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How to Get a Loan for New Business Endeavors

It can be tricky to get a loan for new business endeavors.  You do not yet have the benefit of a long time in business, profitability, or positive business credit history.  As a result, you have to rely on a killer business plan, a fundable foundation, and your personal credit.  

What You Need to Know About How to Get a Loan for New Business Endeavors

When you need a loan for new business, there are several things to consider.  Most business owners understand the personal credit piece. If you have a high enough credit score lenders will lend you money with pretty much no questions asked.  However, what if your credit score is just okay? Can you still get a loan? What if your credit score is great but you have a poorly written business plan? Do you even know how to set up your new business to be fundable?  Here’s what you need to know.

Find out why so many companies use our proven methods to get business loans

How to Get a Loan for New Business Endeavors: You’ll Probably Need Collateral

If your credit score is high enough, you can sometimes get a loan for new business without security, also known as collateral. However, regardless of how great your score is, you can almost always get more money with a better rate and terms if you have collateral. 

Security could be your business, but often it is necessary to use personal assets such as land or a home.  While this can be scary, it is the best way to show a lender you have faith that your business will be profitable.  If you aren’t willing to take a risk, why should they?  

However, the better your credit is, the more professional and complete your business plan, and the more fundable your foundation, the less collateral you may be able to get away with. 

How to Get a Loan for New Business Endeavors: Write a Killer Business Plan

Your business plan is the first impression a lender gets of your business.  This is especially true if you are trying to get a loan for new business startup.  Consequently, your business plan must be complete and professionally put together.   

Honestly, it is best to hire a professional business plan writer if possible. A professional business plan writer can help you gather all the necessary information.  Then, he or she can compile it into the traditional, acceptable format. 

If you cannot hire a business plan writer, there are a number of options. For example, The Small Business Administration offers a template, and your local small business development center can help as well. 

For a business plan to be taken seriously by a lender, it needs to include the following: 

Opening

An Executive Summary

This is a complete summary of the business idea. 

Description

The description goes into more detail than the summary, describing the business. What type of business is it? What will it offer? This is where you get others excited about what you are doing. 

Strategies

Layout your plan for getting things up and running. Do you have a marketing plan?  Is there a location you have in mind? How many employees you will start with? What is your ramp up plan?

Research 

Writing a complete business plan requires a ton of research.  Not only must you do market research to ensure your product is needed and want, but also that your location and market coincide.  In addition, you need to know that the market can support your business. 

Research on any competitors is also necessary. 

Market Analysis

This actually includes two parts, the analysis of audience and the competitive analysis.   

  • Analysis of audience

What need will your business fill, and for who? Will your business fulfill a childcare need for working parents? Are you a restaurant filling a need for those working downtown to have easy access to fast, healthy lunch options? How will your business fill those needs? Include all of this in the analysis of audience section.

  • Competitive Analysis

Is there a business currently working to fill this need? Is there room for more? How do you plan to be the best? 

Strategy

This is the way you plan to run your business moving forwards. Put another way, it is how you plan to put into action what you learned in the research phase. 

Plan for Design and Development

How is all of this going to play out? From start to finish, what steps are you going to take? This section includes more detailed than the strategies section.

Plan for Operation and Management

How will ownership be structured, and who will handle the day to day running of the business? This could be as simple as stating that you are the sole owner and operator.  In contrast, it could mean laying out a complete partnership plan or board or directors’ format. It just depends on how your play for your business to work.

Financials

While all parts of the business plan are important, this is where lenders really sit up and pay attention.  even of the whole rest of the plan is fabulous, it will not matter if the financial section isn’t in order. 

Financial Information

This section includes current financials, projections, and a plan for the loan funds you are asking for.  Lenders need to see that you know how to handle the funds you get, and that you have a plan for paying them back.

How to Get a Loan for New Business Endeavors: A Fundable Foundation

When you apply to get a loan for new business endeavors, having a fundable foundation can make all the difference.  What’s a fundable foundation? It’s basically how your business is set up. It has to appear to be a fundable entity separate from you, the owner.  Like any foundation, it is best to start at the beginning.  

Contact Information

The first step in setting up a fundable foundation is getting your business its own phone number, fax number, and address.    That’s not to say you have to get a separate phone line, or even a separate location. You can still run your business out of your home or on your computer if you want to.  You don’t even need a fax machine.  

In fact, you can get a business phone number and fax number that will work over the internet instead of phone lines.  Also, the phone number will forward to any phone you want, so you can simply use your personal cell phone or landline to take calls.  

Faxes can be sent to an online fax service, if anyone ever happens to actually fax you.  This may seem outdated, but it does help solidify legitimacy with lenders. 

You can use a virtual office for a business address. This is a business that offers a physical address for a fee, and sometimes they even offer mail service and live receptionist services.  In addition, there are some that offer meeting spaces for those times you may need to hold a face-to-face meeting. If you are not going to have a physical location other than your home, this is going to be your best option.  A post office box is not ideal when you want to get a loan for new business endeavors. 

Find out why so many companies use our proven methods to get business loans

EIN

The next thing you need to do is get an EIN.  An EIN is an identifying number for your business that works in a way similar to how your SSN works for you personally.  Some business owners use their SSN for their business. However, it really doesn’t look professional to lenders. Also, it can cause your personal and business credit to get all mixed up when you get to that point.  When it comes to building a fundable foundation, you need to apply for and use an EIN. You can get one for free from the IRS.

Incorporate

This is the most important step in fundability thus far.  Incorporating your business as an LLC, S-corp, or corporation is necessary for fundability.  Not only does it lend credence to your business as one that is legitimate, but it also offers some protection from liability. 

For the purpose of fundability, it does not matter which one you choose.  Choose the option that works best for your budget and liability protection needs.  The best thing to do is talk to your attorney or a tax professional. If you do not do this now and instead choose to begin operating as a sole proprietorship or partnership, you will lose fundability in the future.  This is because when you incorporate, you become a new entity. This means that at that point, you will lose any time in business and positive payment history you may have accumulated. You need both of those for fundability, so best to just go ahead and incorporate now. 

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this. First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

There’s more to it however.  There are several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance. In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments.  Studies show consumers tend to spend more when they can pay by credit card.

Licenses

For a lender to see you as fundable, you need to have all the licenses necessary to run.  If you aren’t there yet, at least let them know you know what you need and how to get it. 

Website

I am sure you are wondering how a business website can affect you ability to get funding.  Here’s the thing. These days, you do not exist if you do not have a website. However, having a poorly put together website can be even worse.  It is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders. 

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service. Along these same lines, your business needs a dedicated business email address.  Make sure it has the same URL as your Website. Don’t use a free service such as Yahoo or Gmail.

How to Get a Loan for New Business Endeavors: The Application Process

You’re probably thinking that after all this work, the application process should be a breeze.  It could be, but there will still be some work to be done. For one, you will need to take some time to consider your options when it comes to choosing a lender and a type of loan.  Do you want to go with a traditional lender or a private lender?  Is a commercial bank or a community bank better for your needs?  Can you apply for a secured loan, or do you need to look for an unsecured option?  Would a line of credit be better? 

Applying for the right loan with the right lender from the beginning can make a huge difference in your chances for approval. 

You Can Get a Loan for New Business Endeavors

Being prepared when you apply for a business loan can mean the difference between approval and denial.  A poorly put together business plan or a kink in the fundable foundation chain can throw a wrench in the entire system.  

Find out why so many companies use our proven methods to get business loans

Spending the time and money necessary to get these things in order, as well as doing a little research to make sure you are applying for the right loan with the right lender for your needs, can make all the difference.  It will be worth it. Not only will you be able to get a loan for new business, but you will also be able to get the funding you need to grow and thrive long into the future. 

In the end, it really is all about preparation and knowledge.  Knowing what lenders want to see and giving them what they want can open doors for your business that you never imagined.  

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Forge Your Fortress: Build a Company Credit Report You Can Be Proud Of

Build a Wall Around Your Business Kingdom with a Strong Company Credit Report

Similar to building a kingdom, a strong company credit report does not happen overnight.  It takes years of hard work and dedication to build a business credit score and report you can be proud of.  You have to start from the bottom, with basically nothing, and work methodically through a process.  It isn’t a hard process, but it does take time, which means you need to start as soon as possible.

In the long run, it is completely worth the time and dedication necessary to build a solid company credit score, because once you do, your business and your personal assets are both protected. Your business has the power of strong business credit on its side.  Your personal finances, on the other hand, will be unaffected by any enemy that may attack the business.  It’s a win-win.

So how do you do it?  Where do you start?  What does it really take to build a company credit report you can be proud of?

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Conquer the Land: Business Fundability

Establishing small business credit is a process, and it does not happen automatically. A company will need to proactively work to establish business credit. Nonetheless, it can be done readily and quickly, and it is much more rapid than developing personal credit scores.

Before you can ever begin building a kingdom, you must first conquer the land for yourself.  In company credit report terms, that means making your business fundable. There are a few things you need to do to make this happen.

  • You need a professional-looking website and email address. The website address needs to be bought from a supplier such as GoDaddy. In addition, the email address needs to have the same URL.  It shouldn’t be a from a free email platform like Yahoo or Gmail.
  • The company telephone and fax numbers should be different from your personal numbers, and they need to have a listing on ListYourself.net.
  • Additionally, the company phone number should be toll-free.
  • A business bank account devoted strictly to the company is always a must.
  • Visit the IRS web site and get an EIN for the company. It’s
  • Formally incorporate. This means organizing as an LLC, S-corp, or corporation.  You cannot operate as a sole proprietorship or partnership and build business credit properly.  The option you choose should be based upon the level of protection and the tax benefits that you need.  For company credit report purposes, they all work the same.
  • Head over to the D&B website and obtain a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a small business into their system to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Gather the Loyal: Your Company Credit Report Fortress

Usually you have to have credit to get credit.  When building a kingdom, you need your inner circle.  There are always those few that are loyal to your cause before they have any reason to be.  For building a strong company credit report, your inner circle is going to be composed of starter vendors.  These are vendors from the vendor credit tier that will help you out before you even have a business credit score.  They are your jumping off point once your business is fundable.

Terms are, in most cases, Net 30.  This is in contract to the more common revolving credit.  However, they will report your payments to the credit reporting agencies, which is what you need to start building a company credit report.  If you have followed the fundability steps listed above, you will have a credit profile at the credit reporting agencies when these vendors report your accounts.

The vendors sell the things bought all the time in the normal course of business, including marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

Recruiting for Your Cause in the Vendor Credit Tier

To begin your business credit profile the proper way, you need to get approval for vendor accounts that report to the business credit reporting agencies. Once that’s done, you can make use of the credit.

But not every vendor can help like true starter credit can. It is important to work with those merchants that will grant an approval with marginal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You may have to apply more than one time to these vendors. Here are some great options to start with: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/

company credit report Credit Suite2

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. They sell shipping, packing, and industrial supplies, and report to D&B.

You must have a D-U-N-S number. They will request 2 references and a bank reference. The first few orders may need to be paid in advance to initially get approval for Net 30 terms.

Quill

Quill is also a true starter vendor selling office, packaging, and cleaning supplies.  They report to D&B and Experian.

Place an initial order first unless you already have a business credit score with D&B. They require some initial purchases before approving net 30 terms for those that do not already have a score with Dun & Bradstreet.

Generally, they will put you on a 90-day prepayment schedule. If you order items each month for 3 months, they will usually approve you for a Net 30 Account.

Grainger Industrial Supply

Grainger Industrial Supply is another true starter vendor. They sell safety equipment, plumbing supplies, and more.  They report to D&B. You will need to have a business license, EIN, and a D-U-N-S number.

For less than a $1000 credit limit they will approve virtually any person with a business license.

Accounts That Don’t Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the credit reporting agencies (CRAs), a trade account which does not report can be of some value.

You can always ask non-reporting accounts for trade references. Also, credit accounts of any sort should help you to better even out business expenses, thus making budgeting simpler. These are providers like PayPal Credit and T-Mobile.

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are service providers such as Office Depot and Staples.

One example of a company in this tier is Lowe’s. They report to D&B, Equifax, and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Once you have 8 to 10 accounts reporting from the retail credit tier, you can move on to the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to purchase fuel, as well as to repair and maintain vehicles.

Shell is an example of a company in the fleet credit tier. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or higher and a 411-business telephone listing.

Shell might claim they want a particular amount of time in business or profits. However, if you already have enough vendor accounts, that won’t be necessary. You can still get an approval.

Cash Credit Tier

When you have enough accounts reporting from all the other tiers, you can start to apply for cards in the cash credit tier.  These are business versions of standard Mastercard, Visa, and American Express cards.  They will come with higher limits and lower rates if you have followed the previous steps and kept up with payments.

Why Is a Strong Company Credit Report Important?

Why build a strong credit kingdom in the first place?  Is it really worth it, especially if you already have solid personal credit? Yes!

Company credit is credit in the business name. It doesn’t connect to a business owner’s consumer credit at all if things are set up properly.  This means a business owner’s business and consumer credit scores can be very different.

Considering that company credit is independent from the individual, it helps to safeguard a small business owner’s personal assets in the event of a court action or business insolvency.

In addition, even if you make payments on time, running business expenses through personal credit can wreak havoc on personal credit scores.  This is because business expenses are typically larger than personal expenses, but personal credit limits are much lower than business credit limits.  As a result, business expenses can keep you close to personal limits consistently.  That means your debt-to-credit ratio goes up, which can make your personal credit score go down.

Hit the jackpot with our best webinar and its trustworthy list of seven vendors who can help you build business credit.

Additional Tips for Building Your Company Credit Report

As you work through this process, here are some things to remember:

  • Make all payments on time. If you do not do this one thing, the rest doesn’t matter.  Bad business credit will not help you, and if you don’t pay on time, that is exactly what you will have.
  • When applying for business credit, use your EIN. You may have to use your SSN for identification purposes, but not for the credit check.
  • Use credit wisely. You do not have to use all you have.  Don’t buy things you don’t need or use so much that you cannot make payments.
  • Make sure your information is updated as needed. If your contact information changes, get that information to the credit agencies.

Once you build a company credit report you can be proud of, you need to keep it that way.  Here’s how.

Stay in the Lookout Tower: Monitor Your Business Credit

Keep an eye on what is happening with your credit. Make certain it is being reported, and deal with any mistakes as soon as you can. We can help you monitor business credit at Experian and D&B for only $24/month. See: www.creditsuite.com/monitoring.

To monitor with D&B go to: www.dandb.com/credit-builder.  For monitoring with Experian, visit: www.smartbusinessreports.com/Landing/1217/.  At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business.  Experian and Equifax cost about $19.99; D&B ranges from $49.99 to $99.99.

Take Down Enemies Before They Reach the Gate: The Purpose of Company Credit Report Monitoring

What are you looking for? You are looking for mistakes on your report.  Your mission is to take down the enemy and repair any damage done. Errors in your credit report(s) can be corrected, but you have to dispute in a particular way.  Generally, this means you mail a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the originals.  Always mail copies.

Itemize any charges you challenge, and make your letter as clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Dispute your business’s Equifax report by following the directions here: www.equifax.com/small-business-faqs/#Dispute-FAQs

You can dispute inaccuracies on your or your company’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.jsp.

D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex.

How Do You Build a Company Credit Report You Can Be Proud Of? Trust the Process

While it isn’t necessarily hard, it is a lengthy and specific process.  Your company credit report doesn’t just appear when you open your first account.  You must have things set up properly to separate your business from yourself.

Then, you must be intentional about finding accounts in the vendor credit tier.  Patience is necessary to build accounts in each credit tier so that you can continue to move through the process. As you do, be certain you do not sabotage yourself by missing payments. Use your credit wisely and you will soon see that you have the credit you need to run a successful business.

Once you have your business credit report where you want it, keep it that way with credit monitoring.  Stay on top of accounts reporting and ensure that your report is accurate and complete.  Then, you will be able to access the funding you need for your business, when you need it.  Your credit kingdom will be a solid fortress than no foe can penetrate.

 

 

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