Business Education

How Entrepreneurs Can Establish Good Business Credit

When you open a small business, you have the opportunity to build credit separate from your personal credit. The better your small business’ credit, the better terms you can get with supply vendors and lending institutions, like banks. This means being able to borrow at a better rate to finance expansion in the future.

Why Building Good Business Credit is Important

Like personal credit, business credit is monitored and reported by credit bureaus. “The major business credit bureaus that compile and provide copies of the reports are: Dun & Bradstreet, Experian Business, Equifax Business, and Business Credit USA,” according to one credit expert.

By having a business credit history separate from your personal one, you can minimize the effect negative events on one might have on the other. For example, if you have some financial missteps that impact your personal credit history and score, they shouldn’t impact your small business credit if you have established a clear separation and vice versa. —Biz Filings.com

Building business credit is essential to a company’s reputation and success. Establishing good business credit is done through a combination of practices. Your small business will have to observe these to build a solid commercial credit record.

How Entrepreneurs can Establish Good Business Credit

When you start a company, you’ll probably need corporate credit for a number of things. Keep in mind, though, these are ultimately your personal responsibility. So, make sure you understand the terms. Here’s how entrepreneurs can establish good business credit:

Secure a debt instrument in the business’ name. A “debt instrument” is simply another term for “loan” or “line of credit”. It means you are borrowing money in advance or taking on debt to purchase necessities for your business, like fixtures, equipment and supplies. Apply for a business loan, line of credit, or vendor credit that does not check your personal credit score or history. You are attempting to obtain credit in the business’s name only. Commercial lenders may waive personal credit checks in lieu of providing collateral or a down payment. Another method for securing a debt instrument is to apply for a credit card in the name of your business. Terms and reporting procedures will vary by credit card companies, but in general, the monthly payments will reflect on your business’ credit profile.
Build your credit history. Make credit line and business loan payments on time. Schedule automatic payments debited from your business checking account for business loans and lines of credit. Or make payments on recurring credit lines or loans at least three to five business days in advance of the due date. Get in the habit of making payments larger than the minimum due.
Check your business’ credit files for errors. Request copies of your business credit report from each of the corporate credit monitoring bureaus, six to 12 months after securing a commercial loan or line of credit. Review each report for accuracy and dispute any errors directly with the agency reporting the erroneous items. If errors are disputed to no avail and are not legitimate, consider having your attorney contact the reporting agency to resolve the situation. Like personal credit reports, business credit reports may be adversely affected by incorrect trade lines being reported.

How have you established business credit? What mistakes would you avoid? Please share your thoughts and experiences!

Interested in learning more about business? Then just visit Waters Business Consulting Group.

Like this article?

How To Network during Periods of Instability

October 15, 2021 No Comments

Despite the reopenings across the country, many places have still yet to return to normal, pre-pandemic schedules. Several offices continue to allow employees to work entirely from home, or only require minimal in-office workdays, usually just one or two. Meanwhile, small business owners also continue to experience disruptions in their operations, due to a labor shortage, shortage of materials and supplies, and other abnormalities. Plus, several professional associations are not holding annual meetings, or have greatly altered, meaning mostly reduced, their events and in-person get-togethers. All of these unusual occurrences have likewise lead to fewer opportunities to network, but this form of relationship-building still remains essential. The Importance of Networking Consistently Even during normal times, regular networking is important for career professionals and entrepreneurs alike. It provides them with the opportunity to meet new people and gain a new perspective. Networking also helps them discover other types of opportunities, including career advancement, product innovations, and possible future alternative routes. Networking has always been essential to small business owners because it costs little to nothing and helps them create brand awareness. Small business owners use networking as a means to form relationships with others, in like or related fields, that help to expand their business’s ability to find new customers, partner, and grow. A key element to effective networking is to make you known. The premise being that the more people you meet, the more people there will be to get to know and remember both you and your business. You should use every professional and social opportunity to meet and connect with new people.–Olympia Benefits Networking also offers a few other benefits, such as improving social skills, being exposed to new environments, and forming new relationships, both professional and personal. In other words, networking isn’t just about selling products and services, it also is a prime environment for self-enrichment. Too few people see these qualities and only network purely for the sales aspect. Regardless, this relationship-building activity still remains extremely important, even though there are many abnormalities that persist, even well after the pandemic reopenings. How To Continue to Network during Unstable Times There have been periods in the past that have completely disrupted the entire business and economic landscape. Perhaps the most recent and largest in modern history began in earnest in 2008, continuing for several years and what is now referred to as the Great Recession. Although this was mostly related to the housing sector, its effects reached practically every corner of commerce in one way or another. Both business owners and consumers had to adapt, with people leaving long careers to go in entirely different fields of work. Similarly, business owners changed their models in order to survive and return when economic circumstances permitted. During this time, networking became very important not only to sell products and services but to find new opportunities. Here are a few helpful suggestions for networking during such times of upheaval: Change your mindset. Perhaps the biggest obstacle to overcome isn’t in external factors but is entirely internalized. That is to say, it’s very difficult to not only identify but change one’s mindset. Your attitude and outlook will have much to do with this and it’s critical to understand how your approaching the world as so many people’s lives and other businesses are still in a state of disruption. Be flexible with your schedule. Your old way of networking might still be partly or mostly intact. If so, that’s very good news and you won’t have to make many adjustments. However, if very little has returned to normal or is still in a state of flux, you’ll need to be flexible in order to find the time and places to network. This is also a great opportunity to think outside the box and identifies places where you did not network before. Temper your normal sales approach. Since things are not completely back to normal for everyone, it’s best to pull back on the sales talk. Instead, make it more about building new relationships, whether they are professional or personal. This might not be of big benefit now but could prove very advantageous in the future. What other strategies can be used to network during unusual economic times? Please take a few minutes to share your thoughts and experiences so others can benefit from your input! Interested in learning more about business? Then just visit Waters Business Consulting Group.

Biggest Pros and Cons of Employee Monitoring Systems Small Business Owners Should Know About

January 18, 2024 No Comments

Biggest Pros and Cons of Employee Monitoring Systems Small Business Owners Should Know About Small business owners are constantly looking for ways to improve productivity, streamline operations, and ensure a safe working environment for their employees. One solution that has gained popularity in recent years is the use of employee monitoring systems. Employee monitoring tools can provide valuable insights into team member performance and help companies to better manage their workforce. However, there are also potential drawbacks to consider. So, it’s important to know the advantages and disadvantages of such technology. Below, we’ll explore the biggest pros and cons of employee monitoring systems for small business owners. Pros of Employee Monitoring Systems Increased productivity. One of the most significant advantages of employee monitoring systems is their ability to improve productivity. By tracking employee activity and identifying inefficiencies, small business owners can make data-driven decisions to optimize workflows and increase overall productivity. Enchanced security. Employee monitoring systems can also help to protect sensitive company information and prevent unauthorized access to critical systems. By tracking employee activity, small business owners can quickly identify and address potential security threats.t Improved employee accountability. Employee monitoring systems can also help to improve employee accountability by providing a clear record of their activities. This can help to reduce the likelihood of time theft and ensure that employees are working efficiently during their scheduled hours. Better time management. By tracking employee activity, small business owners can better understand how their employees are spending their time. This can help to identify areas where employees may be struggling and provide opportunities for additional training or support. Reduced costs. Employee monitoring systems can also help small businesses reduce costs by identifying inefficiencies and streamlining workflows. This can help to reduce the need for overtime and minimize the risk of costly mistakes. Cons of Employee Monitoring Systems Privacy concerns. One of the biggest concerns with employee monitoring systems is their potential to invade employee privacy. Small business owners must be careful to balance their need for information with their employees’ right to privacy. Employee morale. Employee monitoring systems can also have a negative impact on employee morale. If employees feel that they are being constantly monitored, it can lead to feelings of distrust and resentment. Legal considerations. Small business owners must also be aware of the legal implications of employee monitoring. Depending on the jurisdiction, there may be specific laws and regulations that govern the use of these systems. Technical issues. Employee monitoring systems can also be subject to technical issues, such as software glitches and data breaches. Small business owners must ensure that their systems are secure and that their data is protected. Summing It All Up Employee monitoring systems can provide small business owners with valuable insights into their workforce and help to improve productivity, security, and accountability. However, there are also potential drawbacks to consider, including privacy concerns, employee morale, legal considerations, and technical issues. Ultimately, small business owners must carefully weigh the pros and cons of employee monitoring systems and make an informed decision based on their specific needs and circumstances. Want to Accomplish More? Do you want your company to grow faster and earn more while you spend more time with your family doing all the things you started your business to do? We can make that dream a reality. Give us 30 minutes and we will show you how to get your life back. Skeptical? Good! Put us to the test. You can call us for your free appointment at 602-435-5474, or, if you prefer, send us an email. You can also visit us at Waters Business Consulting Group to learn more about us and the services we offer.

Reasons Why Small Business Loans are Denied

May 24, 2017 No Comments

Small business owners can easily find themselves in the unenviable position of needing capital, but, not having ready access to cash. It presents an age-old problem, buying equipment ties cash up, even though said equipment is considered an asset. Such assets can depreciate, which worsens the situation all the more. On the cash liquidity side, there are tax consequences to having a certain level of retained earnings. This is why debt instruments are a part of doing business. However, even profitable small businesses can be denied for a loan, and, there’s ample evidence to support this phenomenon. In the first two quarters of 2014, about half of applicant businesses received any funds, according to a survey conducted by the Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia. Reasons Why Small Business Loans are Denied Unfortunately, present trends don’t show much improvement in the access to capital, or, in reducing operational costs. In fact, since November 2014, three out of ten businesses reported more difficulty in trying to reduce operating expenses, and, one-quarter reported unexpected expenses too hard to plan for, according to a study conducted by Nav (formerly Creditera), a business credit management company. If your company recently applied for business credit and was rejected, you’re not alone. So what can you do if your business credit application is denied? Start by trying to find out why. The Federal Trade Commission suggests submitting a written request for the reasons within 60 days of the denial, and the creditor must give you the specifics in writing within 30 days of the request. Consider discussing any concerns you have with your lender, and you may be able to resolve the issues. —Washington Post Within the same survey, about 20 percent of participant companies considered closing their doors, citing two primary reasons: lack of growth and issues with positive cash flow. These factors are likely why 53 percent of all companies applied for lines of credit or loans over the past half-decade, with more than one-in-four attempting to access capital numerous times. During the same five year period, one-fifth were denied and of those, 45 percent reported being turned down more than once. Twenty-three percent of all those denied loans or lines of credit did not know the reason why their applications were denied. So, why is this happening and what makes it appear so prevalent? There are reasons why small business loans are turned down, and, it’s actually not complicated. Here are some of the most common reasons small business loans are denied: Having no credit or even bad credit. Some business owners do not realize they have two credit scores: their personal credit and their business’ credit. What’s worse, some owners have relied on personal lines of credit and have seriously driven their DTI or debt-to-income ratio into dangerous territory. Making payments on-time, keeping a low balance, and not seeking to continually open new credit lines are all necessary to improve both personal and business credit. Too little collateral. Since most business owners aren’t willing to sign a personal guarantee, leveraging their personal vehicles and home to secure a loan, there’s little to nothing left to pledge as collateral. Lenders aren’t keen and will not provide financing that constitutes an unnecessary risk. Anemic cash flow. After all other expenses are paid, lenders want to see demonstrable proof there’s enough cash to repay the loan. Too tight a margin and banks won’t be willing to approve a business loan. Lack of strategic planning. It’s often true that business owners don’t understand the loan process, including the application itself, and all necessary documentation and that can lead to being turned down. Applicants must provide a clear forecast and show a realistic, actionable plan. Under capitalization on loan applications. There are sometimes more assets available to claim than applicants realize and as a result, their loan application makes the organization appear under capitalized. Some assets aren’t immediately clear, which means all potential assets ought to be identified. Another reason businesses might have trouble securing debt instruments is industry-specific difficulties. For instance, a construction company that’s operating in a locality where people are moving away from, or, a taxi company that’s facing tougher licensing regulations or an industry disruption as we have recently seen with Uber. The best solution in the short term is to reduce your Cost of Goods (labor and materials) to improve Gross Margins and reduce Expense Overhead to increase Net Profits which will help with cash flow and operating capital. Also, negotiating terms with your Receivables and slowing growth will allow for an influx of cash. Where possible, attempt to self fund your growth. If capital is required for growth, pursue alternative lending sources other than banks. There are several available and feel free to contact us if you are in need of alternative lending sources. Want to find out about what a business coach can do for you? [shareaholic app=”follow_buttons” id=”26833294″]