Compound Profit Blog

All businesses have the same quandary when it comes to getting a loan. They have to prove their business fundability. However, small business owners face a steeper hurdle due to the fact that they usually do not have as much capital, as many assets or the connections that big corporations have.

Owners of all businesses, regardless of size, can get a great deal of help learning about business funding at www.businessfundability.com. In the meantime, there are a few things small business owners can do right now to get started creating the kind of business credit needed to prove their business fundability.

Create an Identity

This is usually the first step in starting a business, but many new business owners overlook it. It’s not too late. Get started creating your business’ individual identity now. 

The first step is a visit to the IRS. Don’t run away. You don’t have to go there in person, just go to their website and get your EIN number. The EIN is an “Employer Identification Number” and serves your business the way your social security number does you personally. It is tax identification, but also establishes your business as an entity.

The next step is to register with Dunn & Bradstreet. This organization has much to offer a business of any size. Along with being one of the biggest business credit reporting agencies, they also offer help for businesses in establishing credit, and a Dunn & Bradstreet number can be used to identify it on credit cards too.

Finally, get listed in your local 411 directory. Once you have established your business’ personality you are just beginning on the road to credibility.

Establish Vendor Relationships

Do you walk into your local office supply store, pick up your items and pay at the register before just walking out? Stop it! Talk to the management. Introduce yourself and ask for a vendor account. A vendor account is often a small business’ first credit. Vendor accounts differ in two important ways from major credit cards. First, a vendor account has a short term credit period. You can’t continue to carry a debt. You must pay the entire amount due within a certain period of time, usually either 30, 60 or 90 days. The second difference is you can’t use a vendor account anywhere except that store, or chain of stores.

Don’t just open one or two vendor accounts. Find several businesses you like working with and need products or services from and establish an account. Banks like to see at least 5 vendor accounts when determining business fundability. Once you have these accounts, keep them in good standing for several billing periods and you are well on your way to having the credibility you need to get a small business loan.

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President Obama’s 2010 tax break for small businesses was a real boon for both the economy and the individual worker. Of course, the unemployment situation in the country was, and still is a serious issue. It is one of the main dangers to people’s ability to maintain their personal credit ratings. 

The initial tax breaks made it possible for small businesses to do more without getting extra small business loans. It also helped when more money was needed. The fact that the incentives helped business owners keep their personal credit scores solid made getting small business loans easier.

The old tax credit was issued to small businesses for hiring new employees between February 2010 and January 2011. In August of 2011, Obama once again brought about changes to allow for tax breaks for all businesses that hire. This time he made it available to businesses that hired veterans. This will help the economy and those people who are entering the job force after serving the country.

The new bill is called the “Returning Heroes” credit, and is for the 2012 – 2013 term where businesses can earn a $2,400.00 tax incentive. As an added bonus, those businesses that hire veterans and keep them on the payroll for six months or more can get up to $4,800.00.

As a further incentive, there is a “Wounded Warriors” credit where businesses that hire veterans with disabilities from service can earn $4,800.00. This same incentive will allow for up to $9,600.00 for those employees kept on for six or more months.

There are some who complain about the cost of the bill if it passes Congress. It would end up meaning as much as $120 million dollars lost revenue for the government. President Obama countered the arguments against the bill with the need to recover from over 8 million jobs lost during the recent recession.

Veterans, especially wounded vets, have an even harder time fitting into the employment workforce, and they deserve to find some normalcy upon returning from duty. This tax incentive benefits everybody and is a great way for the country to find some stability, increase job rates and become more productive.

It certainly doesn’t hurt your financing appeal to hire veterans, and banks will also look favorably upon those efforts when you apply for small business loans.

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Getting a loan can be scary for new business owners. However, getting a small business loan is usually imperative when beginning any start up. If your new business idea requires a lot of equipment, office supplies and materials, you don’t have to foot the bill yourself. You just have to apply for a loan. 

Knowing how to make the most of your loan applications can improve your chances of success. Starting small is a good idea. That doesn’t mean small business plans. It means finding smaller, private banks. Small banks are much more flexible. At a local bank you also have a better chance of developing a relationship with your lender.

Another great place to start is the Small Business Association. They have many programs to help new businesses get started. Regardless of where you start, there are a couple of things that will help you get started on the right foot.

Make a Plan

Even a small business needs a plan. A business plan is more than just an idea; it is a blueprint of how to make the idea work. While having a business plan is important for business success, it is just as important as an aid to getting small business loans.

The bottom line is banks and other lenders want their money back. They also expect to make a few dollars extra in the process. That’s their business. When you ask for money, they are likely to want to know everything about your business. They want to know how it will work, what it does and how you expect to get paid for your work.

A business plan goes into everything in great detail, and will be an asset to your loan application. With a business plan, there are no questions left unanswered, and a lender can determine if your plan is realistic, and if they have a good chance of a return on their investment.

Dealing with Rejection

Rejection is a part of the process. You may not get the first loan you apply for. When starting out, understand that the process of obtaining small business loans may take several tries. You can learn from your mistakes and build on the experience from each loan application if you have the right outlook.

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There is a lot more to a business credit card than simply providing available cash. It is very important to have credit cards in your business name in order to protect personal credit ratings. However, depending on your needs there are other things to consider when it comes to what makes the best business credit card for your business. 

There are things like frequent flier miles and hotel savings that the right business credit card can provide for those that have to travel often on business. These are just a couple of the incentives that business credit cards offer. If your business doesn’t require you to travel, however, those may not be the right business credit cards for you, but that doesn’t mean that there aren’t others that will give you the bonuses you can use.

Types of Incentives Available

• Cash Back: Many business credit cards give you a cash back bonus simply for using the card. These bonuses may be general cash back on all purchases, or they may stipulate certain types of purchases. In other cases there may be several types of cash back bonuses on a single business credit card. For instance, the bonus from “SimplyCash®” business card from American Express OPEN that offers 5% cash back on office supply purchases as well as on wireless services. It also gives 3% on gasoline purchases and 1% cash back on all other purchases.

• Bonus Miles: If you travel heavily for business, or just want to take a much needed vacation you can choose a card like Capitol One® Spark Miles for Business that gives you thousands of frequent flier miles with no limits. There are no blackout dates for traveling, or any airline restrictions and you can even use the miles for cash back or gift cards if you decide you aren’t going to travel. Capitol One® also has a Spark card for cash if you prefer bonuses rather than miles.

• Bonus Points: Another form of bonuses are given as “points” toward special purchases. InkBold with Ultimate Rewards gives you 50,000 bonus points if you spend $5,000 in 3 months. If you have a lot of large expenses, or use your credit card for regularly recurring expenses this can be a very beneficial type of bonus.

• Hotel Bonuses: If you travel on business or for pleasure this type of bonus can save you a lot of money. Marriott Rewards Business Card is one of these types of cards. It gives you 1 point for every $1.00 spent, plus 2 free nights at certain locations throughout the year, no limits on the amounts you can earn, plus if you use your card to pay for hotel accommodations at a Marriott you will get triple points for each dollar spent.

What You Should Consider when Choosing a Business Credit Card

Remember that along with helping you protect personal credit, your business credit card will help you build your company. However, it’s important to determine what you need your card for in order to pick a card properly. If you need a business credit card to finance big, long-term purchases look for a card with a lower interest rate rather than big bonuses. In the long-run, you will pay a lot less for the overall purchases even after you take bonuses into consideration.

If you are using your business credit card to finance monthly expenses and make accounting easier, you will be paying off the entire amount every month, so interest is not a concern. In those cases, get the most for your dollars by choosing a business credit card with the most useful bonuses for your needs.

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The economy today is not doing so well, but this doesn't mean that you cannot obtain financing for your business. Here are ten ways your company can obtain the capital it needs.

1. Ask Someone In Your Family

If you are starting your own company, you could always ask a friend or relative who might have some extra cash laying around.

2. Use Your Social Network

Have you ever heard of social lending? It is like asking a friend for a loan, but doing so online and with millions of friends to choose from.

3. Put Up Your Own Assets

A bank might not be willing to lend your business money unless it has a solid track record, but you can put your own personal credit on the line. A house or car as collateral helps greatly.

4. Look For Angel Investors

Angel investors are people who are looking to invest in companies with potential. This isn't a loan, but the investment is an equity one, so they will obtain some percentage of ownership.

5. Sell Stock

The sale of stock will raise capital quickly for your company. Remember that you will be accountable to your shareholders if you go this route. They have the right to expect a profit, so make sure you can deliver.

6. Take Pre-Orders

Allow customers to pre-order and ask that they pay in full. This will raise capital before having to buy or ship goods. Think of it as a short-term loan.

7. Get those A/R To Your Bank Account ASAP

If a customer was delivered goods, but has not yet paid up, ask that the customer do so. You can even offer incentives to get that cash in a little quicker.

8. Micro Loans

A Micro Loan is a small loan that carries a smaller interest rate. A credit card could be as much as 22 percent APR for a small 1,000 loan, but a Micro Loan averages around 8 percent interest.

9. Sell Or Rent Assets

Renting an unused room could be a great way to raise cash. Selling your old copy machine could also be a great way to get some extra money quickly.

10. Credit Cards

If no other loan option is available, a credit card is a last resort. Beware of high APR's, but it could be a bailout when you are in desperate need of capital.

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Though building business credit has to be one of the more tedious activites of the entrepreneurial lifestyle, it is also one of the highest ROI activities that a business can undertake. Building and maintaining good business credit has many advantages and pays dividends far beyond the effort that it initially takes.

Some of the advantages of taking the time to build business credit:

1. Immediate respect from other businesses.

If your business is primarily B2B or if you have need of partnership with suppliers, having business credit simply greases the wheels of commerce as your business is immediately seen as more professional with a line of business credit. Some businesses go as far as to not do business with companies without a line of business credit, which could prove a make or break type of decision, especially if a business is planning a growth stage.

2. Ease of filing taxes.

Separating business expenses from personal expenses is never a bad thing in the eyes of the Internal Revenue Service. The hassles and money that you will save yourself in IRS audits, accountants, lawyers and lost time and manpower means that the effort you expend in obtaining business credit will more than pay for itself.

3. Getting business credit gets easier.

Once you have made that leap into getting business credit, you begin to build your reputation with your loan officer. The next time that your business has need of a credit line, you will find the wheels much less squeaky. So start early and do it now, because when you really need a line of business credit in the future, you will not have to make a scene to get it.

4. Peace of mind.

There are few things better than knowing that your personal assets are safe even if the business fails. This is perhaps the greatest advantage of separating personal and business credit - not having to guarantee your business with your personal assets.


How do I get business credit?

If you are having trouble obtaining business credit, there are companies which specialize in helping you to get it. These companies have already built relationships with financial institutions and will combine your account with many others to leverage better rates from the institution while decreasing the overall risk

 

for the institution. In this manner you can receive business credit lines that you would not be able to get on your own.

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Those who go into business for themselves often use business loans to support their effort. They do this as an alternative or as a supplement to raising funds from friends, relatives and other investors. Starting or growing a company with business loans has several features and benefits that make it an attractive option.

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Don’t let anyone tell you something else: the small businesses play a major role in the American economy – there are tens of millions of small business owners paying taxes out there! Fortunately, it’s quite easy to start a new business these days, no matter if you’re planning to open an online bookstore or a gas station.

If you’ve just started a new business or you plan to start one, using a small business credit card in order to get the needed financing is definitely a good idea. First of all, a small business credit card will allow you to separate the personal expenses from your business-related expenses; using your own finances for your company’s purchases isn’t a good idea at all.

Some entrepreneurs are very organized and like to jot down all their expenses; if you aren’t like them, a small business credit card will be of great help, because you’ll receive monthly statements that show you exactly how much money you have spent each month. More than that, each payment that’s made using a business credit card can help you build business credit, and if you’ve got good business credit records for several months, you will be able to apply for a business loan, which will allow you to get access to larger amounts of cash with lower interest rates.

But what about established businesses? How can business credit cards help them? Even if your business is already profitable, picking a business credit card and keeping it in your wallet is a very good idea; this way, you will have access to a consistent source of financing, and this will help you get the needed money in case that one of your expensive pieces of equipment dies, etc.

As a conclusion, small business credit cards are powerful financing instruments that help you separate personal and business purchases and allow you to buy the needed equipment, merchandize, etc without using cash. Compound Profit has created a business credit card – MerchantCard – that can give you access to up to $250,000 per business location and allows you to have access to cash anywhere credit cards are accepted.

Contact us today for a complimentary consultation and you’ll discover why MerchantCard is preferred by hundreds of thousands of companies across the entire U.S.A. Here’s just a hint: availability increases each time payments are made.

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