Thursday, February 26, 2009

The Essential Checklist for Business Financing: Part 1

Every year, thousands, if not millions, of businesses are declined when trying to secure different types of business financing. Many times, the business owner is unaware of why they were declined in the first place. Banks and other lenders can be very finical at times. If your business is not set up exactly the right way, you may be declined over something seemingly inconsequential, even before the lender takes the time to determine whether or not your company is creditworthy. The following 8 step checklist will make sure your company is set up the right way, the way lenders like to see it.

Step 1: Form a separate legal entity.

A sole proprietor can get approved for a "business loan", but it will not be a true business loan. Since there is no separate legal entity apart from the owner, the loan will be in the personal name of the owner and based on their personal credit scores.

It is highly recommended that a business gets incorporated if they want to maximize their chances of getting approved for financing, as well as to protect the assets and credit scores of the owner(s). An LLC, S-Corp, and C-Corp are all forms of separate legal entities. To choose the right one for you business, you should consult a professional. There are easy and inexpensive services online you can use to incorporate your company (

Step 2: Check for name conflicts
This is a more common occurrence than some may think. If your company has an identical, or even similar, name as another company, it is easy for a lender to get confused and mix up the two. It is possible that when trying to pull your company's credit history, or look at other company information, your business may get confused with another.

To prevent this, you should first check the business credit agencies (Experian, Dun and Bradstreet, and Equifax) to see if there are any companies listed that could get confused with yours. Next, you should do a search at the US Trademark Office to see if your company, or another, is in violation of trademark laws.

Finally, if you do not currently have a website, or are in the process of setting one up, make sure you secure a domain name that matches the name of your business. If somebody else has a website that is the same name as your business you could have problems. If there are any conflicts above, you should change your legal business name with the Secretary of State, or seek to reprimand another company that is using your name or image illegally.

Step 3: Get a separate business address
Funding sources prefer not to lend to home based businesses. This is not necessarily fair or just, but that's the way it is. If you are currently working from home, or do not have a physical location for your business, we recommend getting a virtual address with a place like Mailboxes Etc. or UPS Stores and use it in all business filings. Sometimes you will have to modify the address they give you and use "Suite" instead of "PMB."

Sometimes these addresses will be flagged, so a better way to go may be to find local executive suites that will forward mail to you. This way you can have a business location without having to lease office space.

Step 4: Get a 411 listing and business phone number

Almost all lenders will verify that you are listed in your 411 directory before they consider lending to your business. You should never use your home number for this listing and your phone should always be answered professionally with the company name. If a lender calls your business and you answer with, "Hello," this does not bode well for your chances of getting approved.

Following this checklist will greatly increase the chance of getting approved for business financing. It will also get your business set up the right way to start building a strong business credit profile. Stay tuned for part 2 of The Essential Checklist for Business Financing.

Jarrett Pflieger holds a BA in Entrepreneurship and is a featured writer for Jarrett specializes in helping small businesses establish business credit and obtain business financing.

Visit to run a free search for business capital. To build business credit and manage funding sources for free, access your free Business Funding Management Center today at

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Should You Really Care About Business Credit?

In short, yes you should care about business credit.

Business owners typically fall into one of three categories when it comes to biz credit.

1. They are very familiar with it and have established scores with the 3 national business credit agencies for their company. Their vendor accounts and credit cards report good payment history in their business name only and their personal credit is not tied to their business.

2. They are somewhat familiar with business credit and they may have a Paydex score with Dunn and Bradstreet. They also might have credit vendors and credit cards, but do not know if they are reporting their good payment history to the business credit agencies. They use their personal name and credit on most, if not all, business transactions.

3. They exclusively use their personal credit to finance their business and do not know the benefits of biz credit, or that it even exists at all. Their personal credit and assets are tied so closely to the business that if the company failed, their personal financial situation would be destroyed as well.

Unfortunately, many business owners fall into the two latter categories, or somewhere in between. It is hard to blame them since there is such a great deal of false or conflicting information floating around in terms of biz credit, especially on the internet. There are very few sources out there that provide unbiased information about what business credit is and how to establish 3 good business scores. So how does biz credit help a company and how does one build a solid credit profile?

Having a good business credit foundation not only protects the owners personal credit and assets, but it also makes larger and less expensive financing available to a business including bank loans, alternative financing, business credit cards, lines of credit, vendor credit etc. Access to this type of financing can allow your company to:

-Free up working capital

-Take advantage of business opportunities

-Purchase/lease revenue generating equipment

-Grow and expand, etc.

The protection that separate business credit scores provide to a business owner's personal finances cannot be understated. Many business owners end up destroying their own personal credit at the expense of their business, but it does not have to happen this way. There many tricks and tips that can be used to set up a business the right way in terms of credit. Any business, from brand new startups to 10 year old companies, can benefit from some of these tips.

Once the importance of business credit is understood, the next step is finding out how to build your scores. The main thing to remember is the number sequence 1-3-5. To establish a good credit profile for your company, you will need to get 1 business bank loan, 3 business credit cards, and 5 vendor lines of credit. These all need to report to at least one of the credit agencies in your business name only. Personal guarantees are OK, as long as the credit account only reports in your business name. If you give a PG, whatever you do, make sure you do not pay more than a week late or miss a payment. This will defeat the purpose of trying to build up your business credit profile.

Jarrett Pflieger holds a BA in Entrepreneurship and is a featured writer for Jarrett specializes in helping small businesses establish business credit and obtain business financing.

To learn more about business credit and to get a step by step program to help build yours, get your free Business Funding Management Center today at

Visit to run a free search for business capital.

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Wednesday, February 4, 2009

Small Business Loans: Banks Aren’t the Only Ones with Money

Small business loans are sought after by many small companies for a variety of reasons, but many do not know which type of financing they need, or where to start.

There are many reasons why company would want a small business loan. These reasons could include:

• Working capital
• Purchasing real estate
• Renovating, or construction on, an existing building
• Purchasing inventory
• Taking advantage of business opportunities
• Purchasing equipment or furniture

When most business owners think of business loans, they immediately look to commercial banks to meet their business financing needs. There is nothing wrong with this since banks do provide some of best and least expensive types of financing to small businesses. The only problem is that many do not realize how difficult it is to get approved for a bank loan or line of credit.

Small business bank loans have much more strict approval criteria than other forms of business financing. Expect to be able to show good revenue, great personal/business credit scores, significant time in business, assets to secure the loan amount (in some cases), and the most important part is convincing the banker they can trust you with their money. Some call this the 5 C’s:

1. Character
2. Capacity
3. Capital
4. Collateral
5. Conditions

If your business is in less than ideal condition and cannot qualify for bank financing, but still needs a small business loan, where else can you go? Luckily there are countless forms of alternative small business loan sources to consider. Here are some of the more popular options.

Micro Loan-
Generally loans of 35K and under for new or start-up businesses. The SBA provides funds to community non-profit lenders who then make loans to eligible borrowers. Each individual lender has its own requirements. You will have a better chance of getting financed if the micro-lender is in your area.

SBA Loan-
Contrary to popular belief, SBA loans are not given by the SBA. These loans are actually funded by standard commercial banks, but are guaranteed by the SBA. That means that if a bank makes a business loan that defaults, a percentage of its losses will be covered by the government (SBA). This decreases the risk of lending money for the banks and, in turn, loosens the approval criteria for the loan.

If a business is in need of working capital, but has a lot of its cash flow tied up in accounts receivable, then receivable factoring may be the way to go. Accounts receivable factoring involves selling off a portion of receivables at a discount for immediate cash. A factoring company will purchase your receivables with an advance payment of between 70 - 90% of the total value.

Equipment Lease-
Instead of using a significant amount of a company’s working capital to purchase equipment outright, leasing the equipment can be much more effective for newer businesses with limited resources. An equipment lease is when a lender purchases the equipment and then rents it to the business for a flat rate for a specified period of time. In many cases the business will be able to purchase the equipment at the end of the lease for fair market value, or a previously agreed upon amount.

Merchant Advance-
Technically, a merchant cash advance is not a loan, but rather a cash advance based on future credit card sales. Also called a credit card receipt advance, a merchant advance is when a lender advances a sum of money that is automatically repaid through a small percentage of each successive credit card sale. An amount 1-2 times the average monthly credit card revenue of a company can usually be expected.

There are many more types of financing available. These are just some common alternative forms of small business loans. Before you apply for a small business loan, educate yourself on the details of the loan and how it compares to alternatives. The more informed a business owner is the better.

Visit to run a free search for business capital. To build business credit and manage funding sources for free, access your free Business Funding Management Center today at

Thursday, January 29, 2009

How to get a reporting bank loan in the name of your business

Getting a bank loan in the name of your business that reports to the business credit agencies is invaluable for building business credit and finding larger and less expensive financing in the future. It may seem like an impossible task since banks have very tight lending criteria, but there is a little trick to getting a loan from a bank.

Your best bet is to try an SBA backed bank. Banks that are working with the SBA have a certain percentage of their loans guaranteed by the government. Their lending criteria is a bit looser since they do have that security in case a loan defaults.

You can go on the SBA website to find a local bank in your area. Once you find a few, you will want to find one that will give you a loan in the name of your business secured by a certificate of deposit (CD) of the same amount. It may look something like this:

• Business owner borrows money from a friend to get a CD to secure the bank loan.
• The bank makes a loan dollar for dollar based on the CD amount.
• The day the loan funds the owner can repay the loan 100%, or they can separately deposit the money from the loan/line of credit and use that exclusively to pay back the loan.

This technique gives a large push towards building business credit and is just one of many techniques. Learn more at

Also, check out our most recent press release at

Wednesday, January 28, 2009

Separating Business Credit from Personal Credit is as easy as 1-3-5

Why would a business need to separate business credit from personal credit in the first place? Because good business credit scores will enable a business to:

  • Protect the assets and credit scores of the owner(s)
  • Gain access to lower interest rates
  • Obtain larger business loans, credit cards, and vendor lines of credit
  • Expand the funding programs available to the business

The key to separating business credit from personal credit lies in this simple numerical sequence: 1-3-5. This stands for 1 bank loan, 3 business credit cards, and 5 vendor lines of credit. Getting your business set up with a 1-3-5 will create the ideal situation for building and separating business credit from personal credit. Before you start obtaining a 1-3-5 for your business, make sure you go through this checklist of items:

  1. Get incorporated (LLC, S-Corp, C-Corp, etc.)
  2. Get an EIN (Employer Identification Number.)
  3. Make sure a bank account is open in the business name.
  4. For home businesses, get a separate business phone line and address. You can get a virtual address from somewhere like Mailboxes Etc. or UPS Stores.
  5. Make sure your business is listed with the local 411 directory assistance.

The most important part of the 1-3-5 is that each credit provider reports your good payment history, only in the name of the business, to at least one of the 3 national business credit agencies; Dun and Bradstreet, Experian, and Equifax. A business credit account is useless for building business credit if nobody knows that you have it, or if it only reports under your personal credit.

Let’s break down the 1-3-5

1 Bank Loan - Bank loans are the ultimate catch-22. It is difficult to establish business credit without them, but many businesses are unable to qualify for them. Once a business has a reporting bank loan in the business name, it is put “on the map” in terms of business credit.

Here is a little trick to obtain a business bank loan. If you deposit an amount of money (at least $5,000 recommended) at an SBA preferred lending bank, then you should be able to get a business loan back for 100% of the CD value. Not all banks will do this so you will have to find a bank that will work with you. The money will never be at risk and your company will have a reporting bank loan in the name of the business.

3 Business Credit Cards – Many business credit cards are actually personal credit cards with the business name on the front. Companies like Advanta, Discover, and AMEX have offered true business credit cards in the past, but have cut back issuing these cards during the financial crisis.
Currently the best way to get true business credit cards that report in the business name only is to think more retail specific. Places like Home Depot, Staples, Office Max, and others offer reporting business credit cards in the name of the business. Before you apply for any business credit cards you should make sure the following step is completed.

5 Vendor Lines of Credit -
Vendor lines of credit are the easiest to qualify for. There are over half a million vendors in the United States, but only 6,000 or so that report. If you cannot get your current vendors to report, try places like ULine, Office Max, DHL, Borders, and Staples. It is OK if the vendors’ products or services do not directly apply to your business. The most important part is that you get no more than 5 reporting vendor credit lines.

Once you can obtain the 1-3-5, be sure to make purchases utilizing your business credit cards and vendor lines of credit so your good payment history will be reported and your business credit scores can grow. Whatever you do, do not pay late as it will defeat the whole purpose of these accounts which is to grow your business credit separate from personal credit.

Visit right away to gain access to your free Business Funding Management Center. The BFMC will allow you to search for matched funding sources and complete all the steps necessary to establish business credit scores with the 3 national business credit agencies, for free.

Access your free Business Funding Management Center today!