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6 Benefits of Borrowing the Right Way

Situation:
According to the National Federation of Independent Business, 79% of small business owners use credit cards. Additionally, according to the Meredith Whitney Advisory Group, 82% of small business owners use credit cards as a vital part of their overall funding strategy. So, depending
on who you listen to, about 4 out of every 5 small business owners are using credit cards and probably consistently to start, build, and grow
their businesses.

Problem:
It is unofficially estimated that less than 15% of those small business owners are using their credit cards the right way to get all the benefits out of them and ensure their future success. This means, among other things, that they use the wrong credit cards, they damage their credit profiles and
FICO scores and limit their ability to acquire additional financing in the future.

Solution:
By learning the 6 Benefits of Borrowing the RIGHT Way small business owners will be able to:

  • Access additional Capital
  • Separate their personal and business credit
  • Achieve or maintain excellent personal credit as they build their business
  • Find Cash-Flow friendly loans and lines of credit
  • Minimize their interest expenses
  • Maximize their tax benefits

Result:
When you properly obtain your financing you will not only take full advantage of the 6 Benefits of Borrowing the RIGHT Way but by ensuring that you maintain or improve your credit profile, you’ll ensure your ability to obtain additional capital in the future as your business grows. More importantly, you don t have to worry about one of the main reasons why businesses either can’t grow or fail: lack of access to capital. You can focus on what you do best and grow your business.

Introduction
When looking for “unsecured” capital for the business you want to have these goals in mind. Ideally, you would want to accomplish as many of these goals as possible.

  1. Access Capital – This is the obvious (and to some people the ONLY) goal when looking for cash for your business. You need money to start, build, grow, or maintain your business so you need access to some capital. Pretty simple.
  2. Separate, Preserve, and Improve your Personal & Business Credit – This process is like anything else…you can do it the right way or you can do it the wrong way. The RIGHT way is to separate your personal & business so that all or most of the business loans and lines of credit do not show up on your credit report. There are some circumstances where you will benefit if some credit lines appear on your credit as well but this depends on a few different variables and each person’s situation is different. This is not one size fits all.
  3. Achieve (or Maintain) Excellent Personal Credit Profile – This means you want to keep your high FICO scores, maintain low DTIs (debt to income ratios), and have a low credit card utilization percentage (since this is 30% of your FICO score), & keep a minimal amount of inquiries on your credit report.
  4. Cash Flow Friendly – For Entrepreneurs and small business owners cash flow is king so you want to borrow money in a way that is as cash-flow friendly as possible. When borrowing money be mindful of your budget in all things. For example, if you borrowed $50,000 and had to pay it back at $10,000 per month this would not work for most people because of the high monthly payment. Of course, you have to pay the money back but try to get the most favorable monthly payments based on your lending options.
  5. Minimize Interest Expenses – Would you rather pay more interest or less interest?
    It’s pretty simple. The only way this can get confusing is if you don’t understand your options. In other words, just because John got a rate of 7% doesn’t mean that you can qualify for that same rate. If you need capital then you learn your options and take the best options available to you. Sometimes you don’t have a lot of choices but this one is easy when you know and understand your options.
  6. Maximize Tax Benefits – We see this one ALL THE TIME. The vast majority of people miss out on tax benefits because they don’t borrow money the RIGHT way. If you’re using a personal loan or line of credit or credit card then you probably don’t qualify (or should not qualify) to write off all the fees and interest associated with using these funds. Do you think the wealthy write off all the money they borrow for their businesses? Why don’t you? Of course, you’ll want to consult with a tax professional for the details here but don’t miss out on this one! We’ve done this for thousands of people over the last few years so we’ve seen these scenarios many times. We find that the number one issue or concern people have is that they are not sure what their unsecured lending options are. We can help you to understand what those options are and then, once you clearly understand these options, you can focus on borrowing the funds properly. When you do borrow your funds properly then you’ll be able to take advantage of many – and maybe all – of these benefits. Our programs have been designed for these purposes and you may be able to benefit from our years of experience and also from the fact that we’ve worked with thousands of entrepreneurs & done thousands of applications with all the top national, regional, and local lenders in the country.
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Best Business Financing Options for Your Small Business

Problem:
Most entrepreneurs and small business owners need financing to start, build and grow their businesses. When acquired and used properly, financing is an investment in growing your business to achieve your goals and dreams. Acquiring financing incorrectly or using it poorly, however, will hinder your business’s cash flow, damage your business relationships and hurt your chances of business success. Getting financing is difficult for established companies and even harder for startup and fledgling companies in their first two years of existence. Because they don’t fully understand their business credit and financing options, many small business owners make mistakes such as paying too much for financing, needlessly giving up ownership or control in their business in exchange for financing, and pledging collateral unnecessarily, or pledging too much collateral.

Solution:
When you understand your business credit and financing options, and you work with a trusted advisor who understands them, you greatly increase your chances of getting the right kind of financing to start, build and grow your business.

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Business Capital For Startups And Established Companies

Ideal Client Persona

  • Time in Business- Start Up’s with $0 in revenue all the way to companies established for 2+ years with revenues up to $250,000.00 are probably the most ideal.
  • Type of Business- High Risk, Low Risk, any risk type is ok but there will always be small differences between the funding of high risk and a low-risk business but not substantial enough for you to focus heavily on this.
  • Capital Needs- Start-Up and Working Capital between $25,000-$150,000 is going to be ideal. If they’re looking for more than that or they’re looking for capital for installment-based purchases such as buying a major piece of equipment, purchasing a house, or buying a business Credit Card Financing isn’t going to be ideal (It’s still doable but it gets a lot messier at that point).

Ideal Credit File
Age of File-

  • 5 years should be the minimum file type you run through a UBL program.
  • 10 years and beyond is ideal.
  • 12+ is the cherry on top of the icing on the cake

Credit Inquiries-

  • 0 is ideal
  • Up to 3 no matter the type within 6 months is acceptable.
  • Anything over 3 will become more and more complicated and cause more and more denials for a reason such as “too many recent inquiries”.
  • If they’ve applied to any Credit Card lenders that we would apply to (it doesn’t even have to be the same card) can cause us denials for multiple applications on file thus leading to fewer total applications being permittable for a plan.

Late Payments-

  • More than 2-3 late payments in a 2 yr. the period will be a huge issue for lenders (especially business lenders).
  • When they are greater than 2 years old the negative impact is much less severe but more than 5-10 greater than 2 years old will start to cause denials based on a late payment pattern.

Negative Accounts:

  • 0 negative accounts (paid or unpaid) is ideal.
  • 2 or less paid negative accounts is acceptable but will cause some denials or lower approvals if the rest of their credit doesn’t offset the impact of the negative accounts.
  • 3 or more negative accounts (paid or unpaid) is going to start to feel like rolling the dice when it comes to the success of an application plan. At that point if their credit score and income aren’t strong it could cause the majority of applications to be denied.

Revolving Utilization:

  • 30% is the rule of thumb. Anything over that performance will be inconsistent and is a credit by credit basis at that point.
  • The lower the utilization the higher the score and the better the funding results will be.
  • The rule we try and use is overall revolving at 30% or below and no individual tradeline over 50%.