me for a Business Financing Strategies Webcast

the xbanker — Thu, 29 May 2008 17:10:43 +0000

Mark your calendars! July 29, 2008 will be the debut of Sound Credit Practices For Your Business webcast sponsored by Wells Fargo. I’ll be one of the panelists bringing you advice and strategies during the program.

Along with other top experts, we will be showing small business owners how to build and keep healthy personal and business credit, best practices for cash flow management, what banks are looking for in loan applicants, and strategies for creating a long-term plan for credit and business financing stability.

Registration for the event is now open. Did I mention it’s free?

I hope you’ll join us!