Business Credit News

There are a LOT of misconceptions about marketing and what works. In this article, I am going to review what Does NOT Work and give some insight through my experience about each reason.

1. Don’t know who you are talking to – I am always amazed at the lack of clarity around this issue. I will make this REAL simple: You MUST do a market analysis and define your target client by as many metrics as possible.
2. Your message isn’t right – Run your message by existing clients, friends, family, vendors etc….spend the time to make sure you have this mapped out.
3. You’re talking about yourself – Big mistake! Too many business owners use marketing to boost their own ego instead of offering benefits and solutions to the prospect.
4. You’re not where the people are – Is this google? Radio? Print? – Maybe a combination of all three. My experience here is: start small and grow what works.
5. You have silver bullet thinking – Successful marketing takes multiple approaches. There is PR to think about as well. If there was a “one size fits all” we would all know about it.
6. You don’t really have a brand (different, meaningful, and genuine) – Before you ever spend $1 on marketing, make sure you have this nailed!
7. You quit before it has a chance to work – Patience my friend….use your network and advisors to get a feel for this one. You should be able to set up a timeline with expectations for results.
8. You’re not repetitive enough (consistent image, message) – Most of my failed marketing attempts can be summed up by this one. I always budgeted at least ONE year for each campaign with weekly hits. So, plan for a budget of 52 weeks when putting together your strategy.
9. Your timing is off – Are you selling snow shovels in July? Even if you are not in a seasonal business, this can make a BIG difference in the success and ROI of your efforts.
10. You don’t invest enough – It takes money to make money. A good rule of thumb for small companies is 2 to 3% of your sales at a minimum. So, if you are running a $1 million dollar company, you will need $20 to $30k at the very least.

Of course there are many other reasons why your marketing may hit a snag, but if you can eliminate these ten, you will be well on your way to growing your sales through effective marketing.

Scott Fritz
Earn.com Expert Advisor
And Founder Growth Connect

Is it possible to get financing for a business when you personally have bad credit? I get this question all the time from small business owners. They are looking for strategies and tips to obtaining financing when their personal credit is very poor. So, is getting financing a dead end when you have bad credit? The quick answer is no. There are always ways to obtain financing for a business regardless of what your personal credit looks like; the key is knowing where to look and how to prepare your company and yourself before you apply for the financing.

Here are three steps to obtaining financing when your personal credit is poor:

1. Don’t ignore your personal credit. Just because you may be able to obtain financing with bad credit it doesn’t mean you should ignore your personal credit. You should always monitor your credit and take steps each quarter to improve it. There are financing options you won’t have access to if you have bad credit, so you need to constantly work on improving your score. In addition, there will be several financing options that charge you more interest because you have a lower score.

A simple way to look at this is, if you have poor credit you will have fewer options and pay more in interest. So make sure you continue to improve your overall score as you build your business and not ignore it.

2. Establish a solid foundation for your business that puts it in compliance with the lending markets so you can start to obtain credit in your business name without the use of your personal credit. This is what Business Credit Services specializes in, getting companies in compliance and improving their chances of obtaining credit. Once you have a solid foundation (what I refer to as “Being in Compliance”) you can start to apply for trade credit from companies willing to provide credit strictly based on being in compliance. They don’t look at personal credit scores to determine your credit worthiness. I refer to these types of companies as Tier1 vendors. Once you have built a good payment experience in working with these vendors you can then apply with Tier 2 vendors and again obtain credit under your business name only.

You can learn more about business credit and our programs here http://bcscredit.com/business_credit_tab/

3. Know your options. There are several alternative lending sources that don’t rely on your personal credit. Depending on the type of business you have and the financial statements of the company there are options such as merchant account cash advances, factoring, purchase order advance, leasing, corporate credit and more that don’t always rely on personal credit scores.

Take the time to research the various options and work with an expert in small business financing. There are a lot of scams out there as well, so don’t get caught up in the “too good to be true” myths that some companies offer for high dollar amounts. You can read about scams at: http://bcscredit.com/business_credit_tab/scams.php

I have worked personally with thousands of small business owners of the last 15 years and have seen people with personal credit scores of 510 still obtain over $250,000 in credit for their business. I worked with one client who had a 620 fico score and we were able to get them $700,000 in financing. It can be done with the proper foundation, direction and advisor.

David Gass - Founder
Business Credit Services, Inc.
www.bcscredit.com

Next week the federal government is going to begin its new SBA backed loan program. As part of the stimulus bill, this new program, called the “America’s Recovery Capital” (ARC) program is aimed at businesses 2 or more years old that are currently struggling to make payments on existing debt.

The loans range in amount up to $35,000. HOWEVER, you will have no payments in the first year. After that, you have up to 5 years to pay back the loan. There are no fees and no payments for at least a year. The interest payments will be fully subsidized by the government.

What can the ARC loan be used for?

This loan can be used to make payments on existing loans, credit card debt, and business operations. It can be used for personal credit card payments as long as the debt on those cards is the result of business related expenses.

Am I eligible?

To qualify, your business must be at least 2 years old and show at least 1 year of profitability. You must have an “acceptable” personal credit score, as all SBA loans are personally guaranteed (but may report to your business credit score). You’ll have to prove that you are no more than 60 days past due on any loan you’d like to use the ARC funds to cover.

You must prove you have a viable business. The SBA will want to see 2 years of cash-flow projections. If you don’t have projections now, you should. It’s vital to your success.
You must show that your business is suffering financial hardship. You’ll have to show that you had declining sales (20% or more) or rising business expenses (again 20% or more), or that your business is having difficulty meeting payroll, paying rent, or making loan payments.

How do I apply?

There is a pool of $255 million dollars to lend. The SBA expects around 10,000 businesses to get this loan. It should be available through your local SBA lenders by the end of next week. Of course, here at BCS, we’re working with a national lender to make the application easy for you. We should have something finalized early next week. You’ll be able to see it at www.earn.com.

Should I do this?

This loan isn’t for everyone. It’s not aimed at new start-ups, but if you have an existing business and can prove your business is viable, it’s a good option to stay afloat in a tough time.

Joel Blakley
Director of Operations
www.earn.com

If you thought filing the paperwork to form a corporation or LLC was all that was required to maintain the benefits of the entity, you were wrong. There are several things required to maintain the corporate veil and benefits of a corporation or LLC structure.

Every state has a requirement that you maintain specific documents for your corporation each year. In every state there has been case law that shows owners of businesses, who failed to maintain these corporate records and had their personal assets at risk because the corporation was deemed invalid.

I often hear, “I thought a corporation was there to protect my personal life no matter what.” Well, sorry to those dreamers who feel this way. Remember, there is no such thing as a free lunch.

If you are going to form a corporation and want the protections and tax savings the corporation provides, you must do something in order to maintain those privileges. As in any relationship—marriage, children, friends, employees—you have to work at keeping the relationship strong. It doesn’t just happen automatically because you get married or have a child.

With a corporation, three key areas that you need to maintain are:

• Annual meeting minutes of the shareholders
• Stock ledger and stock certificates issued with shares to each shareholder
• Resolutions that track the activities of the corporation

Most business owners understand the need for these items, but aren’t sure how to track them or put them together. There is a great software program I recommend to track all of this for you called the BizDoc Software. The program tracks each of these areas for you and much more. www.businessdoc.com

It is also helpful for business owners to understand the various terms associated with the corporation and LLC. The following is a list of some of the key terms.

State Statutes – Laws developed by each state that govern how a corporation or LLC can operate in their state. Articles of Incorporation – The document that is filed with the Secretary of State in order to form the corporation. It indicates the name of the company, number of shares, etc. Articles of Organization – This is the LLC equivalent to Articles of Incorporation.

Bylaws – The bylaws in most states do not need to be filed with the Secretary of State. The bylaws are the corporation’s requirements for running the business. It says what officers there will be, how they are elected, when meetings will be held and how voting of the shareholders will take place, to name just a few of the items. Operating

Agreement – This is the LLC equivalent to Bylaws. Officer List or Member/Manager List/ Annual Report – An annual list of officers filed with the Secretary of State indicating the names of the officers of the company, as well as other information.

Stock Ledger – The stock ledger is where all names of shareholders must be recorded. Each transaction of a stock certificate is written down in this booklet.

Stock Certificates – The Corporation’s paper that represents the number of shares owned by the shareholder written on the Certificate. Certificates of Ownership – The LLC’s paper that represents the percentage of ownership by the members of the company.

Resolution – A resolution is a written document that provides permission for a corporation to perform a specific task. The permission is granted by either the Directors or shareholders depending on the activity.

David Gass - Founder
Business Credit Services, Inc.
www.bcscredit.com

We have received several questions over the years about what is the best structure for my business. There are a couple of things you can do to determine that. Sit down with a tax or legal professional or do some research of your own. I tend to do the research myself. I find that the tax professional gives their slant on which entity I should choose, based only on what’s best from a tax perspective as the attorney has the liability perspective only. If you were to sit down with me, I’d give you the positive and negative to each of the entities from the tax and liability side, but I spend a great deal of my time determining your financing needs now and in the future. So the answer to which is best is really determined by you once you have all the facts from the different perspectives.

To help in getting all the facts here are a few tools. First, is a link to The Company Corporations website where you can fill out a questionnaire and learn what entity other people in your industry are using in your state. This is helpful to understand what the majority of people who are forming S Corporations, C Corporations and LLCs are doing.

Second, I’ve provided an explanation of the three types of entities I tell 99% of small business owners to form either an S, C or LLC.

LIMITED LIABILITY COMPANY
Limited Liability Companies have been around for many years in such countries as South America and Germany, but was first adopted in America in 1977 by Wyoming.

Evidence of LLC legislation in other states around the country did not take place until the IRS made a key ruling on the taxation of this new structure. On September 19, 1998, the IRS issued Revenue Ruling 88-76, stating that LLC’s would be taxed as partnerships even though none of the members (partners) or managers would be personally liable for any of the company’s debt. This ruling encouraged other states to adopt this new vehicle as well. All states have accepted LLCs into their domain as legitimate business structures.

The LLC structure can be used to hold property and transact any type of business. LLC structures are similar to partnerships, limited partnerships and “S” corporations. An LLC by default is taxed as a partnership which make it a flow-through entity. It passes all of the LLC profits and losses directly to the members of the LLC. Individual members are therefore taxed at their personal tax rates. It is possible to elect a different tax status when you file your SS-4 form with the IRS. Speak with a tax professional to determine which is best for you.

LLCs can also be handy tools when exploring joint ventures. For example, let’s say you are enjoying the benefits of controlling your own corporation, and you now want to combine efforts with another individual by forming a joint venture. Taking two corporations that you control and forming an LLC will allow the profits or losses from the joint venture to flow directly into your respective corporations. The taxable entity in this case would be the corporation. This is a simple way to bring two corporate entities together and keep an arm’s length from the business at hand.

CORPORATIONS
Although a corporation is separate and distinct from its stockholders, directors or officers, it is a separate entity that can act only through its members, officers, or agents and cannot have knowledge or belief of any subject independent of the knowledge or belief of its people. A stockholder (owner or partial owner) is a holder of shares of stock in the corporation and is NOT IN LEGAL DANGER for the acts of the corporation. In other words, you, as the owner, are not responsible. A stockholder is not the employer of those working for the corporation nor is he the owner of a corporate property.

A corporation is a citizen in the state wherein it was created and does not cease to be a citizen of its state of domicile by engaging in business or acquiring property in another state. Since corporations are solely creatures of Statute, their powers are derived from the constitution and laws of the state in which it is incorporated. As an artificial person, a corporation is considered to have its domicile in the state where it is incorporated and the place where it has a statutory presence. When the corporation functions in a different state, the site of its designated resident or registered agent is sometimes called its “statutory domicile”.

The existence of the corporation is not affected by the death or bankruptcy of a shareholder, officer, or director. It has a continuous existence as long as it complies with the statutory requirements of the state where it is incorporated.

For the purposes of raising capital and building credit for a small to medium sized business, corporations provide the best chances for gaining approval and are recommended by the authors of this book. A corporation is a separate legal entity from the owners and officers of the business. It files a SS-4 form with the Internal Revenue Service to obtain a tax identification number that will be used to create a separate credit profile for the business.

Corporations are the oldest business entity in the United States and have the most case history. Credit card companies have designed credit cards just for corporations. Venture capitalists and banks will spend more time with the owner of corporation then that of a sole proprietorship. Corporations are taken more seriously in business. Some companies will not hire another business unless it is incorporated.

There are several types of corporations, but the two that are most commonly used are the “S” and “C”. To decide which of the two is best for your situation consult a tax professional.

David Gass -Founder
Business Credit Services, Inc.
www.bcscredit.com

There are so many changes with the credit markets these days it’s tough to keep up. As a small business owner, it’s important to keep updated on the highlights so you know where you can turn to when you need capital. At Business Credit Services we strive to stay abreast of the latest developments and pick out the highlights to keep our readers informed.

In our latest blog post we have a few updates about some credit issuers and the latest credit bill being passed this week in congress, all information that a small business owner should be aware of.

Advanta Corp said late Monday that it is no longer going to issue small business credit cards. Advanata (NASDAQ: ADVNB; ADVNA) of Spring House, PA funds its credit-card receivables by placing them into a trust and selling shares in it to investors who are paid interest on their investment. The rising delinquencies is causing less money to come in from investors and putting a strain on the business. Analysts are not seeing a good outcome for Advanta.

If you have an Advanta small business credit card you may want to call the bank and find out if they will be calling your account payable any time soon. This could be a way for the bank to bring in much needed capital, but cause an even bigger strain on small businesses with balances of their cards.

The NSBA recently completed their 2009 Small Business Credit Card Survey just recently. Some of their findings included:

In December 2008 – 49% of small businesses used credit cards to finance their firms in the last 12 months

In April 2009 – 59% have used credit cards to finance their firms in the last 12 months.

In December 2008 – 69% said they experienced worsening credit card terms in last five years

In April 2009 – the number was 79%, and when asked if their credit card terms had worsened in the last six months 75% reported they had

In April 2009 - 33% of small business had their credit lines reduced, up from 28% in December 2008

In April 2009 – 40% report paying off credit cards at the end of the month down from 50% in Dec. 2008

What does all of this mean?

We know small businesses are having more difficulty getting traditional bank financing. Many of them are turning to credit cards not thinking there are any other choices. The banks are taking advantage of this and raising interest rates and making terms much worse for the business.

Credit Card reform Legislation is going through the House and Senate this week and is expected to be signed by the President by the end of the week.

There are a lot of proposed changes to keep the credit card companies from making dramatic changes to terms, however once again small business credit cards are NOT included in the legislation.

If we are to see a recovery in the economy we need small business to create the jobs. Job creation of small business got us out of the last recession; it could get us out of this recession too, HOWEVER, the lack of financing options will slow this down.

Small businesses need access to capital, financing options and the knowledge of when terms will change in order to manage their finances. We can do everything in our power to change the mindset of politicians, however I choose to take actions that I can control the outcome. Politicians have their own agendas and seem to rarely look at the small business owner’s needs when making decisions. That being said, we (the small business owners) need to keep our options open for alternative financing sources and capital access.

The alternative financing industry is growing rapidly and vendor/trade credit is being used more and more as business owners find decline letters from banks in their mail box each day. The key is to be prepared and in compliance with what these institutions / lenders need so you can get access to the capital.

The Business Credit Builder program offered by BCS has a compliance check that lays out any inconsistencies of the business that will cause a lender to decline a credit application. This is critical to have a check completed on your company and correcting those inconsistencies before applying for the alternative lending.

David Gass
Founder
Business Credit Services, Inc.

By now, you all must have heard about Earn.com. The excitement here is building quickly and every day we are adding more and more to the site. One of my key tasks at Earn.com is to build relationships and strategic partnerships with companies that offer products that will benefit our clients. Most importantly, the product or service they offer has to have a value to our clients that isn’t duplicated anywhere else. It truly has to be an amazing deal for our customers.

Having owned a small business and being a serial entrepreneur, I love this challenge! I took some time to think about what tools would have made me more successful with my businesses.

Over the last couple of months, I’ve met with dozens of companies and I’m boiling the list down by ensuring each of their offerings fill a specific need. I can’t discuss all of them yet, but I can give you a sneak peak at several.

Online Bookkeeping

I don’t know about you, but I’m terrified of the big software suites out there that help keep your accounting in order. They’re expensive and quite complicated. I wanted to find a solution that will allow our clients to do their accounting online. It had to be easy to use and allow double entry.

After a lot of research, I believe we’ve found a great solution. We found a product that allows small business owners to manage their books online, build quotes, manage inventory and allow access from mobile devices. It works great and is easy to use. There’s no huge out of pocket expense to get it started and there’s nothing to install on your computer. We will start rolling this out on Earn.com next month. Best of all, every Earn.com member will get full use of this tool for FREE. That’s right, no charge. That’s a thank you for becoming an Earn.com member. Look for a demonstration of this tool in May via our regular Earn.com webinars.

Business Goal Tracking

Earn.com is partnering with a software company to provide an online tool that will allow our clients to set financial and operational goals for their business, then track and update them as they go. This is more than simply a template; it’s a full interactive experience that allows the business owner and staff to see where they are in the trek to obtain their goals. Also, when it comes time for a company meeting, you can use this system to print out agendas that focus on obtaining your corporate goals. We’re very excited about this. We will be doing a demo in an Earn.com webinar in May. There will be a small cost to use this, but it will be minimal compared to the success it will help you maintain.

Access to Small Business Administration Microloans

We have been quiet about this because it’s a huge deal and we didn’t want to jinx it! We are nearing completion of our agreement with a SBA lender that provides SBA backed microloans. They are 100% online and guarantee fast approvals and closing. A microloan is from $5000-$25,000. We will have the application process up on Earn.com in May.

There’s lots more coming!

We’re currently working with companies that provide online business plan support, CRM systems, collections, lending, online marketing, and a ton of other areas. I really could use your feedback. Please use the feedback link on Earn.com and send me ideas for tools and products you’d like to see. That will send me a direct email and I will start to chase down a solution for you.
The staff at Earn.com truly appreciates each and every client. You are a part of something special here and we will continue to work tirelessly to ensure Earn.com is your trusted partner as you grow your business. You can help us by telling your friends and business associates about us and helping us spread the word!

Looking forward to our shared success,
Joel Blakley
www.earn.com

According to a Wells Fargo/Gallup poll here is how a large group of entrepreneurs answered the question, “How much did you use to start your business?”

21% - $1,000 or less
14% - $1,001 - $5,000
10% - $5,001 - $10,000
21% - $10,001 - $50,000
10% - $50,001 or more

24% - Did not know or refused to answer

If you are looking to start a business and don’t have a lot of money don’t think you have to start with hundreds of thousands of dollars. You can see that the majority of the entrepreneurs surveyed have started and survived with less than $50,000.

So the real question is “What is the minimum I HAVE to have to get started?”

To answer this you need to sit down and outline a realistic budget of how much money all start-up costs will take and what fixed expenses you will have each month until revenues starts coming in.

Lots of new business owners are so focused on the actual start-up, with what color the walls of the office will be, what furniture they’ll buy, what top of the line server they can get, what the new brochure and website will look like – all without ever looking at how the first dollar of income will be generated.

My response to these business owners is to focus on income and then look at how you will support that income. In the start-up phase make sure you focus your attention on where the revenue will come from and what marketing will cost to generate the sales, then look at what is needed to support that. In most cases you can start with smaller offices, work out of home, and having simple computer and office equipment. Look to outsource larger tasks such as printing, graphic design and even bookkeeping.

As you grow the business and are generating a profit then you can focus on bringing the outsourced areas back into the company for more control.

David Gass - Founder
Business Credit Services, Inc.
www.bcscredit.com

“Men are not prisoners of fate, but only prisoners of their own minds.” – Franklin D. Roosevelt

To begin, let me ask you some revealing questions. As a business owner, can you walk away from your business today for one or two months and come back to find it operating smoothly and profitably? Can you even escape for two weeks? Have you ever had a work-free vacation? If your answers are “no”, you don’t have a successful business, you have a glorified job in which you are trapped! You don’t have an effective business system; you are the business system! In a large sense, you are a prisoner of your own success.

No matter what industry you are in, you should not be a prisoner to your business! If you are, you have it backwards. Your business should serve you and your dreams. It should give you greater freedom, not less. In fact, your business, properly designed, should function practically without you, not because of you. It should run predictably and automatically whether you are in the office or not, in the store or not, out in the field or not, on vacation or not. Your business should not depend upon your presence, personality, problem solving and perspiration for its daily survival. If so, your business does not work, you do!

Bottom line, you should run your business; it should not run you, your family or your life. Your business should work harder so you don’t have to. It should be systems-dependent and not owner-dependent or expert-dependent for its success. It should have its own heart, mind, and soul – it should not steal your vital organs and spirit!

Stop for a moment and think of the consequences. If everything in your business flows through you and is dependent upon you, then you are restricting dramatically the growth and profits of your company. As a single human being, there are natural limits to the amount of work, transactions, problems, and decisions that can flow effectively through you in a given day. Stop being a bottleneck or clog. Otherwise, you will continue to restrict the potential of your employees and business and ensure your persistent exhaustion. Stop missing out on greater personal freedom, money and happiness.

If you would like to achieve greater freedom, fulfillment and financial returns from your business, visit www.earn.com. Earn.com is our new community for entrepreneurs and we are registering the first 1,000 members at no cost to you. You get free access for 30 days for providing us feedback on how to improve the community. After 30 days it’s only $24.95 per month to continue.

David Gass - Founder
Business Credit Services, Inc.
www.bcscredit.com

The number of small business owners who say their companies turned a profit in 2008 was 49%, according to a recent article published in Fortune Small Business. So this got me thinking, why only 49%.

Some entrepreneurs say they make sure the company doesn’t make a profit for tax purposes, or they take all the money as income and perks and never leave a profit, or some other scheme they’ve developed in order to lower profitability.

Of course entrepreneurs are going to do what they can to lower their tax liability, yet expensing everything just to lower profitability defeats the purpose of making a profit. A very successful entrepreneur once told me, “It’s not what you make it’s what you save”. So why spend all the profit just to save on taxes.

More importantly, a company losing money or breaking even every year is going to have a very difficult time finding financing. Lenders would rather work with companies making a profit for obvious reasons. It’s the same scenario when you don’t pay yourself very little wages from the business and then try to get a mortgage or other financing personally. Yes, you may have saved some in taxes, but you have also hurt your ability to get the financing you need.

When looking at a business you need to view the business as a shareholder from four different perspectives. The first is tax liability, the second asset protection/legal, third financing needs and fourth profitability of the business/financials.

Spend at least two solid days once a year to review your company’s strategic plan and take time to review these areas; tax, legal, financing and profit. Having a clear understanding how these areas need to work together will help the growth of your business. The problem most entrepreneurs have is they feel very comfortable with one advisor they have; their CPA or Lawyer and rely solely on what that person says. The problem is that that professional typically only views their clients business from their professional perspective, tax or legal and not at the other key areas.

So when building your team be sure you have individuals looking at all perspectives and keep in mind the advantages of showing a profit may outweigh the disadvantages of paying more in taxes.

David Gass - Founder
Busines Credit Services, Inc.
www.bcscredit.com