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Business Credit Lines: Are You Protecting Yours?

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Protect Business CreditWe all know that banks are in caution mode right now and suspending business credit lines is obviously an effective way to reduce the risk on a bank’s balance sheet. As they continue to cut small business credit lines what can you do to protect yours?

 

Not too long ago a close friend of mine who own a digital imaging company based here in Michigan had his line of credit frozen and the explanation from the bank was that his house had lost over 30% of its value. It didn’t matter that he was never late on payments and was a long standing customer for over 10 years.

 

Rather than continuing to talk about the negative impact it’s had on thousands of business owners I would prefer to share with you specific factors that flag and trigger a bank to change the terms of your business credit lines. To prevent a bank from cutting yours, you need to reduce your risk level.

 

Avoiding the following red flags will reduce your risk level and keep your business off the radar screen.  Keep in mind that while these are not the only factors they are the most common ones.

 

Missed Payments

Missing payments can easily raise a red flag so at all costs catch up on overdue payments and pay more than the minimum.

 

Poor Financials

Banks re-evaluate their business customers using their tax returns and projected income statements to determine their creditworthiness.  Weak earnings for the year can trigger an adjustment to the terms of your line of credit.

 

Reduced Bank Rating

For example – If your balance rating was a “Low 5” ($10k for 3 month period) and drops below to a “Mid 4” ($5k for 3 month period)

 

Depreciated Value

If you have secured your credit line using collateral that has depreciated in value or business receivables that have reduced significantly then in order to stay off the radar add additional collateral to offset the depreciation.

 

Lower Credit Scores

A drop in credit scores and new derogatory items showing up on personal credit files are a major contributor to credit lines being cut across the country. Avoid making large purchases on credit cards that could put your debt to credit limit ratio above 30%. In addition be sure to monitor your credit on a regular basis and avoid inquiries.

 

One of the best ways to protect your business credit lines is by NOT putting all your banking and lines of credit in one basket. It scares me to think of how many business owners across the country have put total dependence on one bank to handle all their deposits, withdrawals, checks, savings, credit lines, loans, credit cards and so on.  It’s important to diversify your business banking relationships and credit lines.

 

By establishing multiple business credit lines with several banks will put you and your business in a much safer and stronger position. So if one of your banks happens to reduce or even cancel your business credit line you still have several other credit lines readily available.

 

You can protect your business credit line during these tough economic times but it requires you to be proactive and diligent in reducing your overall risk level.

 

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

To Your Success!

Marco Carbajo

About the Author

Marco Picture 2009 Super Small pic

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Business Credit Reporting: A Smart Move in Today’s Economy

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Business Credit Reporting

Business Credit Reporting

 

While extending a credit term by as little as 30 or 60 day is just like offering an unsecured loan it’s a credit risk most of us are willing to take. We’re simply providing goods or services in return for a promise to pay.

 But as many business owners have learned during these tough economic times, promises are easily broken.

However, by reporting your customer’s payment experience to a business credit bureau you can reduce customer late payments, defaults, and improve collections. In fact one of my clients who is set up with D&B’s trade exchange program experienced a 25% reduction on his past due accounts once his customers were notified that their payments were getting reported.

Here’s a list of benefits you can expect:

  • Confidentiality – Your company name is not revealed to other clients in order to protect the privacy of your information.
  • Timely payments – Customers who know you are reporting to the business credit bureaus are less likely to default on their debt
  • Improve Collections – Leverage the powerful brands of the major business credit bureaus like Dun and Bradstreet,business Experian and business Equifax in your invoicing and collections activity.
  • Contribute to your customer’s financial health – Reporting your customers’ payment experience can help ensure that your clients don’t assume more debt with other creditors than they can manage
  • Reduce Credit Risk – Through data sharing your business will have the ability to make more informed credit decisions and receive additional solutions from the business credit bureaus to further mitigate risk and identify opportunities.

Here’s how to get set up with some of the major business credit reporting agencies so you can start business credit reporting.

D&B Trade Exchange Program

If your business has more than 300 active accounts or is a current DNBi customer you can qualify to participate in the D&B Trade Exchange Program. There is no fee or cost to participate and your customer data is secure at all times.

Small Business Financial Exchange (SBFE) 

The Small Business Financial Exchange is a non-profit association consisting of national and regional financial institutions. It’s managed by business Equifax and is a member-owned database of positive and negative small business trade line data including loans, credit lines, leases, credit cards and SBA loans.

To participate in data sharing with SBFE you must be a financial institution or leasing company. If you are interested in joining the SBFE, call 888-201-6879 or send an email to [email protected]   

Small Business Exchange (SBX)

With the development of the SBX database, Equifax now offers both banking and leasing payment experience information and non-banking trade receivable history. This is great news for small business owners who don’t fall into the financial institution or leasing company category required by SBFE. Now there is a single source of data from banks, leasing companies and trade suppliers.

Data sharing with SBX is open to any company that provides products and services to small businesses on an invoice basis. If you are interested in joining the SBX, call 888-201-6879 or send an email to [email protected].   

Corporate Experian

Business Experian offers commercial trade reporting through the Internet via Secure HTTP.  If your business gets set up it can only submit payment data via electronic transmission. There is no fee or cost to participate.

To set up a user ID and password to begin reporting your data online call at 800-478-0650.

By reporting your customer’s payment experiences with creditors across the country, you help other business decision-makers reduce their credit risk plus ensure the growth of your company and that of the business community at large. Begin reducing your customer late payments, defaults, and improve collections by reporting to a business credit bureau today! Stay tuned for additional posts on how to get set up with additional bureaus.

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Picture 2009 Super Small picMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Business Credit Builder: Build Business Credit History in Record Time

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Business Credit In Record TimeGetting listed by using one of DNB’s business credit builder products is one way to get your company on the fast track to build business credit history fast. Once you’re listed you should focus your attention on getting positive payment experiences added to your file in order to generate history and favorable business credit scores.

 

This can seem like a tough task because you have to make sure that the suppliers, vendors, and lenders you have an already existing payment experience with will now start reporting to your newly established business credit files.

 

In addition, there is no way for you to confirm which company is reporting to your file because the business credit bureaus do not disclose what business is supplying the payment data.

 

Plus, you have to worry about new vendors and suppliers reporting as well.  One of the biggest mistakes made by small business owners is assuming that every vendor reports their payment history to their corporate credit file.

 

Last but not least what if the specific vendor or supplier your business has a good history of payment experience with is not set up to supply payment data to the business credit bureaus? One of my new clients who had been in business for over 15 years recently got listed with Dun & Bradstreet and contacted one of his suppliers to let them know of his new DUNS number. He was excited because he had a 10 year solid track record of payment experience with them and knew that this could benefit his newly established corporate credit file. Unfortunately this supplier was not a trade reporter with D&B so needless to say he was not happy.

 

Fortunately for you and my client there is a way to solve all these challenges and build company credit in record time!

 

One of the largest credit builder companies, Dun & Bradstreet offers a unique program ideal for new businesses that need to quickly build business credit history. With this program you have the ability to submit your company’s trade references that D&B will contact to collect payment experiences and report them to your file.

 

This allows you the opportunity to add your company’s good trade references to your business credit file with D&B and it doesn’t even require them to be a trade reporter with D&B. Best of all you can establish a Paydex score in a matter of weeks depending on how many references you supply to D&B to contact.

 

One very important thing to keep in mind is you cannot submit credit cards, gas or utilities as trade references to D&B.

 

The two business credit builder services I’m referring to are CreditBuilder Plus™ and CreditBuilder Premium™.

 

This is how you can build a business credit file in record time and benefit from doing what you’ve always done as a business owner. The only difference is now you have a business credit report that shows how responsible your business is in handling its financial responsibilities.  This can make the process of obtaining credit and business financing for your company much easier.

 

*You can add trade experiences using D&B’s program but be prepared to pay a substantial fee. This is an option but keep in mind there are other business credit bureaus you will also need to establish a file with such as Corporate Experian and Small Business Equifax. To access premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

To Your Success!

Marco Carbajo

About the Author

Marco Picture 2009 Super Small pic

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Are Business Charge Cards A Better Alternative to Business Credit Cards?

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Business Charge Card 

Business Charge Card

 

Even though business credit cards allow you to make purchases and carry a balance from one billing cycle to the next the disadvantage of having to pay interest on that balance can become pretty costly.

 Another kind of credit card for your business that may be a better alternative is the business charge card.

 A business charge card is a specific kind of credit card that has all the convenience of a credit card without the costly interest. The balance on a charge card account must be paid in full when the statement is received and cannot be rolled over from one billing cycle to the next like a credit card. Because you can’t carry a balance, a charge card doesn’t have a periodic or annual percentage rate, so there is no rate for a charge card issuer to disclose.

 The specific impact to your business credit bureau is significant because charge cards will not allow you to incur a revolving debt like a credit card will. The larger the balances you carry on your business credit cards the more harm it can cause in your overall debt to credit utilization.

 Here is a list of several business charge cards available in the marketplace:

  • OPEN from American Express offers business card members the OPEN Savings program designed for companies with 100 or fewer employees. Some perks include 5 percent to 20 percent discounts on shipping, travel and business services.
  • Diners Club International has been a leading charge card for business travelers since the 1950s. Features include club rewards, cash access, airport lounge program, a 24-hour emergency travel hotline and a rental-car insurance program.
  • Universal Air Travel Plan is accepted by over 250 airlines and thousands of travel agencies for air travel, service fees and management fees. It’s best for companies that want to restrict charging to airline-related expenses.
  • The American Express Corporate Meeting Card allows all event-related expenses to be charged centrally, so hotel rooms, meals, transportation, and so on, all go on a single bill.

 While using a business charge card makes much more sense than a business credit card there several other important things to consider.

First, a business charge card should only report your payment experience to the business credit bureaus and not your personal credit files. This prevents you from putting your personal credit scores at risk every time your company makes a purchase using your company charge card.

Secondly, some charge cards like Diners Club International will self contain your payment experience and will only report to the business credit bureaus if your account becomes delinquent. While this is good for protecting your personal credit scores it does not help your business credit file because they do not report your positive payment history.

Keep this in mind if you decide to start shopping around for a new business charge card that does not impact your personal credit. Pay special attention to the fine print and don’t hesitate to call and ask questions pertaining to how your payment experience is reported.

One of my favorite types of charge cards is ones that base their approval solely on your business’s credit worthiness. This type of card is the best of both worlds! Once approved your payment history reports solely on your business credit and there is no personal guarantee keeping the liability strictly tied to your business.

I encourage you to be as proactive as possible by selecting business charge cards that report to the business credit bureaus. Don’t hesitate to inquire with vendors, suppliers, and leasing companies how they report your payment experience with them as well. Bottom line it’s smart business to use business charge cards in order to save thousands of dollars in interest and build business credit history.

 

To Your Success!

Marco Carbajo

About the Author

Marco Picture 2009 Super Small pic

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. Want to learn more about how you can start business credit? Become a member and gain access to Marco’s business credit secrets, sources, and information on how to obtain unlimited financing for your business without a personal guarantee? Claim his FREE ‘Eight Steps to Ultimate Business Credit without a Personal Guarantee’ audio seminar ($597 Value), for a limited time by submitting your name and email below =>

Start Business Credit: What Business Structure Should I Choose?

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Business Entity

Start Business Credit: Entity Selection

 

I get asked this question quite often and thought I would clear the air on what business entity selection is best when you start building business credit.  This step by far is the most important because it’s the foundation for what you will be building your business credit upon.  Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.

 When a client comes to me for advice on selecting the best business structure, the first questions are:

 What Does Your Business Do?

I ask this to get you into the best structure for taxes. How your income is taxed depends on the type of income your business earns. If your income is earned through passive sources – rent, portfolio income, etc., it will be taxed differently than if your business provides a product or a service that you sell.

Where Do You Live?

I ask this question because where you live can make a difference to the kind of business structure you form. Some states charge more for one type of structure over another. Knowing where a client lives allows my entity specialist to choose the most economic structure.

How Much Does Your Business Earn?

This question again relates to taxes, and is specifically geared towards someone who receives “earned” income (that’s income from selling a product or providing a service). There’s an income threshold we look at – once your income surpasses it, it’s time to rethink your options.

Taxation is a Critical Factor!

Did you notice that all three of those questions are related to taxes? That’s the secret lesson to take away here. All business structures will work in all situations. The secret is knowing which business structure best matches your income and tax situation so you keep more of what you earn.

The mistake I see so many business owners make is selecting the wrong entity structure for their company. They get anxious about building their profile with the business credit bureaus and think that one type of entity is better than all the rest. There is no cookie cutter approach to entity selection because every business is different. Don’t take any shortcuts in this step because it can cost you big time.

As a business owner, you have four real choices when it comes to business structures and two bad choices:

    * C Corporation

    * S Corporation

    * Limited Liability Company

    * Limited Partnership

    * Sole Proprietorship

    * General Partnership

Business Credit Blog » Business Credit » Start Business Credit – entity selection for business credit
 

Sole Proprietor and General Partnership

 

To learn why Sole Proprietorships and General Partnerships are so dangerous to you and your family, read on.

A Sole Proprietorship is bad…

Have you heard the saying “You get what you pay for?” Well, you normally don’t pay anything to start either a Sole Proprietorship or a General Partnership. Of course you don’t get anything, either. Unless you count the following as valuable business assets:

    * Lots of personal liability

    * No protection from your business creditors

    * An increased risk of being audited

    * Problems with valuation for a subsequent sale of the business

The reason for this lack of protection is because neither of these structures is considered a separate legal structure. Instead, they are considered personal extensions of you, if you are operating as a Sole Proprietorship, or you and your partners, if you’re operating as a General Partnership.

And, because these business types are considered personal extensions of you, you don’t have any protection from them.

But a General Partnership is Downright Ugly!

It gets even worse if you are operating with a partner as a General Partnership. That’s because not only are you responsible for all debts and agreements you enter into in the name of your business, you’re also on the hook for all of your partner’s actions in the name of your business as well. This can be devastating if your partner is financially irresponsible, and, because either of you can bind the partnership; you have zero protection from your partner.

If You Don’t Choose a Good Entity, the Government Will Choose a Bad One for You!

If you’ve been doing business up to now without a business structure, both the IRS and your state government have defaulted your business into either a Sole Proprietorship or a General Partnership.

And that means you’re exposed.

Select the proper business structure  and incorporate your company if you want to start business credit and you want to protect yourself from personal liabilities. So if you already decided on the right entity structure then the next step is incorporating your business.

If you already have an existing entity set up then the next key step is obtaining a federal Tax ID.

Business Credit Resources

» Business Credit Seminar

» Business Credit Insiders Circle

» Business Credit Blog

 

Are you ready to incorporate and start building business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system.

To Your Success!

Marco Carbajo

About the Author

Marco Picture 2009 Super Small picMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. Want to learn more about how you can become a member and gain access to Marco’s business credit secrets, sources, and information on how to obtain unlimited financing for your business without a personal guarantee? Claim his FREE ‘Eight Steps To Ultimate Business Credit Without a Personal Guarantee’ audio seminar ($597 Value), for a limited time by submitting your name and email below =>

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