2008 October « Nevada State Corporate Network, Inc.

How Personal Credit Affects Your Life

The stock market is rebounding. The government is investing approximately 200 billion dollars into nine of the country’s largest banks. We may soon see positive changes in the personal credit market. This is great news; however, now we must consider what it means to have and maintain good personal credit.

We buy everything from homes, to cars, to computers on credit. Good personal credit allows for a better life style, no doubt. Poor personal credit can stop you from doing many things such as buying that new home, car, or computer. What some people do not know is that poor personal credit can also affect your ability to receive competitive insurance rates as well as your ability to secure a job.

Many employers will run a credit check before offering you a job. The logic being that by looking at your debt to income ratio or delinquent payments they can judge the likelihood of theft or embezzlement. While this may or may not be a rational course of action, it is being prevalently used.

What does this mean to you? It means that keeping your personal credit up-to-date and pristine is more important than ever before. What I frequently see are business owners who have started their businesses using their own personal credit. The heavy debt that is placed upon the business owner can be extremely difficult to manage.

Along with the management of that newly acquired debt, business owners must consider how they are going to pay these new bills: What if the business does not do as well as expected the first year? What if I have to find a new job? What about any unexpected personal expenses? All of these questions and more need to be addressed when you are using your personal credit to build a business.

The best solution to all of these questions is to not use your personal credit at all. Separate your business from your personal life and build credit on the business, itself. Using business credit to build your business will preserve your personal credit, all the while making use of the largest lending source in the world.

A New Dawn: The Heyday of The Small Bank

October 9, 2008 at 10:49 am | In Business Credit | Leave a Comment
Tags: banks, Business Credit, fasttrackcredit, llc

When the head of Berkshire Hathaway, Warren Buffett, has stated that “the U.S. Economy is ‘flat on the floor’ after a cardiac arrest (http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches-100208.aspx), it makes even the most optimistic types such as myself wonder about our perhaps inappropriately upbeat position. The world economy is now at stake.

Despite all of this, I see several rays of sunshine. I still see new stores opening. I still see the clients in our business credit program obtaining new trade lines and lines of credit. Most importantly, I still see many smaller, regional banks offering generous offers of credit.

For many years I have instructed our clients to cultivate relationships with small local banks. When I first begin working with a business owner I am often asked if I have a preference as to what bank they open their business checking account with. I tell them that I have excellent referrals if they are looking for them, but I then ask: Do you currently have a good relationship with a bank? If, indeed, they do, I urge them to maintain that. In fact, as a business owner building business credit, a strong relationship with a bank is one of the most valuable tools that they have.

It is true that right now many large banks are facing heavy financial woes; even large banks that are strong and sound are still tightening up the requirements on the money that is lent, that includes the credit cards that are offered and approved. It is difficult than ever to make a splash with one of these large banks.

Again, I must fall back on the argument that small banks are better for small to midsized businesses building credit. Here is an example to consider:

John Smith owns ABC, LLC which operates a restaurant on Main St. in a small town that is on the way to a large and popular ski resort. John successfully builds the credit of ABC, LLC with the assistance of a business credit firm such as ours. He is able to improve his menu and the interior of the restaurant using the independent lines of credit that have been established for the business. At the beginning of all of this, John opened a business checking account with Small Town Bank. Small Town Bank has ten branches all in the same state. John has a good relationship with the Officers at his local branch. He continually puts money into the bank. Lately, due to the improved credit of his business and increased profits he is carrying a mid-five figure balance.

One day the owner of the building where John’s restaurant is located comes to him and says “John, I have had this building for nearly forty years. I am thinking of selling it and moving up to the mountains. You have been a great tenant. You always pay your rent on time and take great care of the space. I would like to give you first crack at it”.

To make a long story short, John goes to Small Town Bank’s local branch and is able to secure the financing for the building. Of course, some of this has to do with the fact that the building is a tangible asset and is priced near its current market value, but the more important fact here is that Small Town Bank knows John and his business. They are doing what they always have done, they are lending to their depositing pool.

Had the business owner in this story went over to the Big National Bank across town he very well may still be paying rent to a new owner. The reason: The growth of his business and the bank balances probably would not have made a blip on the radar. In addition, he would have had to go through a mountain of time wasting paperwork. In the meantime, another buyer could come in and buy out the investment from right underneath his feet. This would place the tenant in a precarious position. Not only did he lose out on a great business investment, the business, itself, could be in jeopardy if the new owner decides not renew the lease.

I urge all small to mid-sized business owners to consider the benefits of forming an ongoing relationship with a local or regional bank in their area. These banks take notice of you and your business. You do not need to carry six or seven figure balances in order to have your needs catered to. When it comes time for expansion, these lenders are your best friends. Small banks remain a constant a ray of sunshine for us all.

Ian D. Tenen

Director of Business Credit

Business Credit Solutions, Inc.

info@fasttrackcredit.com

The Art of Compliance

October 6, 2008 at 1:37 pm | In Uncategorized | Leave a Comment
Tags: Business Credit, credit for business

The first step a business owner must take in order to establish business credit is to incorporate their business. After their business has been set up as a separate legal entity, the next step is to bring that entity into a compliant status. There are several steps involved in this one particular step. Our business credit coaches will cover this in detail with you. The purpose of this article is not to outline each individual point of compliance; rather its purpose is to illustrate the importance of this step in the process of building business credit.

Many people come to us, anxious to begin the process of building business credit; however, many people think that just having an entity in place makes them eligible to start opening up trade and vendor lines of credit and building business credit. Unfortunately, this is not the case. Every business, whether brand new or 10 years old must go through a compliance check by a business credit coach in order to successfully build business credit.

I have found that the most helpful thing to do in order to illustrate the importance of compliance is to ask our clients to place themselves in the position of the lender. If you were extending credit or lending money to ABC, LLC what kinds of things would you expect the business to have in place? Obviously, you want to feel comfortable before lending money to this business. Each client that we speak with will have various items that they will list in response to this question. Well, in response to same question, the lenders and credit bureaus have gotten together to create their own set of standards.

Some things are obvious, for instance having your legal business entity current with the Secretary of State’s office. There are many other things that are not so obvious. It takes a trained expert like the professional business credit coaches in our FastTrackCredit program to assist clients in the finer points of compliance.

It seems extreme, but having even one thing out of place, can ruin your chances of building credit for your business. This is known as being “red-flagged”. Red flagging is something done by the business credit bureaus such as Dun & Bradstreet. When a business is red flagged it means that it is permanently disqualified from building business credit. Not only will the present business be disqualified, any other business you are associated with can also be red flagged.

The process of building business credit is something that should be exciting, but it is also something that requires caution. Lenders and creditors have approximately 2,000 points of criteria that must be met before extending credit to a business. In order to build business credit properly and not have any red flag issues, we must begin with a strong, solid foundation. Please contact us today so that we can assist you in successfully building A Plus credit for your business

The Lending Oasis: Where has all the Money Gone?

October 1, 2008 at 11:28 am | In Business Credit | Leave a Comment
Tags: Business Credit, corporate credit, establish business credit

“Where were you when the stock market dropped 778 points in one day?” This will probably be one of those questions that are asked of us years from now by future generations. One of the questions we will still be trying answer ourselves is: Why? Why did congress not pass the bill that would bail out the nation’s financial institutions? Why did all this happen?

The effects of this are far reaching. There is no way to sugar coat it. What we need to think about right now is how we survive. “Don’t panic” is certainly sage advice and I agree. People understand this advice, but are they are seeing their options for credit drop like flies.

In an effort to not see people wander in the proverbial desert searching for the oasis, I have chosen to write this article. Larger banks have certainly been using the word “no” a lot lately. CNN recent published an article title Credit Crunch Hits Small Businesses that states “Around 65% of domestic banks say they have tightened their lending standards for commercial and industrial loans to small firms over the past three months, according to the July 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices.” These are daunting statistics.

My usual rebuttal to statements such as is this is: Consumer banks are not dealing with small to medium sized businesses, they are dealing with everyday consumers and those are the standards that they are using to judge people and their businesses; they do not make any delineation between the two. I stand by this argument more than ever.

The same article goes on to site Bill Dunkelberg who is not only the chairman of a small New Jersey based bank by the name of Liberty Bell Bank, but is also the chief economist for the National Federation of Independent Businesses. He states that small banks who are dealing with small business are doing fine.

Dunkelberg’s reason that the small banks are fairing better is that they are lending to the same people who are making the deposits. Essentially they are lending to, and investing in their depositing pool. They do not have a large network to support. They do not need to be involved in the riskier Wall Street investments.

I have often recommended to clients in our business credit program that they ought to form a relationship with a small local bank. Smaller banks will take more notice of you than a larger bank; especially banks that you have dealt with for a substantial amount of time. If you have shown a history of consistent deposits that will go a long way with that bank when you want borrow money.

Herein lays our answer: Build the credit of your business. Business credit is separate from your personal credit. This is not to say that having great personal credit cannot help build your business credit; however, having an independent method to help your business flourish amid these uncertain times is something that business owners cannot ignore.

There are several advantages to the business credit system and as consumer credit tightens its regulations you can be sure that there will be even more. Corporate credit is governed by a system completely separate from the FICO system which regulates consumer credit. Things like debt to income ration do not even enter into the equation. That is why you can build separate credit for your business.

Also remember that business credit is still the largest lending source in the world. What a great system! In some cases it even allows you to use other people’s money with no interest. Instead of having to pay a bill for this or that wholesale item immediately, you have time. You can use this time to allow yourself to meet payroll expenses, turn a profit, and expand your business.

Businesses that have successfully built their credit are reaping the benefits. These businesses have opened trade lines with office suppliers, computer companies, etc. They have gone on to purchase vehicles under the business. Most importantly, they have been able to secure financing for their business. This financing has not only ensured their stability but has allowed these businesses to grow solid and strong.

Ian D. Tenen
Director of Business Credit
Business Credit Solutions, Inc.
Toll Free: 1-800-910-9919 x240
Fax: 702-838-5130 Attn: Ian

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