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.


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.


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.


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!

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.

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.


Equipment financing at the end of the year

The fourth quarter is the perfect time to begin planning for the coming year. In addition to profits, losses and sales projections, business owners should consider acquiring new or updated equipment before the end of the year to take advantage of legislation that both expands deductions and extends depreciation benefits for qualifying equipment purchases. In fact, tax benefits make the fourth quarter of the year a really good time for businesses to finance new or new to you equipment.
Equipment financing enables your business to conserve cash and lines of credit while providing maximum flexibility, and entering into a finance agreement at the end of the year is also a smart way for companies to use any remaining capital budget while preparing for the new year.

Consider this when determining whether investing in equipment during the fourth quarter of the year.

The IRS Code Section 179 is an incentive created to encourage businesses to invest in equipment. It covers accelerated write-offs for equipment purchases and is beneficial to smaller businesses with limited budgets.

Effective Jan. 1, 2016, businesses purchasing $2 million or less in capital equipment can deduct up to $500,000 of that expense immediately on their 2016 tax return. Financing can further enhance the bottom line by eliminating the upfront cash outlay typical of an equipment purchase while still preserving the Section 179 deduction. However, equipment must be financed and in place by midnight Dec. 31, 2016, in order to qualify for the 2016 tax year.

Bonus depreciation, under the same legislation for 2016, businesses of all sizes can depreciate 50 percent of the cost to acquire eligible equipment on their 2016 tax returns. This tax break has been extended through 2019, although it will phase down to 40 percent in 2018 and 30 percent in 2019.

For many businesses, asset depreciation plays an important role in fiscal management. Most equipment acquisitions offer depreciation benefits, but determining whether a company can effectively use all of that depreciation may require you accountants assistance.

This is especially true for equipment-intensive businesses. Taxpayers in need of the sheltering effect of equipment depreciation will typically benefit from tax ownership of equipment. This can be accomplished with a loan, installment payment agreement and some leases. All of these options allow the user to deduct depreciation and interest charges from taxable income.

Companies with a more complex tax situation may want to consider a tax lease. Tax leases effectively trade tax depreciation for lower payments. Plus, tax leases allow the entire lease payment to be deducted as an operating expense.

Leasing, allows a company the freedom to obtain the equipment it needs when it is needed.

There are many reasons to finance equipment at any time of the year, but companies interested in taking advantage of expanded tax benefits for 2016 and getting a head start on next year should consider financing new or updated equipment before Dec. 31. It may be the best decision you make all year.