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.

Sell Financing

10 Tips to Help Your Sales Rep Sell Financing

I have spent a good part of the last 30 years training the sales teams of my vendor partners on how to use equipment financing to help sell their products. While the product types have range from software to construction equipment, selling financing as part of equipment sale remains much the same.

Below are 10 tips to help your vendor’s sales rep sell more equipment:

  • Control the sales process from beginning to end.

Many equipment sales are lost when the equipment sales rep does not offer financing and leaves it up to an outside party like the customer’s bank. If the bank turns the customer down, chances are the customer will look to the equipment company that offered them financing in their proposal to try to obtain the equipment. This loss of control during the sales process is an open door for the customer to entertain other proposals because the equipment rep did not keep control of the sales process from start to finish.

  • Bring up financing early in the selling process.

The biggest mistake equipment sales reps make is to wait until the end of the sales process to bring up financing. Waiting until the end of the sales process leads to wasting time on customers that don’t qualify for financing and don’t have cash to pay for it. Another downside of waiting until the end of the sales process is that the equipment sales rep has stripped out any gross margin upside that could have been used to pay for a finance promotion like a 90-day skip or interest rate reduction, that would have put them over the top and win the deal.

  • Ask these 3 questions.

Train your equipment sales reps to ask these 3 questions at the beginning of the sales process. It will help them sell more products:

  • Do you plan on financing your equipment purchase? (Starts the equipment finance discussion on the front side of the sale.)
  • How long do you plan on using the equipment? (Lets you know the term of the finance contract).
  • What do you typically do with old equipment when purchasing new? (Good indicator of need for FMV financing if they typically trade it in or sell it).
  • Include a monthly payment on every equipment quote. 

At the beginning of my dealer training sessions I always ask how many of the sales reps use leasing to sell equipment. Many hands will go up, but very few hands remain raised when I ask if they offer a finance quote on every deal. While the excuses vary, most have to do with equipment sales reps fear/ignorance of being asked a question they can’t answer about financing from their customer. Including a finance quote on every deal at very least let’s your customer know that financing is available.

  • Memorize the 36-month rate factor.

Great equipment sales reps are not afraid to ball park a monthly payment verbally during the initial part of the sale. This allows the equipment sales rep to judge their customer’s reaction to pricing.

  • Sell the monthly payment, not the equipment price.

In the copier and forklift industries, where more than 50% of the equipment is financed, the best sales reps will quote a monthly payment without ever discussing the equipment cost.  This allows them to maintain higher gross margins by using the flexibility of leasing to maintain pricing margins.

  • It’s easier to justify productivity gains or cost saving with a monthly payment.

I am always amazed by equipment sales reps that will try to justify the price of their equipment through features and benefits, and completely ignore using a monthly payment to minimize the price shock.  I once helped a dealer increase the sales of a $5000 add on by calculating that the cost was less than $5 per job when leased ($100/mo. lease divided by 20 jobs per month) The sales of this equipment add on jumped when the sales reps found out that it was easier selling $5/job than $5000.

  •  Get a credit app completed before you leave the meeting.

There rarely is any level of commitment if the end user is just window shopping. Getting a credit app completed increases the customer’s level of commitment to the sales process.

  • A question that will help avoid any credit surprises.

Equipment sales reps can avoid the aggravation of not being able to get one of their customer financed by asking one simple question “Are there any problems in your history that I need to explain to the finance company?”  You will be amazed by the number of companies that forgot they had a bankruptcy a few years back.

  • Offer to get financials for bigger deals.

If there is one thing that intimidates an equipment sales rep more than anything it’s the fear of asking their customer for 2 years of financial statements. Alleviate this stress by telling the equipment rep to tell their customer that you will be calling them for some follow-up credit information. It will be easier for you to justify the need for the financials to the end user.

Upgrade equipment? Follow these steps to decide if it’s time.

It’s best to start the process well before you actually need it. You increase your likelihood of landing your loan when you’re not in crisis mode.

Whether you run a fledgling company or you’ve been in business for years, investing in equipment upgrades can be an anxious process — from the time you first identify an issue to waiting for the bank to approve your loan or lease application.

Should you upgrade? Seven factors that might influence your decision.

  1. Is old equipment hurting productivity?If your systems struggle to perform tasks they were never designed to do in the first place, you could be at risk of losing potential revenue or prospective customers because your administrative systems can’t keep up with you.
  2. Is it prone to breakdowns or a struggle to repair?Aging equipment is bound to be less efficient and require more frequent repairs when it’s pushed beyond its useful life. If you’re limping along with an obsolete system that is unsupported by the vendor or you’re finding it increasingly difficult to locate consumables or replacement parts, you can only delay for just so long before you’ll be forced to upgrade. Better to proactively upgrade before your equipment fails completely and you — and your customers — are left in a lurch.
  3. Are you experiencing frequent bottlenecks?If performance is suffering because too much demand is being placed on a particular resource, then you’d be well advised to expand the existing system to make it accessible to more users.
  4. Is it preventing upgrades in other areas?Dependencies often develop between various systems or equipment so that, even when you’re eager to upgrade one piece of equipment, you can’t make the switch until you upgrade another piece of equipment that, in many cases is far more expensive to contemplate. For example, you’d like to implement a new administrative management system but you can’t do that until you upgrade and expand your server array. One upgrade can have a domino effect on other systems but sometimes you just have to tap that first tile to set the entire thing in motion.
  5. Is your image suffering?In any competitive environment, customers come to expect a threshold level of products and services. If you can’t offer services, features and benefits that have become an industry standard, you could be driving current and prospective customers away because they perceive you as outdated and unprofessional. Your antiquated systems and processes could be hurting your reputation. Customer confidence, once lost, is difficult to recover, so upgrades may be a necessity to maintain your competitiveness and a modern, professional image.
  6. What are the costs of action versus inaction?The benefits of an upgrade are usually apparent because you’re already highly aware of the problems the upgrade should solve. However, there may be hidden costs and unintended consequences that result from an upgrade. Be sure you’ve examined the upgrade from all angles and are aware of any interdependencies in your systems that could be affected. Create detailed projections on cost savings or revenue gains against the replacement cost and the expense of servicing and maintaining the new equipment.
  7. Does the timing seem right within the larger marketplace?Do things appear generally stable for the near term? Nothing is guaranteed in today’s economy, but pay attention to basic economic indicators that provide you clues about whether to proceed or delay. An announcement about lowered interest rates, a new financing program soon to be released or a change in a relevant tax deduction, are just a few of the factors that may influence your choices about whether to take action now or delay for a time.

Next steps: Funding for your equipment upgrade

Applying for a small business loan will require some effort on your part. It will take time to prepare and assemble the required documentation, so it’s best to start the process well before you actually need it. You’ll increase your likelihood of landing your loan when you’re not in crisis mode. Here’s what you can do to prepare.

  • Consult the professionals.Talk to your accountant about the best options for you and discuss the tax advantages or liabilities you should be aware of when considering whether to purchase, lease or finance. Work with your lender to determine the best type of loan for your needs and the loan terms that fit your situation.
  • Prepare the loan package.Loan programs differ slightly in their requirements, but nearly all will require the loan package to include your business plan, profit and loss projections and current financials. You’ll need to be able to clearly articulate why you need a loan, how much you need and how you plan to use it. Be sure your business AND personal finances are in order because, for small business loans, many lenders will use your personal financial position to help gauge how well you might manage a business loan.
  • Present your loan package.Request an appointment with the commercial lender you’ve selected, rehearse your presentation and make your case to the lender about how the loan will be put to use. You may want to invite the lender to your place of business for a tour of the operation and to illustrate your plans for upgrades, improvements or expansion.
  • Follow-up.Stay in regular contact with your lender while the loan package is under consideration. Respond to any subsequent requests from your lender for additional documentation as quickly as possible. Your rapid response indicates your desire to achieve a successful outcome.
  • Obtaining a small business loan or lease can be an intimidating, time-consuming process, but by educating yourself about the options and investing the time to create a compelling package, you’ll increase your odds of success.

What do they want and how do we connect?

The business world is racing to connect with the millennial generation. Always trying to find out what makes them tick and what they want. My 30 year old son tells me “It’s not difficult, and really kind of simple.”

Millennial buyers want: Convenience, transparency, technology, a positive experience and simplicity.

He’s right, these items come up in any research you read, but really don’t we all want the same thing?

We should give credit to Millennia’s in their 20s and 30s for being “the first generation to articulate what we all want.”

Time is my most important personal asset, and I’d say that’s true for everyone. To connect with customers Millennia’s and everyone else, value and respect their time and give them convenience, transparency, technology, a positive experience and simplicity.

It’s what they want.

Great customer relations come down to being an expert listener. Listening is the gateway to those five things. In reality, every customer is different. Listening lets you understand what each one wants.

Online Lending Means the Bank’s ‘No’ is Not the Last Word Any More

When many think of online lending, they think of loan sharks, payday loans, or scams. They define online lending by early products like MCAs (merchant cash advances) or short-term loans and write the industry off under the assumption that all products found online come with double- or even triple-digit annual percentage rates (APR).

But in recent years, the online lending industry has evolved, opening up lower-cost opportunities to small-business owners. As a business owner who could very well need capital to grow their business, you need to understand that online lending is no longer just MCAs.

In fact, online lending has changed the small-business lending game in a big way — giving more business owners access to credit than ever before. When four out of five small-business owners get denied funding by a bank, they can turn to a faster, more flexible, and more convenient online alternative.

But unlike what many believe, online business loans come in all shapes and sizes. There are loans beyond the expensive short-term loans and merchant cash advances.

Let’s take a look at just four examples of online loan types that are far more affordable than the industry’s pioneering products.

Longer term loans.

Surprised to see a traditional term loan here? You wouldn’t be alone — but in fact, many business owners can and do secure these classic loans online.

If you’re not familiar, a traditional term loan is probably what you think of when you imagine a loan: you’re given a predetermined amount of money and have to pay it back, plus interest, over a fixed period of time.

Traditional term loans found online usually fall between $25,000 and $500,000, with terms of one to five years and interest rates as low as 7 percent or as high as 30 percent. They can come with daily, weekly, or monthly payment schedules — it all depends on your business’s financial strength and your credit history.

Equipment financing and leasing.

The online lending industry helps business owners out with asset-based loans and leases, too. For the business owner in need of new machinery, equipment financing or leasing could be the solution.

A lender will use that piece of equipment you’re buying as collateral for the loan or lease, so your contract amount and term are tied to the price and expected lifetime of the asset. Interest rates fall between 7 percent and 30 percent and typically these loans or leases come with monthly repayments.

While it’s cheaper to buy equipment outright than pay interest on them, equipment financing prevents you from needing to save up — and waste time.

Invoice financing.

Another kind of asset-based loan, invoice financing lets you bridge the time gap between invoicing a customer and them paying you back. Yes, you can get invoice financing from an online lender… And they can even sync up with your accounting software to provide a seamless experience.

Most of the time, an invoice financing lender will upfront you 85 percent of the invoices you select, withholding the other 15 percent until your customer pays — and taking their fees directly from that cash. They’ll usually charge a set fee for the transaction (say, 3 percent) and then a set percent per week outstanding. You’re paying the cost for speed, access to capital, and ease of mind. This isn’t the only way invoice financing works, though: some lenders will upfront you 100 percent of your invoices and charge you fees for 12 weeks and that’s it (regardless if your customer has paid.) You can pay the advance back early without any penalty.

What the government can do to help small business.

Access to Capital for Small Businesses

The driver of capitalism is, of course, capital. So, it makes sense to make it easier for small businesses to obtain capital to aid in business expansion.

It is important that lenders behave responsibly and it helps to have some level of protection in place. But at the same time we need to make sure the loans that grease the engine of small business are still obtainable.

Step one would be taking an objective look at current regulations to ensure a balance and access to small business loans.

Consistent, Simplified Tax Codes

Business tax rates in the U.S. are among the highest in the world. The effective rate – taking into account various deductions – is 27.9%. We would foster a more competitive business climate with a lower rate.

But, perhaps more important than the actual rate is consistency from the government in how taxes and regulations are applied from one year to the next.

Investment is needed in capital equipment and R&D across a broad spectrum of businesses. But Schedule 179 and other depreciation rules seem to be moving targets from year-to-year.

The same holds true for R&D credits. Accountants don’t know from one year to the next how rules for depreciation will be applied. What is a deduction last year might not be a deduction today.

This is a challenge for any business that invests heavily in capital equipment and R&D. The fear of the unknown can deter investing in new technology or equipment. This hurts the business and suppliers who miss out on a sale.

The current tax code is riddled with similar examples. Consistency from one year to the next allows businesses to better plan their resources, make capital acquisitions and understand the tax implications.

A simplified longer-term commitment from taxing authorities would go a long way toward creating stability in capital equipment and R&D investments.

 

Workers Need Re-Training

President Trump’s announcement that Carrier was keeping 1,000 jobs here was a nice win for the U.S., Indiana and affected workers.

But this is more the exception than the rule. I like President Trump’s promises to bring back manufacturing jobs, however some of them simply aren’t coming back.

While the exodus of many manufacturing jobs can be traced to international trade deals, and of course cheap labor beyond our borders, many simply vanished because of robots, automated material handling systems and overall greater efficiencies in manufacturing

Frankly, Americans are manufacturing more than ever before, we’re simply more efficient and consequently can do more with less manpower.

Workers who have been displaced need retraining in burgeoning industries such as the high-tech, health-care sectors, and even the trades where job opportunities often go unfilled.

Providing federally funded job re-training programs for displaced employees and tax credits for companies that hire them is a win-win-win for people, companies and communities.

More Students Need STEM Training

My advice to college students: science, technology, engineering and math. Repeat over and over again. Then pick one and study hard. The majority of high paying jobs in the coming generation will predominantly revolve around STEM and we need to point as many people in this direction as possible.

We also need to recognize technology is advancing rapidly. It is difficult to keep pace. Imagine the changes a class of 2007 information-technology graduate has seen in the past 10 years.

Now, imagine as an employer keeping your team up to speed and investing in their continuing education, only to see the best and the brightest cherry-picked away. In essence, you just paid for your competitor’s talent pool. Kind of discouraging.

I would support a program where businesses receive tax credits for workers’ continuing education. That way, more companies will invest in ongoing education, as a society we will have a much more educated workforce and risk of training investment will be mitigated.

I know these aren’t all of the answers, but it would be a start.

Your Business Credit Score Can Impact Funding Terms

Good business credit can help you qualify for more credit at lower rates and have a positive effect on your repayment terms.

Lenders consider a number of factors before deciding whether to help fund your business needs. Amongst these factors, they may consider how well your business repays its debts. This is where a business credit score comes into play.

As a general rule, a higher business credit score indicates to lenders that your business is a more trustworthy borrower. If your business has solid scores, it will have a higher likelihood of getting approved for financing, it can help you access more credit at lower rates and have a positive effect on your repayment terms. Here are five ways having a good credit score can help you when applying for financing.

Higher Likelihood of Approval

Business owners with solid business credit scores have a greater chance of getting approved for financing. You might not know about this because, unlike personal credit, lenders aren’t required to notify you that they have made an inquiry into your business credit when you apply.

Businesses applying to the Small Business Administration’s (SBA) most popular loan, the 7(a) loan program, are required to go through a business credit pre-screen if applying for a loan of up to $350,000. This involves checking the business’s FICO, LiquidCredit, Small Business Scoring Service score, or FICO SBSS score. The FICO SBSS score ranges from 0 to 300, and the minimum score to pass the SBA’s pre-screen is currently 140. Most banks and 7(a) lenders, however, require a 160 or higher.

Lower Rates

Even a slightly lower annual percentage rate (APR) can make a huge difference in the cost of a business loan or line of credit, so having a good business credit score can help even if the effect on your loan interest rate is marginal.

Imagine a business with low credit scores qualifies for a $200,000 business loan with a 12-month repayment period at 20% APR. If that business had a credit score high enough to help shave just 2% off that APR, they’d save over $2,000 on the total cost of the loan.

 

Better Repayment Terms

Obtaining a good business credit score before applying for business financing is particularly important for businesses that struggle to maintain a consistent monthly cash flow, because some lenders will offer longer repayment periods to businesses that can show they successfully repay their debts.

Let’s take our $200,000, 12-month term loan example from above. If the credit score of the business in question was good enough to help it qualify for a longer repayment term on that loan, say an 18-month term instead of a 12-month term, they would be responsible for paying back less than $13,000 per month rather than over $18,000 per month.

Higher Amounts

If you’re looking to finance a big purchase or large project, you’ll want to get your business credit in shape before applying for financing. Businesses with solid credit scores may be able to qualify for higher lines of credit or loan amounts—if lenders see that your business successfully pays back debts already, they’re more likely to lend you more cash.

Wider Variety of Financing Options

Having a solid score can help businesses qualify for another, less talked about type of financing that many businesses don’t realize are available to them: trade credit.

If you work with vendors or suppliers and have maintained solid relationships with them, they may be willing to extend you “terms.” For example, net-30 terms give you 30 days after the invoice to pay, while net-90 terms give you 90 days. This is actually the most common type of financing used by businesses and it can improve your business’s cash management should you qualify. Vendors and suppliers may look into your D&B PAYDEX score before extending this form of credit.

Not all lenders are going to look at your business credit scores, but because you may not know when your scores will come into question, it’s a good idea to keep them in good shape. Different lenders look at different scores, so it helps to know how multiple scores rate your credit before you start searching for financing.