Business Credit

Since Business Credit Is Highly Unregulated Most Companies and Business Owners Are Unaware of How Important It Is

Tracy Becker, FICO Pro CEO & President of Credit Restoration and Education at North Shore Advisory, Inc.

Personal credit reports and scores are a hot topic these days and there is a wealth of information available online to help educate consumers on how they work, their significance, and regulations pertaining to them. When a bank rejects a consumer for a mortgage the law requires the bank give an explanation for the rejection and the credit score used in the decision making is supplied to the consumer.

On the other hand, opposite rules apply for business lending and business credit information. When applying for a business loan a bank doesn’t need to divulge if it used a copy of your business credit reports, scores, and indexes to make a decision. If businesses actually knew how easily accessible a copy of their business credit was and how limited and poorly the scores might reflect on them, they would be running to get a copy of their Dun & Bradstreet or Experian business credit profile. Equifax is also a business credit bureau but is rarely used.

However, building a well-balanced and positive business credit profile can be a great asset for a company. Unfortunately business owners & professionals believe if a company has credit it will automatically be listed on their credit profile and reflect on their score. Actually, this is the furthest from the truth. Many vendors, lenders, and creditors do not report to the bureaus and it is difficult for companies to figure out which ones do. Having a professional credit expert guide and build the right credit can give a company an edge in getting loan approvals and the best interest rates.

5 Myths About Leasing a Car

Automotive leasingThe Basics

5 myths about leasing a car

Don’t believe everything you’ve heard. For many drivers, leasing can be a better deal than buying. Here’s what you need to know before you head into a showroom.

 

Leasing often gets a bad rap, and no wonder: Its confusing argot sounds like fodder for a course in high finance, and dealers have been known to slip bad deals past confused car shoppers who simply wanted low monthly payments.

 

About 20% of new-car transactions are leases, but more people should be leasing. As interest rates rose, automakers shifted incentives from rebates and low-interest financing to leases. If you know what you’re looking for and negotiate smartly — and get over the five myths below — leasing can be a good deal.

 

1. Buying is cheaper than leasing.

If you keep a car well past the day the loan is paid off — or you paid cash to begin with — you save money by buying. But if you trade in your car before the loan is paid off, the value of the trade-in is unlikely to cover the remaining balance on the loan.

For example, if you leased a new Chevrolet Malibu LTZ for three years, your monthly payments could be $489. When you turned in the car at the end of the lease, you’d pay a “turn-in” fee of $395 and then walk away. If, however, you bought the Malibu with a five-year loan your monthly payments could be $546, and after five years you’d own the car free and clear.

But say you want another car after three years. To match the residual value written into a three-year lease, you’d probably have to sell the Malibu on your own rather than trade it in. Then you’d have to pay off the loan. Buying would leave you about $1,600 poorer.

Leases are negotiable. But first you need a tour of the jargon:

 

2. Capitalized cost. The vehicle price is called the capitalized cost. You should haggle over this just as hard as you would haggle over the price if you were buying.

Money factor. Another crucial term is the money factor. The lower this number, the better (multiply it by 2,400 to get an estimate of the interest rate). Dealers are sometimes reluctant to reveal the money factor, so be persistent.

Residual value. Finally, the residual value is the value of the car or truck at the end of the lease.

An inflated residual value lowers your monthly payments, but it can also handcuff you.

A more realistic residual value will make it easier to sell the lease, trade your vehicle midlease or buy the vehicle at the end of the lease. Compare quotes from auto insurers

Ask the dealer to show you deals from several banks, focusing on the money factor and the residual value.

 

3. Only businesses get a tax break on leases.

Tax laws allow businesses to deduct monthly car-lease payments as expenses.

But most individuals get tax breaks, too. In most states, you pay sales tax only on the monthly payments, not the sale price of the vehicle. In the Malibu example above, you’d owe taxes on about $18,000 in payments rather than the $27,000 sale price.

Arkansas, Maryland, Minnesota, Texas and Virginia charge sales tax on the entire sale price.

If you’re in the market for a car, one of your first decisions will be whether to buy or lease. Which is the better option?

 

4. You may have to pay hefty fees when you turn in the car.

The typical annual allotment of 10,000 to 12,000 miles is stingy, and the 35 to 55 cent-a-mile penalty for exceeding the limit seems daunting. But if you buy a car, you’re also penalized for higher-than-average mileage when you trade it in.

You can probably negotiate a higher limit in exchange for a higher monthly payment and still save money.

 

5. If you want out early, you’re stuck.

Several fee-based Web sites, including LeaseTrader.com and Swapalease, match people who want to get out of a lease early with those who want to assume a short-term lease. At LeaseTrader.com, for example, it can cost $80 to post a vehicle and $150 to complete the transfer of the lease.