by Sam | Business Credit
What makes up your business credit score? What gives you the best chances of
getting a loan? Here are a few factors that play into your business credit picture, and
what you can do to make the most of them:
1. Payment History – Your payment history is an important part of your business
credit profile, and is what your D&B Paydex score is based on. Many credit
opportunities come with a minimum Paydex requirement. What you can do: always
pay vendors EARLY. On time is “okay”, but paying early (as in before you receive the
invoice) is best.
2. Credit Applications – Believe it or not, multiple applications for credit can be a red flag that will keep you from getting approved for a loan. Too many in a short period of time will make your company look desperate and be a sign to potential lenders that things are going downhill. What you can do: plan your use of credit accordingly, and keep applications to the minimum necessary to accomplish your goals.
3. Blanket UCC Filings – One thing that many people don’t realize is that they need to pay attention to the order in which they get certain types of loans, and what UCC filings the lenders will file. Some lenders may file a “blanket” UCC filing, which essentially says they have an interest in ALL of your assets. These blanket UCC filings will then take precedence over any subsequent ones, which drastically reduces your ability to get credit elsewhere. What you can do: plan your credit carefully, and negotiate UCC filings according to what your needs are. For example, if you need particular assets excluded from a UCC filing to use as security for another loan, explain that fact in advance to get those items excluded from any blanket filings, or, alternatively, get the loan or accounwith the more specific UCC filing first. Some experts recommend opening accounts with competing UCC filings at the same time, and negotiating the details with each party simultaneously.
4. Company Financials – With D&B, it’s important to make sure your financials in your credit file are up to date. If they are not, it could negatively reflect on your company when the lender is comparing the available data. What you can do: update
your financials on your credit reports so that they reflect your current circumstances, and plan to do so periodically.
5. Company Legal Structure – The legal structure of your company (LLC versus INC versus Partnership, etc.) can also affect your business credit. Lenders are less likely to loan money to Sole Proprietorships and Partnerships than Corporations or Limited Liability Companies. What you can do: if you aren’t incorporated, you should be. The advantages span far past just your ability to get credit.There are other factors that affect your ability to get credit, such as the amount of debt you already have, how heavily invested you are in your company, and even your personal credit can play a role in your approval or denial. Here we’ve covered five of them. In the end, the better the all-around picture you can paint, the better
your chances of getting approved for loans will be.
by Sam | Business Credit
The 5 Cs of business credit are:
1. Character
2. Capital
3. Capacity
4. Collateral
5. Conditions
Character is all about you. It’s about your personal history, your stability, and how reliable you are. This variable is more subjective than the others, and is one of several reasons it is beneficial to do business with a bank where you have built relationships with the people who work there. In determining your character, the lender may look at your education, your work history, your personal income, and personal credit history. Again, it’s important to remember that this is one area of business credit where relationships do matter! Capital is about how much you have invested in your business. Whether you are seeking a bank loan or a loan from a private investor, the lender will want to see that you are heavily invested in your own business. Generally speaking, the more of your personal money that you’ve invested in your business, the better it will look to a potential lender. (After all, if you’re not confident enough to invest in your business, why should they be?) Capacity is about your ability to repay a loan according to the terms. Things like cash flow, payment history, and the assets and resources of any person providing a personal guarantee will play a part in determining your capacity to pay back a loan.
Collateral is something offered up as security for a loan. Anything from equipment to inventory to a home you own can be considered collateral. It may be easier to get approved for loans with collateral, and many loans will require it. In some cases, the more that you can offer as collateral, the more likely you will be to get approved. “Conditions” may mean any number of things, some of which could be out of your control. The current economy, for instance, may play a role in your ability to get approved for a loan. Other things that they may look at include your industry and its economical status, and the purpose of the loan. If your industry is suffering and businesses in your industry are struggling, it could negatively affect your ability to get approved. Some loan purposes are more readily approved than others, too. Loans for riskier purposes such as new and unproven expansions are generally less likely to be approved.
by Sam | Business Credit
If you are looking for money for your business than you will be happy to know you only need one “C” to qualify. In lending when we look to see if a client is fundable we are looking for one of the 4 “C”s. You don’t have to have all of the 4 Cs, only 1 to secure funding.
The first C is Cash Flow.
When you have an existing business with good cash flow you can qualify for business funding. If you do have verifiable cash flow this substantial increases your chances of being approved for funding. There are many funding programs you might qualify for including Business Revenue Lending.
If you don’t have cash flow your business still might have Collateral, the second C.
The second C is Collateral
Collateral for your business is really your business assets. Many things can be used as collateral including equipment, purchase orders, even account receivables. Having Collateral greatly increases your chances of being approved. If you don’t have cash flow or collateral, don’t worry you still can qualify for business funding. Lenders also look at your business Credit to qualify you.
The third C is Business Credit
Lenders will lend you money with no personal guarantee based on your business credit profile and score. If you have a good business credit profile you can use that as security to obtain funding. If you don’t have business credit built now, call me so I can help you quickly build an
excellent business credit score and profile. Maybe you are just starting a new business, and you have no business credit, cash
flow, or collateral. In this case you can still qualify for funding. But lenders will use your personal Credit to qualify you.
The fourth C Is Personal Credit
Personal Credit is the fourth and final C that lenders will look at to approve you for funding. You can secure credit lines, through me, up to $250,000 with as low as a 650 credit score. These types of unsecured credit lines do not look at revenue or financials. Your credit is all that is used to qualify you for funding. All you need is 1 of the 4 “C”s to qualify for much of the business financing that is available to you today.
About the Author Sam Rivera is currently the CEO of Rebirth Capital Solutions At Rebirth Capital Solutions he specializes in helping business owners establish excellent business credit scores and then leverage those scores to access cash and credit for their businesses.
