Creative Business Funding

I get the opportunity to work with new and existing business on a regular basis and I need to tell you, the lending market is getting tight. Does this mean your business can’t qualify for funding no it does not however what it does mean is that it is most important now than ever before to make sure your business meets the lending market criteria. The Banks and lenders simply can’t stop lending this would be very unrealistic. If you’re a business owner or thinking of becoming a business owner or are just tapped out in your business this is a must read article for great knowledge.

I meet with Vice Presidents of Chase, Bank of America, Wells Fargo and they all say the same thing, you need to have great business credit in today’s economy, period. Now this doesn’t mean you can have a 350 FICO score personally and great business credit and expect the bank or lender to automatically qualify your business for lines of credit of business loans. More and more bankers are telling me we need to think outside the box, be creative in your endeavors. Now we all as individuals see things in life through different eyes so it is important to have a great team of advisors around you at all times to help spot the roadblocks you might not see yourself. We as business owners can’t wear all the different “hats” that come along with running and operating a business. We sure would like to think we could do it all but that just isn’t the case.

Here is what I have learned and found out from the Banks just what is exactly going on and I would like to offer you a few different angles to look at this from:

Factoring: If you’re running credit cards from clients then you can certainly qualify for what’s called factoring. This enables a business owner to free up some capital in times of need. Let’s be honest now it is a little pricey to go this route but time and time again I tell clients, if you’re not going out of business what’s the difference you need cash! You can also qualify to receive advances on future credit card transactions for your business, great way to get some cash quickly but again, you have to meet the qualifications.

Lines of Credit: If your business has great business credit and you’re showing up at Experian Business, DNB, Client Checker and other bureaus and business directories don’t be surprised when the bank asks for your personal information including your social security number. They need to be able to minimize their risk of you not defaulting on the line of credit they extend your business. I get asked all the time “I thought I didn’t have to use my personal credit to fund my business?” This is true but look at from the eyes of the lender themselves they need to make sure your not on a fraud list, no bankruptcy and if there is it has to be discharged, and they all around just want to make sure you’re a good candidate to lend to. It’s all in the ability to pay back the line of credit.

Collateral Lending: This is an avenue not many people understand but the fact of the matter is simple, if you have a piece of property with the deed maybe a truck or vehicle with a deed you can do what’s called collateral lending or asset based lending. What the bank typically will do is take your deed to the property or vehicle or whatever it is your lending against and hold on to it until repayment of the loan is completed. If you do not pay it back then of course you know the deal, you just lost that collateral to the bank. This avenue shouldn’t scare you away from lending because again, you’re not planning to go out of business right? In business sometimes being creative is the only way to go. Traditional lending is GONE unless you have great business credit and an 800 FICO score, not many of us are in this position. Be creative.

Business Credit Cards: Now this is one of the most traveled roads for business owners. Getting access to 5k all the way up to 50k on a business credit card can be a very useful tool when running and maintaining your business. I have clients using this angle with no problems basically what the bankers have told me is simple, great business credit and business tax returns. Typically you’re looking at 10-15% of your business gross not net. The lenders will do a business credit check just like they do a personal credit check when applying for personal credit and they will want to see some history and the company’s ability to pay back vendors and debts the business has incurred.

New Business Owners: If you fall into this category pay attention. If you’re a new business obviously you won’t have business tax returns or P&L statements and the things needed for immediate funding. You will have no other choice but to either start working with smaller vendors and purchasing products and making on time payments for 60-90 days to build your Inteliscore at Experian Business and your Paydex score at DNB. The other option would be to go at it with your personal credit because without anyone extending your business credit nobody wants to be first in line to hopefully get paid back. So again, start with smaller companies and work your way through the system of building credit or use your personal credit and go for some funding if needed but be very careful is all I can say. Just because you use your personal credit for your business doesn’t mean it will reflect on your report personally unless again you plan on committing fraud which I would never recommend.


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