Tips for Obtaining Financing – Despite Challenged Credit

By:  Doug Houlahan, EVP, Maxim Commercial Capital

Did your bank turn down the credit application for your small or mid-sized business because your personal credit (FICO) score is less than stellar?  You aren’t alone!  Entrepreneurs bootstrapping their businesses as well as seasoned business owners experiencing hiccups have let personal bills take a backseat in order keep their businesses afloat, compromising their credit scores.

Don’t despair!  While your FICO score is a major factor for banks and other traditional lenders, alternative capital sources exist for well-prepared business owners.  The following tips will put on you the path to a new business loan.

  1. KNOW YOUR NUMBERS: Knowing your numbers is not limited to annual revenue, income, profit margins and debt service.  It also encompasses the benefits the potential financing will provide to your business, or “Economic Benefit.”  Economic Benefit is the return on investment (ROI) generated by the financing through:  increased revenues, incremental profits, improved cash flows, etc.  A well-prepared Economic Benefit justification can go a long way in supporting a loan’s approval.  Rule of thumb:  To be compelling, the Economic Benefit should be a multiple of the cost of the financing.  Knowing your numbers also allows you to confidently decide whether or not the proposed financing terms make sense for you and your business.
  2. CONSIDER THE THREE C’s: Beyond your FICO score, the other important factors considered by lenders in the credit approval process are the 3-C’s:   Capacity, Character and Collateral.
    • Capacity is the ability to pay your bills. Strong cash flow and lower debt loads are clear indicators that you are a good business operator, regardless of a challenged FICO score.  Rule of thumb:  Up-to-date and well-presented financial statements are the best tools to illustrate your capacity to service the proposed debt.  A few extra dollars spent on a bookkeeper every month to polish up those numbers is a worthwhile investment.
    • Character evaluation has changed significantly over the past few years thanks to the Internet. Many lenders search online to attempt to assess a prospective borrower’s character and likelihood of paying.  Social Media sites like LinkedIn, Facebook, Twitter and Instagram are reviewed to evaluate an individual’s public persona.  Many assumptions are made from these profiles.  Rule of thumb:  Remember that EVERYTHING you post online is a permanent record.  Be aware of what your public image communicates about your character.
    • Collateral is the ultimate enhancement lenders can hang their hats on. When a business fails to operate profitably and cash is tight, excess collateral coverage can increase a lender’s willingness to extend credit since its investment can be recovered by liquidating the collateral.  Rule of thumb:  Acceptable collateral extends beyond the obvious business assets.  Consider your personal assets including homes, investment properties and other liquid assets as collateral for your desired financing.
  1. HIRE A BROKER FOR CREATIVE SOLUTIONS: Sophisticated brokers may source multiple credit facilities from specialty lenders to fulfill your liquidity needs.  Accounts receivable financing, equipment loans, sale and leaseback transactions, inventory financing and even real estate mortgages can be combined to provide you with the best overall financing package.  A Broker can also save you countless hours in tracking down the right lenders and putting together the required loan packages, allowing you to stay focused on running your business.  Rule of thumb:  Interview multiple brokers to find one with whom you have chemistry, and have your broker coach you throughout the process.
  1. REMAIN OPEN-MINDED: Payment options have evolved thanks to technology, reducing repayment risk for lenders and creating more options for borrowers.  Instead of debiting interest and principal payments monthly, lenders easily can structure weekly, and even daily, loan payment programs; accelerated or front-loaded payments; seasonal payments; lock box arrangements; and contract financing.  Rule of thumb:  Make sure you thoroughly understand your obligations under a proposed loan agreement.  Have your broker, controller or accountant help you build cash flow projections to demonstrate you have sufficient cushion to remain in compliance with your loan agreement(s) in the event of an unforeseen hiccup.

THE BOTTOM LINE

You don’t need multiple lenders wanting your business to achieve your liquidity goals.  You just need the right capital structure from the right lender(s).  With that comes the flexibility you need to seize opportunities to profitably grow your business – resulting in a higher credit score in the future.

 

Hard Selling Your Customers? Stop!

Aggressive sales tactics can backfire and turn customers away from doing business with you. Instead, build lasting relationships with content marketing.

We all get telemarketer calls, right? Of course you do—aggressive sales calls plague everyone. How often do those callers convince you to buy something? Probably not very often.

Uninvited hard sales tactics are a relic. Today’s customers want to be engaged by businesses. Treat your customers the way you want to be treated. Instead of aggressively pitching your product or service, take the time to build trusting relationships with prospective customers through content marketing.

What is content marketing? Content marketing is the opposite of hard selling. Content marketing means:

  • Cultivating relationships. Expert advice articles and how-to videos that help your potential customers will keep them coming back to your website or social media page. Help them—no strings attached. When they’re ready to make a purchase, they’ll likely buy from the company that has their best interests at heart. Be that trusted company, not a pushy telemarketer.
  • Giving, not taking. The hard sell is all about demanding something from your customer: Do this, buy that, commit now! Content marketing is all about being in the right place at the right time, so your customer can come to you when they’re ready. Populate your website with information that customers find useful, enjoyable and relevant. Use photos, videos and writing to help them solve the problems that drove them to search the web for your products and services in the first place.
  • Listening and responding. The problem with the hard sell is that it’s all talking, never listening. Good content marketing is grounded in the needs, wants and habits of your customers. Research what words people use to search for the products or services you offer. Learn whether your target customers use Facebook or Instagram, LinkedIn or Twitter. Listen and respond with humbleness when they post online reviews or social media comments.

 

Serve their needs with care, and you’ll win their hearts.

 

Specialty Funding Alert!!

What you should do about the Equifax Breach

BE EXTRA CAREFUL ABOUT EMAILS AND LINKS

You should avoid clicking on links or downloading attachments from suspicious emails that claim to be updates from Equifax or connected to the breach.

Equifax will send paper mail to consumers whose credit card numbers or dispute documents with personally identifying information were impacted. It has also created a dedicated website for consumers to see if they were affected at www.equifaxsecurity2017.com. They can also call the Equifax call center at 866-447-7559. 

Hackers often use news of big breaches to conduct “phishing” campaigns, sending official-looking emails that make it seem as if the affected company or other legitimate services are asking them to supply information or click through to a link to repair any damage.

When in doubt, call or email the company that appears to be sending the message separately, don’t go through the email you’ve been sent.

Leasing your Company Vehicle

A company vehicle can be a real asset to the business depending on the industry. When deciding to lease a company vehicle there are many factors you must consider:

 

Type of vehicle

Age of vehicle

Use of vehicle

Tax implications

Lease structure and term

 

Type of vehicle

When a business or a self-employed/contract worker needs a vehicle, he or she may feel they

have free reign to lease whatever they want as long as their cash flow is sufficient to cover the debt. That is not necessarily the case. First, the Federal Government may see it as unallowable expense or asset to be claimed by the business – check with a tax professional. Second, most lenders will only lease a true business asset, meaning a Ferrari, Maserati, or Bentley may not be the right vehicle, unless your business is to race them. The type must be appropriate for the business both for leasing and tax implications.

 

Age of vehicle

In most cases the vehicle must be high enough value to have a useful life, meaning after

accounting for depreciation the vehicle still has value. Most vehicles depreciate beyond their value in about five years. I know, the GEO Metro you drive as your personal vehicle is nearing three hundred thousand mile and still works great. Yet for a business it must have a useful life. Leasing in most cases will only go to five years old on the vehicle however older vehicles often times can be an exception.

 

Use of vehicle

The use of the vehicle needs to be appropriate. Having a Lamborghini to get from home and work may not classify as a needed business expense or asset. Be sure it makes sense to be financed as a business lease, if you’re not sure, contact a tax professional.

 

Tax implications

This may be the most important aspect for leasing because at the end of the day the biggest

reason you are requesting a company vehicle as a business expense – to get the tax benefit. The

things to consider we have already discussed have a great impact on leasing a vehicle and if it is an allowable business expense/asset. You wouldn’t want to lease something and find out later you can’t expense the lease or interest and depreciation.

 

Loan structure and term

In most cases the maximum lease term will be five years. Three years may be more appropriate for a smaller purchase amount or a used vehicle. If the vehicle is significant amount of $100,000 or more and an appropriate expense, seven years might be warranted. Be prepared to have a down payment, especially if the purchase is over $100,000.Typically, 20% is the standard down payment requirement but in many cases a 100% lease amount is available.

If you are ever unsure about whether a company vehicle will be considered a true “Business

Expense” consult your tax professional.

Specialty Funding excels in commercial vehicle leasing programs. Vehicle and fleet leasing is the foundation of our business. We have always favored vehicle leasing as our core business because that is what we do best. Going on 40 years of vehicle leasing experience our team knows how to tailor a leasing contract to best fit your business needs. We are always happy to work with you and your accountant to find the best solution for your business.

Get trade terms from vendors and suppliers

Boost your small business’ finances and build strong credit. Get trade terms from vendors and suppliers.

Even if business is great, it can sometimes seem like the “exit” door to your bank account is bigger that the entry. Negative cash flow, although it doesn’t necessarily mean you have poor business performance, can crush your company. If there’s not enough cash coming in to cover what’s flowing out, your business’ cash reserve will dwindle and continuing to operate will be difficult.

If cash flow is a problem for you, you may be able to leverage your business relationships to stop serious problems before they start. It all starts with one simple question you can ask your vendors and suppliers: “Do you offer trade terms?”

What Are Terms?

When a vendor or supplier offers terms, trade terms or trade credit to its customers, it’s really offering customers a chance to delay payment for the length of the specified term. In some cases it’ll be a short term (e.g. seven days), but it can be longer (30, 60, 90 days). If a vendor offers you “net-20” terms, it means that you have 20 days before you have to fork over the money you owe for the product or service provided.

In this way, trade credit is actually a form of financing. The supplier is the lender, the customer is the borrower, and the trade terms are the repayment terms specified in the agreement.

Some suppliers or vendors will specify in their agreement a discount for earlier payment. For example, you might have net-30 terms, but if you pay within 10 days you get a 2% discount. On your trade agreement, this will look like: 2/10, n/30

If you can manage to pay early and keep a cushion of cash in your bank account, this is a great way to save some money. Depending on the trade agreement and how often you work with the vendor in question, it may even be worth getting an emergency line of credit or business credit card in order to take advantage of this discount. You’ll pay interest on any funds you use from the line of credit, but the discount may offer more in annual savings than you pay in interest for the line of credit.

How to Take Advantage of Trade Credit in Your Business

Your ability to get trade credit is often closely linked to your business credit scores and reports. Here are a few things you can do to make sure you’re getting the best terms.

  1. Apply for a DUNS number.

A DUNS number is a unique identifier for your business used by vendors, suppliers and lenders to access information about your company. When you apply for trade terms, your vendor or supplier may want to look up your DUNS number to inquire about your business’ payment history.

Generally, the score they’ll check is your Dun & Bradstreet (D&B) PAYDEX score, which uses your business’ payment history (early, on-time and late payments) to calculate a score for your business. Making sure you have a DUNS number is a crucial first step toward establishing a profile with D&B.

  1. Ask suppliers if they offer terms and open trade accounts with suppliers that do.

The vendors and suppliers you currently work with may offer terms to customers that ask about them. It’s possible that they’ll start with a short-term arrangement and, if your business pays on time, offer a longer-term one. Don’t be shy about negotiating if you’re a dependable customer!

Some big-name business vendors that might offer terms to your business are Staples, Quill, AutoZone, Comcast, Verizon, Home Depot and UPS.

  1. Make on-time payments so you are offered even better terms in the future.

Here’s some great news if you make on-time payments on your trade agreements: Accounts with terms are often reported to commercial credit agencies like Dun & Bradstreet. D&B will then take your payment experiences into account when calculating your business credit score.

This is a good way to start building business credit. With strong business credit you’ll put your company on track to qualify for the best terms and to secure financing you may need in the future.

Making Sense of the Financing Process

The financing process runs like clockwork here at SFG. After all, we are in the financing trenches all day, every day. We understand that to people on the outside of the financing world, the process might not be second nature. In fact, it’s typically quite the opposite. That’s why we have put together this guide to cover the ins and outs of the equipment financing process.

Inside this guide you’ll find:

  • What you should know before you begin working with a lender
  • How to select a lender you can trust
  • What you should know about the application
  • How to decipher the financial documents
  • How funds are distributed from the lender

 

The Plan

Approaching a lender for financing isn’t something you should do on a whim. You will need to prepare first.

Know what you need and why you need it. Simply walking into the lender’s office and saying “I need four trucks” likely won’t get you very far. Why do you need those four trucks? Has your bakery business picked up so much in the last several months that you can’t handle all of the deliveries with a single truck? Do you need to replace your current fleet of delivery trucks because they are ten years old and constantly breaking down? The key here is the reason. It may be obvious to you, but your lender is going to want to know how the new piece of equipment is going to be beneficial to your business.

Consider your time frame. If you have to make that massive amount of deliveries in your single truck tomorrow, you’re going to need financing a lot sooner than if you’re just looking to upgrade your fleet. It’s important to have an idea going into the financing process of how soon you’re going to need the equipment. That way, your lender will know from day one if they are going to have to move mountains to speed up the process for you – in many cases, they will.

Know where your finances stand. Before you go waltzing into that lender’s office, you’ll want to pull your credit report and recent financial statements. That way you’ll have an idea of any errors or blemishes that might be red flags to your lender and you’ll be prepared to talk about them. On top of this, you should be prepared to answer questions about your monthly, quarterly and yearly revenue, average bank balances, and credit history.

Select a Lender You Trust

Now that you’re certain that you need financing, the next part of the process is to find a good lender. Before you run right into your nearest bank, be sure to consider your options and do some research.

There are many different types of lenders, from a traditional bank to a non-traditional “alternative” lender. Consider what you are looking for and the benefits of each. Be careful, though, some banks will not finance used equipment and will likely put many more restrictions on your loan.

Once you’re settled on the type of lender and think you’ve found a good place, go online and check out their website. Is there any­thing there that raises a red flag or doesn’t sit right? Do a Google search and read all that you can about that lender. See if you can find reviews of other peoples’ experiences. The more you know the better.

Complete the Application

You’ve selected a financing partner you’re excited to work with and you’re ready to sit down and tackle the application. Easy, right? Maybe. Making a mistake at this part of the process could mean your funds are delayed, which could be costly if you’re count­ing on that money for an important business need.

Remember, the lender is going to want to learn a number of things from your applica­tion – most likely the length of time that you’ve been in business, your overall revenue, an average bank balance, and your credit score. It’s important to give the lender only and exactly what they ask for. If the lender wants to see bank statements from the last three months, don’t send bank statements for the entire last year, even if it might paint your business in a better light. This will only give the lender more paperwork to sift through and could confuse the process.

On the same token, don’t withhold critical information about your business. If they ask for bank statements for John Doe’s Tasty Bakery, but you give them bank statements for your other operation, John Doe’s Bread Shop because both businesses will be using the new equipment, but you didn’t tell them about your second business in the first place, then you are going to slow down the process.

Submit the Application

In the end, the timeframe depends on you as well. If the lender sends you the appli­cation, and you sit on it for four days before you send it back, you are slowing down the process for yourself. Be prepared for the lender to come back and ask for more information or clarification on parts of your application.

Once you have submitted your application, and it has been approved by the credit team (usually within 1-to-48 hours), the lender will begin to assess your options and what programs might be a good fit for your needs.

The Financial Documents

This is when the lender will draw up the financial documents. The documents will include information on payment terms and your financial responsibility.

It’s usually not necessary to have a lawyer go over the paperwork, but don’t be afraid to call in counsel if there’s something that doesn’t sit right with you or something you just don’t understand. Be sure to read the entire document carefully. Don’t worry! Though it may seem like there is a lot of financial jargon in the financial documents, almost all of it has to do with consequences and actions the lender may take if you don’t pay your bill on time. As long as you pay on time, you generally won’t have anything to worry about.

Remember, if you do have an issue paying, call your lender first before just skipping out on your bill. Chances are they will be much more willing to work with you if you call and explain your situation.

The Funds

Once the signed documents have been returned to the lender, the lender will ensure that the documents are signed in all of the correct places and that nothing has been altered. Now, the lender may begin the funding process.

The lender will call the vendor for the delivery date of the equipment and request their payment terms. At this point, the vendor will likely deliver the equipment to you. It is your responsibility to look over the equipment and ensure that it is exactly as advertised and free from damage. Look carefully, as this is an important step!

If all is well with delivery, you’ll give the lender a verbal authorization and funds will be released to the vendor. In almost all cases, the contract will start when money leaves the lender’s hands.

Repayment

Once the funds have left the lender, the financing process is complete and the responsibility for repaying the loan lies in your hands. Be sure to make payment in accordance with your contract terms.

If your financial agreement is a lease, you will most often return the equipment at the end of the lease term, but in some cases you may be granted the opportunity to purchase the equipment at “fair market value” or at set a price outlined in the initial contract.

Now, you’re ready to finance your next piece of equipment!

2017 Best of Albuquerque Award

Specialty Funding Group Receives 2017 Best of Albuquerque Award

Albuquerque Award Program Honors the Achievement

ALBUQUERQUE July 11, 2017 — Specialty Funding Group has been selected for the 2017 Best of Albuquerque Award in the Equipment Leasing Service category by the Albuquerque Award Program.

Each year, the Albuquerque Award Program identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Albuquerque area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2017 Albuquerque Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Albuquerque Award Program and data provided by third parties.

About Albuquerque Award Program

The Albuquerque Award Program is an annual awards program honoring the achievements and accomplishments of local businesses throughout the Albuquerque area. Recognition is given to those companies that have shown the ability to use their best practices and implemented programs to generate competitive advantages and long-term value.

The Albuquerque Award Program was established to recognize the best of local businesses in our community. Our organization works exclusively with local business owners, trade groups, professional associations and other business advertising and marketing groups. Our mission is to recognize the small business community’s contributions to the U.S. economy.

 

Should You Let People “Pick Your Brain”?

“Would you mind if I picked your brain?”
You get this question, I’m sure. You’re an attorney. Or an accountant. Or a doctor. You’re a senior manager or a business owner. You have experience. You have knowledge. And now someone wants to tap into that knowledge. For free. Do you let him?
This is how you earn your living, isn’t it? And now, just because it’s after hours and drinks are being served, this complete stranger thinks it’s OK to basically get free advice from you. He has a problem. He’s looking for help. He knows that you charge for this kind of advice. But he doesn’t seem to care. What are a couple questions, anyway, between friends? What other reasons are there to network than to meet new people and learn new things, right?
So what do you do when this situation occurs? You can be a jerk and tell the guy that you’re more than happy to help him if he wants to call the next day to schedule an appointment. Or you can just give in and offer him the advice that he wants. You can act annoyed. Or you can be gracious. You can turn and walk away in disgust. Or you can put down your drink, ask the guy to take off his shirt, and examine that strange looking hairy mole on his back right there in the middle of the party. What’s the best move?
How about this move: you thank the person for asking and offer whatever advice you can.
You earn plenty. You have customers and clients. You’re doing fine. Yes, of course you’d like to be doing better. And yes, it’s human nature to not want to give something away for nothing. And sure, there will be some people that will take advantage of your kindness. But you’re fortunate. You are making a living. And here’s a complete stranger that is asking you for help. And you genuinely may be able to help this person. So help him. Let him pick your pick brain, because two things will come out of it.
1. You’ll feel better about yourself because giving is always better than getting. That’s your humanitarian and benevolent side. You’re a good person. And you care about others. This is doing something nice.
2. You’ll get your money in the end. Maybe you’ll never see that guy again. Or maybe that guy will appreciate your advice and think you are so smart that he’ll be calling you first thing the next day to offer a million dollar contract. That probably won’t happen. But what will likely happen is that he will eventually walk away appreciating your help and valuing your knowledge. He will tell others. He will remember. Someone in his network of friends will have a similar hairy mole on their back and ask him for a recommendation or remember that he liked you. What comes around really does go around.
So let people pick your brain. Give your advice away for free. Don’t get defensive and don’t be annoyed. Be grateful instead. This is not a burden. It’s an opportunity to help. You’ll get your compensation someday. I guarantee it.

Interest rates sure to rise this year

With interest rates sure to rise this year, is now the right time to borrow? If you’re going to need that money, you’d better think seriously about it.

 

You don’t need a crystal ball to conclude that interest rates will rise significantly in 2017. If you think your business will need money in the next 24 months, the time to borrow is now.

The price of money is going up. Way up. Since late 2008, our economy has lived in an “interest-rate fantasy world” where the cost of borrowing money was extremely cheap. Everyone from Joe Smith looking for a mortgage to Uncle Sam financing a deficit has been able to borrow money at historically low rates.

The price of money is going up. Way up.

It’s no coincidence that rates have been so low. A confluence of factors has led to this:

  • Over the past eight years, the Federal Reserve has maintained a policy to keep the target federal funds rate (FFR) at between 0.0 percent and 0.25 percent, the lowest ever. This interest rate sets the benchmark for all other interest rates in our economy. The lower the FFR, the cheaper the interest you’ll pay on your loan.
  • The Federal Reserve also implemented several rounds of quantitative easing, which means it purchased debt securities from banks for cash. This added trillions of dollars in available lending money. With the “supply” of money available to lend increasing, the price of lending that money went down.
  • Foreign investors have had limited options for parking trillions of dollars in cash in safe places. The European economic crisis that started with Greece in late 2009 spread to other countries in the region. Suddenly, lending money to European governments—or even having money in euros—was seen as risky. This led to hundreds of billions of dollars being transferred to the U.S., creating an even greater supply of money here.
  • The havoc caused by the housing and financial crises devastated consumer finances, cutting off people’s ability to qualify for loans and making businesses think twice about borrowing to expand. This led to a precipitous decline in the demand for money just as the supply was increasing tremendously.

A Change Of Pace

This year, however, has been marked by significant changes in the global economy and in U.S. economic policy, which started reversing its history of low interest rates.

Earlier this year, the Federal Reserve announced that it would begin tapering off and eventually cease its quantitative easing program. This will drastically reduce the amount of new capital available for lending. But as the supply of money goes down, lenders will be able to charge more.

Conditions in Europe have also improved significantly. As of the second quarter of 2016, Germany’s economy, the largest in the region, has been growing and is no longer in a recession. Surveys taken of business owners and executives across the region indicate they’re feeling optimistic about the future and plan to increase investments and hiring. These positive signs point to an overall stabilization of the European economy, making it a viable investment alternative to the U.S. once again. As a result, foreign investors have already begun taking money out of the U.S. and investing it in Europe, thus impacting the supply of money available for lending here.

China and Japan are dumping U.S. Treasury securities. Earlier last year, the two countries sold a net $40.8 billion worth of U.S. Treasuries. The U.S. owes nearly $2.4 trillion to these countries, so the sale is relatively small compared to their overall holdings, but relative to what the U.S. needs to borrow every month to keep paying its bills, it’s significant.

The reason they sold is precisely because they expect U.S. interest rates to go up. The price of a Treasury security goes down as interest rates go up. In order to avoid a drop in the price of their investments, these countries are trying to get out as much as they can as soon as they can. This presents a significant problem for the federal government. In order to make lending attractive to us, they’ll need to raise the interest rates they offer on the money borrowed, which will lead to a general rise in rates.

 

So after all of this is sitting on the sidelines as the cost and availability of money really making sense?

Business Credit Myths That Can Cost You Money

Business Credit Myths That Can Cost You Money

Start building your business credit the right way.

You know the adage: A little bit of knowledge can be a dangerous thing. That’s certainly true when it comes to credit, where a misstep can affect your credit scores for months or years, making it more difficult and expensive to get funding when you need it. And when it comes to business credit, many small business owners have little experience or frame of reference, making it easier to fall for bad advice.

Here are some common business credit myths that can trip up small business owners:

Myth: Building Business Credit is Just like Personal Credit

The overall process of building business credit is similar to that of building personal credit: Establish accounts with companies that report payment information, then pay on time and keep debt low. But there are some differences between the two you should know. One major difference is that payment information for business credit may be much more detailed than that of personal credit. Unlike personal credit, where payment history falls into 30-day buckets, if you pay a business account even a few days late, it may be reported as a late payment.

Myth: My Business Needs to be Two Years Old & Turning a Profit

While it’s true that many banks prefer to lend to successful businesses with at least two years of experience and solid financials, there is nothing stopping you from establishing a commercial credit history as soon as you start your business. And why wait? Similar to personal credit, an older credit history will be considered lower risk than a newer one, so the sooner you start, the better.

One easy way to get the ball rolling is to get a business credit card to use for your business purchases. Most business credit cards report to one or more commercial credit agencies; however, the application is usually evaluated using the owner’s personal credit scores. And personal income can also be used to help qualify. That means that if you have decent personal credit and sufficient income from a variety of sources, you can probably get a business credit card—even if your business is not yet profitable.

Myth: I Pay My Bills on Time So I Have Good Credit

Paying your bills on time is a great habit, but it only helps your credit history if those accounts are reported to business credit bureaus. Some lenders and vendors report to one or more of these agencies, but others do not report.

 

Myth: I Don’t Need to Borrow So I Don’t Need Credit

Your business credit information may be used to evaluate your business for a variety of opportunities beyond loans, such as working with new partner, a major retailer, or landing a government contract. It may be reviewed when you apply for business insurance.

You never know when your business credit reports will be reviewed, or when business credit scores will be used to make a crucial decision about your business. Establishing that credit rating before you need it will give you one less thing to worry about when opportunity comes knocking.

 

Setting all myths aside if you have questions ask your accountant or a lending professional for direction, that’s what they are there for.