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!

• Retain Accountant’s and Attorney’s services - Although the expense may seem burdensome at first, accountants’ and attorneys’ services will save you and your business money in the long run. The hourly rate of a competent advisor is little compared to the cost of losing your business or being held liable for the business’s mistakes. These advisors will help you to structure your business properly and take steps to help the business grow responsibly. Some accountants and attorneys even provide flexible payment options for young businesses.
• Establish the Necessary Structure - While many business entities are available that provide differing advantages, structural differences may affect your ability to obtain financing without losing control of your business. If you have any aspirations of developing your business into a publically traded entity, you will need to know about the structure of a C corporation. Before you approach your first investor, you need to decide the number of shares of stock to authorize, whether more than one class of stock will be necessary, and how many shares to retain yourself.
• Prepare Your Business Plan - The first step in your business’s search for financing, if not a preliminary step in creating your business, should be ensuring that you have developed your dream into a coherent, well-drafted business plan. Your business plan should provide potential investors with a comprehensive view of the structure of your business, your conclusions about the business, a realistic operating plan that you intend to abide by, potential risks the business may face, the position the business can pretty safely expect to be in over the next six months and over the next year, and possible the comments about your hopes for further developments. In addition to providing investors with valuable information, your business plan will cause you to focus your attention and force you to look at every opportunity and every risk that comes with it with a clear eye and a level head. Periodically updating your business plan will help you to gauge your progress and enhance your ability to make realistic predictions.
• Decide Between Loans and Equity Offers - Before considering financing, and possibly in the course of developing your business plan or through other research, you should gain an understanding of the costs involved in operating the business. Remember that many young businesses operate for at least three years without any profit. Unless you start your business with old money, you will need to explore the possibility of loans or raising money by selling partial ownership of your business in equity offerings. While loans may allow you to retain ownership and control of the business, often, institutional lenders will be hesitant to help finance a new business. Accordingly, the business may have to sell equity to meet its financing needs. Depending upon the business uses, this may be through the sale of shares of stock, membership interests, or partnership interests. In selling equity, you and your business must exercise care so as to prevent giving control of the business to investors and to ensure compliance with federal and state regulations affecting such sales.
• Differentiate Among Investors - Federal and state regulations affecting the sale of equity in businesses, generally referred to as securities regulations, differentiating among types of investors. Accordingly, in selling equity in the business, you and the business will need to differentiate between investors to ensure compliance with securities regulations. For most young companies, the investor of choice is an accredited investor. Generally, accredited investors have the financial resources and knowledge to rationally make business investments. Regardless of the type of investor involved, the business must make certain disclosures regarding the business’s financial resources and its business plan. Before accepting money from anyone, the business must know which type of investor it is dealing with, what the investor needs to make an informed decision, and which laws affect the transaction.
• Satisfy Continuing Obligations - Once the business obtains the initial financing it needs, it must manage its debts and obligations responsibly. As with a personal credit history, the business’s ability to satisfy creditors and manage its obligations may affect future financing options and prevent the business from being subjected to creditors’ lawsuits. Part of ensuring that the business will be able to satisfy its continuing obligations is ensuring that the business obtains sufficient financing from the start. By carefully and realistically planning for the business’s needs, you can help the business to achieve short-term and long-term financial stability.

Every business is unique. Your financing strategy should be based on your specific circumstances. However, success requires careful consideration of available alternatives. By considering your financing options and engaging in financial planning, you will ensure that you take advantage of available opportunities.

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.

Does signing a car lease and making those payments impact personal credit in any way? The short answer is, “It may.”

If the car lease is a personal lease, and is reported to the credit reporting agencies (most are, but not all), it will affect your credit. Whether it helps or hurts depends on all the other information in your credit report. If you already have a lot of debt and payments, then it could be negative. If not, it may be a positive.

Even if the lease doesn’t impact your score much, it can affect your credit in other ways. I recall one entrepreneur, for example, who was charged a higher rate for her mortgage due to an expensive car lease payment that appeared on her credit report. Except it wasn’t hers. When she got it removed, her interest rate improved.

If the vehicle is leased under a business lease, and does not appear on your credit report, then it will not affect your personal credit.

In many states the lenders (or, in future years, those bottom feeders who buy such judgments for ten cents on the dollar) will pursue the borrower for a deficiency judgment. Meaning if you owed $400,000 back, you still owe $300,000. Years later you will still have someone chasing you for the money and your problems will continue long past turning in the keys on a failed investment.

It is now becoming clear that your best strategy is to fight a foreclosure. Hire an attorney to defend a foreclosure complaint. There are many defenses to be asserted, including a developing theory of predatory lending practices. As well, there are many appropriate procedural tactics which can be used to delay a foreclosure. When lenders run up against an aggressive defense, they are much more open to negotiating a settlement. They don’t want to spend a great deal of time or money on one case that has become a problem” for them. And as we know, they have a lot of cases to work on these days.

We are hearing of cases from around the country where lenders are becoming frustrated with defendant challenges to their foreclosure actions. Frequently, deals are struck whereby in exchange for the borrower allowing the foreclosure sale to proceed the lender agrees not to pursue a deficiency judgment and further agrees that the property value equaled the loan amount, thus avoiding the tax on forgiven debt. Borrowers are thus able to truly walk away from a property without the nagging concern of someone later pursuing a deficiency judgment or Uncle Sam later wanting money for debt forgiveness taxation. The attorney’s fees of between $2,000 to $5,000 in most cases are a small price to pay for getting clear of tens to hundreds of thousands of dollars in continuing obligations.

The time has come to stand up and fight foreclosures. Gain the leverage you need to release yourself from years of liability. Our office handles foreclosure matters in Nevada and California. In other states you will want to locate a competent real estate litigator in your area. Good luck.

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.

Now you can nab a free chapter of the book here. It’s offered by Robert Skrob, the info marketing guru who pulled the book together (in an amazingly short period of time I might add!). And in the true tradition of info marketing, Robert’s offering a bunch of good free stuff for would-be entpreneurs.

We’ve learned a lot from Robert and his colleagues who authored chapters in the book. So if you’ve ever thought about getting paid for that stuff in your head, I would recommend you go ahead and get your chapter (or ideally the whole book!), get inspired, and GET STARTED!

You might be very surprised.

The Incorporation Transparency and Law Enforcement Assistance Act, or Senate Bill 2956, was recently introduced by Senators Barack Obama, Carl Levin and Norm Coleman. These senators want to know exactly who owns each and every corporations or LLC formed in every U.S. state.

Granted, certain U.S. criminal minds have used corporate privacy to shield their fraudulent actions. Yet methods do exist to learn of this information. So why the concern? Some government officials now claim that international terrorists are using U.S. entities to hurt us. We have heard this song before as our civil liberties get chipped away. And so under this legislation the basic privacy in conducting one’s affairs will be sacrificed at the temple of complete government knowledge to combat what may not be a problem.

Stay tuned. But for now know that the bill as proposed would contain the following:

• Requires states to obtain a list of beneficial owners of each corporation or LLC formed under their laws.
• Requires states to ensure the beneficial owner information be updated annually.
• Requires states to provide information to law enforcement upon request.
• Requires entities with foreign beneficial owners to provide certification from an in-state formation agent that the formation agent has verified the identity of those owners.
• Establishes federal, civil and criminal penalties for persons knowingly providing false beneficial ownership information.
• Provides exemptions for publicly traded corporations since the Securities Exchange Commission already oversees them.
• Authorizes states to use an existing Department of Homeland Security to use already appropriated funds to meet the requirements of this Act.
• Gives states until October, 2011, to require beneficial ownership information.
• Requires the Treasury Secretary to issue a rule requiring formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or other entities for criminals or other suspect persons.

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!

First, some background. LLCs alone are an excellent structure for many different uses. For instance, they work well as a method of holding high dollar assets like real estate. If you own commercial or rental property, it’s important that you hold title to that property in an entity. If this entity (most likely an LLC) is run and managed properly, it can protect you from any personal liability.

Many people own a number of different investment properties. They want to protect both their investments and themselves by placing them into one or more LLCs. The task then is scenario, every investment is held under a different LLC. That’s not a popular answer for people who have lots of investments, but it’s built on sound reasoning. Think of LLCs as giant shoeboxes. As many investment items as you like can be placed inside, but they’re all at risk if something happens to the box. If a lawsuit happens, every investment you’ve placed into that LLC will be in danger.

The solution is to separate your investments. Ideally, you should use a separate LLC for each one. If you can’t, be sure to examine the equity you have at stake in every investment along with its liability potential. Then group them in LLCs accordingly. As an example, it’s not a good idea to include a single family beach front rental in Maui in the same LLC as a duplex on the wrong side of town. You may have several thousand dollars of equity stored in the house on Maui, which is placed at risk by including it in the same LLC as the rough edged duplex. Keep them separate. However, if you own three single family homes in Idaho, each within about twenty thousand dollars of equity, you might feel that placing them together is an acceptable risk. But that segregation strategy can get expensive.

If you have ten properties, using ten different LLCs might seem confusing and costly. Series LLCs seem to provide a solution as statutes in certain states allow you to create separate series within a single LLC, the debts and liabilities of which are only enforceable against that series. These laws allow LLCs to establish separate series of interests, members and managers, giving them separate duties, powers and rights. Those include the rights to profits and losses with respect to specific property and obligations. In states that have this kind of enabling legislation, each series within the LLC works as a separate entity under state law. This is why many people are attracted to series LLCs - they theoretically have the ability to shield property in different series from liabilities incurred in or against one another without paying state fees for multiple entities. This means that an LLC containing two properties can choose to place each into a separate series, so that liabilities from one can’t cause problems with the assets of the other. (Remember the same effect can be created using two different LLCs to hold these two properties.) Many people prefer series LLCs because at first glance they appear to be cheaper to set up. However, this assumption is false. It’s actually more complicated to set up a series LLC, making it more expensive than the basic type. In California you might find a series LLC appealing because the Franchise Tax Board charges an annual fee of eight hundred dollars for each entity. Many people think that setting up a single series LLC means paying only one fee in California. However, the Franchise Tax Board takes the position that each series counts as its own LLC for fee purposes, meaning you’ll have to pay the same whether you set assets up in series or in their own separate LLCs.

The biggest problem with series LLCs is that many states (including California) don’t have series legislation and may choose to ignore the laws of the state where the series was created. That’s because you’re subject to their rules when doing business in their state. The example of the attitude of the California Franchise Tax Board applies to fees, but liability protection is also an issue. Since series LLCs are so new they’ve never been tested by courts, even in the states that permit them. That means there’s no guarantee that limited liability protection will be extended to each series until every state rules on the subject. It’s hard to see how a court would choose to grant this kind of protection inside one entity, and only time will tell if courts will do this. But do you want this type of uncertainty when you are trying to protect your assets?

Again, one should be concerned about how series LLCs will be treated by the states that don’t have laws permitting them. If you set up a series LLC in Nevada then register it as a foreign entity conducting business in the state of Massachusetts, each series in the LLC own a separate piece of property. If there’s a lawsuit in regards to one of these properties you can’t be sure that the Massachusetts court will honor the series structure of the LLC, applying Nevada’s law to the real estate and activities that are located in Massachusetts. If they do, the claimant can collect only against the property in that series. If they don’t, the claimant can collect against the properties in other series as well. States are expected to give full faith and credit to legislation of other states, but the answer is uncertain. Exceptions do happen. It is also important to note that the American Bar Association did a review of series LLCs and declined to endorse them. You can be certain that future court cases will take note of this development.

Since the laws about creating series LLCs are different in every state that permits them, it might take a long time before enough case law is accumulated to give us any level of comfort about using them. If you want to make sure your assets have good, solid protection, it’s a much better idea to avoid corporate structures that don’t provide reliable protection. Avoid series LLCs as a form of protection until a definitive case law is established and rely instead on known, tested entities such as individual LLCs.