Small Business Capital

Don't You Love the Ivory Tower...

Todd Taskey — Wed, 06 Feb 2008 16:25:16 PST

Maureen Farrell is a staff writer at Forbes.com and I think I can tell from her recent article that she is an academic who never had to make payroll or struggle for capital. The tone of her article paints anyone who has taken a merchant cash advance as stupid or foolish. Are there really that many stupid small business owners out there?

Most business owners seem to be pleased to have the opportunity to make a choice between "expensive" capital and none at all. Without this type of financing, who would provide the money to grow thousands of small business...the bank? The mortgage industry? Forbes? (Which I love by the way).

What surprises me is that Forbes knows how the free markets work. Capital flows in because of demand and because these funding companies can make a profit to justify their risk without regulation created by beaurocrats to protect business owners from themselves. If there is a great demand for merchant cash advance, it is because there is a great need not being met.

She also makes it seem like this is a product newly popular because of the recent credit crunch. In fact the industry was been around for 10 years now and provided over $500 million of financing to small business owners of all credit profiles in 2007.

I am also a small business owner and collectively we are the largest employer in the Unites States. We have a long history of being the back bone of American business and the engine of creativity. I am surprised Ms. Farrell and Forbes would not give us credit for having the ability to make intelligent business decisions about capital and the growth of our businesses.

Credit Crunch Survival Guide

Todd Taskey — Wed, 06 Feb 2008 16:26:29 PST

5 Steps to Side-Step a Crunch in Your Business

You’ve been reading about the credit crunch as it affects on the biggest banks and the lower credit home owners in the country for the past several months. This week you’ve been reading about stock market turmoil and the fear of a “global recession”.

This economic storm has worsened recently and in the next 30-45 days you’ll begin to feel the effects in your business in one (or more) of the following ways.

· Slower paying customers

· Reduced consumer demand

· Disappearing personal and business credit

· More conservative business spending

· Better buying opportunities

Counter to press reports, recession is not necessarily bad. In fact, it is a normal and regular economic cycle. A slowing economy does, however, seem to finish off weaker businesses and it will weaken even good businesses.

If you resolve to survive the next one or two economic quarters of “slowing economic growth” then you should consider the following steps to protect your business now and position it for a stronger post-recession future.

1) Take steps now, regardless of current need, to arrange for additional capital. Increase credit lines, get approved for additional credit cards, establish credit with vendors, and pre-qualify for merchant cash advance. Whatever the source, take steps now, before your capital needs increase or your credit standing decreases.

2) Confirm existing credit terms and amounts. Citi Bank recently announced that it is “re-underwriting” existing credit it already has extended to both business and consumer borrowers. Many Citi Bank clients will discover they do not have the credit amount they thought they had.

3) Merchant Cash Advance has been a working capital source for thousands of business owners over the past several years and will now have a great opportunity to move out from the shadows as an excellent financial tool for small business owners. Understand this marketplace and be a wise consumer. (Free report).

4) Whenever possible, have customers pay in advance or on credit card. If you do not accept cards, apply to accept Visa and MasterCard now. You’ll be surprised how many business customers will use credit cards and how much accepting them improves your cash flow.

5) Take advantage of renewed buying power. In slower economic times, buying opportunities are more available. If you’ve arranged credit, keep an eye out and ask about better terms and prices if you are able to buy more aggressively.

Recession is a normal economic cycle and this one may last for several months. A recession will likely eliminate some of your competition and leave you financially stronger with greater opportunities in the future.

Crunch Arrives - Problems will Worsen

Todd Taskey — Wed, 06 Feb 2008 16:27:23 PST

If you'll review past blog titles, you'll see I've anticipated the current credit crunch since last summer, giving readers and clients ample time to prepare for a credit crunch that will almost certainly worsen before it becomes better.

The 1/22/06 Wall Street Journal had 46 related articles to the "credit crunch" including a great one that discussed why funding will get much harder for smaller companies (here).

Many of the biggest small business lenders are reeling with multi billion dollar sub prime mortgage losses and are reducing their lending activities. Citi recently announced they will increase rates on consumer credit and reduce lending limits on already committed and underwritten loans.

Fed Chairman Bernanke's .75% emergency rate cut yesterday clearly helped calm the stock markets, and should help with liquidity. However, we are not out of the woods. In fact, I suspect we're still in the middle of the forest.

As alternatives for business financing vanish, merchant cash advance has a wonderful opportunity to fill a void vacated by traditional lenders. From early evidence, that is exactly what is happening.

While some funding companies have had their credit reduced, the industry's largest and most stable companies are adding additional lending capacity in anticipation of growing demand.

As suggested last summer, smart business owners will take the time NOW to become approved for reserve capital that can be accessed quickly in the event emergencies arise or current credit lines are reduced or eliminated.

Your Personal "Credit Crunch" - 2008's Biggest Obstacle

Todd Taskey — Tue, 15 Jan 2008 06:20:11 PST

The results of a recent survey of small-business owners found that the number one barrier keeping them from meeting their financial goals in 2008 is lack of access to working capital small businesses indicated that their own "credit crunch" outweighs all other business obstacles they will face in 2008 including taxes, staffing, seasonality and energy costs.

For the past year, news headlines have cried out that the U.S. is in a full-blown "credit-crunch." While the impacts of the crisis vary from industry to industry, the common factor is that access to lines of credit and traditional financing is increasingly difficult to obtain, credit and capital are getting more expensive when they are obtainable, and consumers are feeling the pinch as banks tighten approval requirements. Small businesses, which are also consumers of credit, are no exception.

As a result, we has seen a significant increase in business volumes particularly with “alternative funding providers” that offer capital to small and mid-size business owners with personal credit scores as low as 525.

As the industry matures, new funding alternatives have come to the market place at the end of 2007 that offer greater funding options for small business owners who have been able to keep their credit score above 600.

As awareness of alternative funding continues to grow in the business community and options expand, we anticipate more business owners will continue to seek professional, objective guidance about the best financing programs to meet their needs.

“Trickle Down” Anticipated, $3 Million Allocated

Todd Taskey — Mon, 22 Oct 2007 05:26:01 PDT

At $27 billion, the bond market is not only larger, but arguably more important to most small business owners than the more popular stock market. It is the bond market that allows banks to package and sell mortgages, car loans, credit card debt and business loans to investors, allowing them to replenish their balance sheet and make new loans.

The bond market has allowed banks to maintain a strong capital position as they try to manage the sub prime mess. New capital has allowed them to keep lending when in the past they would have turned off the spigot. (Read more - WSJ)

Nationwide, commercial and industrial lending, the critical loans that fund plant expansion, share buybacks and the growth of American small business has jumped significantly over the past 2 years.

The problem, and in my opinion the beginning of the “trickle”, is that many banks have been forced to take on loans and support credit lines they never expected or intended to make. Banks made enormous commitments to companies, hedge funds and private equity firms as they fund share buybacks, acquisitions and take over public companies at a record pace in 2007.

Problem is, banks would have normally sold these commitments to investors through the bond market. However, the buyers have disappeared and the big banks are now holding these loans, taking up valuable room on their balance sheets. Lehman Brothers estimates there is currently $150 billion in buyout loans that still need to be sold by banks and there is the risk of billions more that will go unwanted in the coming months.

Real estate lending has taken the biggest and most visible hit thus far, but we have significant concerns that tightening will extend to the business market and could trickle down to effect small business owners within months.

We continue to work closely with our funding sources, have capacity for $3 million of business funding for the remainder of 2007 and DO NOT anticipate any impact on our capacity or underwriting requirements through Q1 of 2008

Your 20th Anniversary

Todd Taskey — Tue, 16 Oct 2007 08:25:27 PDT

Do you Remember October of 1987, “Black Monday” and the market drop of 23% in a single day? That would equate to a 3,200 point drop today.

There are many important lessons learned from that day which you can read in detail at Breakingviews.com. The question back then is the same question currently raised from the “credit crisis”: Will this financial crisis turn into an economic crisis.

Financial crises do not have to become economic crises. To date, this crisis is contained. The amount of loans that could default is not significant enough to push the economy into a recession or threaten the financial system. A benefit of globalization is that the debt is widely spread among investors and institutions around the globe. If the situation does get worse, the Federal Reserve and other central banks have a number of tools available to deal with the problem.

As you keep your eye on the economy, there are three factors to watch for that will indicate it this is the beginning of an economic crisis.

1) The first factor is short-term interest rates. If treasury rates stay low or decline further, investors are not reversing the flight to quality. If short-term treasury rates climb to where they were before the crisis, investors are more optimistic and markets are returning to normal.

2) The second factor is the commercial paper markets, especially the asset-backed securities market. This is where short-term loans are made to companies and sold to investors. Asset-backed loans are secured by specific corporate assets. In coming months, I hope to see that companies are able to issue new commercial paper at reasonable interest rates.

3) The third factor is the dollar. Watch the dollar to see if foreign investors and governments sharply reduce loans to and investments in the U.S. If they lose faith in the potential for good returns in the U.S. or lose confidence in our investment vehicles, the dollar will decline further and sharply.

I believe the credit crisis is overblown and have not seen any impact on our ability to help clients obtain the financing they need to continue to grow their businesses. I do not expect that to change, but will be watching these factors closely.

The Threat of Regulation

Todd Taskey — Tue, 02 Oct 2007 06:33:04 PDT

The merchant cash advance industry continues to evolve into a rapidly growing industry since the product was originally introduced almost twenty years ago. Today, there are estimated to be over twenty merchant cash advance providers although the “big six” dominate the industry. There are also dozens and dozens agents, card processors and sales people offering the merchant cash advance product through various cash advance providers.

As more and more people are selling this product, capital is becoming a more reliable and available funding source to businesses nationwide that may not have access to traditional lending sources. Because a merchant cash advance is typically not a loan, (it's a sale of future credit card receivables) it allows funding companies an alternative underwriting method to provide working capital to merchants that would not qualify for financing with traditional underwriting formulas.

It is estimated in 2007 alone that $600 million - $700 million worth of merchant cash advances will be provided to help grow tens of thousands of businesses nationwide. With that said, the marketplace has become extremely competitive.

Whenever an industry experiences rapid growth, there are some almost predictable consequences.

1 – Some merchants will be abused by “bad brokers”

2 – Capital will become more competitively priced

3 – The industry will become regulated or will self regulate

Regulation is by far the largest threat. Not to the funding companies, but to the merchants and those business owners needing capital quickly and effectively. If the industry grows too large or if there are significant complaints, the temptation to regulate will likely become too great and I suspect the end result will restrict how this industry can serve the needs of its clients.

It will be interesting to see how this develops over the next two to three years. In the short term, however, merchants today can serve themselves best by using one of the reputable funding companies and working with an independent, professional broker who will help them through the growing and complex network of companies to find the capital that fits them best.

The card advance industry is serving an important niche in American small business and I hope it can survive in its current form.

The Problem of Complexity

Todd Taskey — Wed, 29 Aug 2007 05:32:26 PDT

Last spring Harvard University's most famous dropout, Bill Gates of Microsoft, delivered the commencement address. A theme of the address, according to The Wall Street Journal, was complexity. An inspiration for Gates was a comment from Warren Buffett that complexity keeps people from understanding problems and how to solve them, and that prevents change and improvement.

Another of Gates' inspirations was his experience with his charitable foundation. Once he decided to seek solutions for global poverty and disease, he discussed the issues with friends and associates. He found that while many people wanted to help, the complexity prevented most from understanding the causes and how they could help solve the problems.

I see the same pattern every day as business owners struggle with all the complexity of their current business environment and then, with little time, try to tackle the complex and constantly changing world of small business finance.

How do you get capital? What do you really need to do regarding your business credit? What about a lease? What about a line of credit? What about credit card advance?

Not only is their plenty of complexity and confusion untangling this mess, it changes constantly. And now, with the credit world upside down, leadership and direction is critically important.

It is even more difficult and expensive to venture into this world without contacts, experience and a clear direction of what you want to accomplish.

As the most successful Harvard dropout encourages: “Don't let complexity stop you. Be activists. Take on the big inequities. It will be one of the great experiences of your lives.”

If becoming a small business financing “activist” does not excite you, hiring one in today’s world will undoubtedly save you hundreds if not thousands of dollars in financing costs.

Credit Crunch Coming???

Todd Taskey — Tue, 14 Aug 2007 05:07:44 PDT

The credit crunch is on its way. It has already begun in the mortgage world and will likely spread to other areas of the economy which many worry will effect the stock market and potentially drag the US economy into recession.

The Fed can have some impact on this ripple effect and is being watched closely for indication of how they will handle this potential threat to the economy. However, there will likely be an impact to your ability to get credit and access capital.

While away last week I came across a very good article in the Wall Street Journal (read here). It outlines the potential problems on the horizon for small companies looking for capital and gives some solid ideas on how best to prepare for a credit crunch.

As always, advance planning is the best approach and our CARE Program outlines several steps to position you for more and better capital.

Read this article and take the steps now to prepare for future credit needs now.

A $499 Gift from D&B...Sort of.

Todd Taskey — Mon, 23 Jul 2007 04:36:13 PDT

Lets understand a couple important things about Dunn and Bradstreet.

First of all D&B it not THE credit rating agency, they are one of three, and are relied on by vendors and credit card companies for your business credit profile. For a full business credit profile, you'll need to also deal with Experian and Equifax.

You will have a "file" with D&B once you have a "Dunn's number"which is nothing more than a number your company will be identified by, similar to your social security number. This is free and takes about 2 weeks. However, D&B has an expedited service with a charge of $499 . We have had many clients tell us that the phone sales rep has told them they must pay this fee to get "set up" will D&B, which is not true.

Do not be surprised by extremely aggressive sales tactics by D&B.

The first time a potential creditor asks for a credit profile on your company, D&B will need to compile a credit profile on your company or they will have nothing to sell their customer. At that time they will contact you to build your credit profile.

As you can see, there is no need to pay for the expedited services, should a creditor need a profile about your company, D&B will pull on together at that time. Use the $499 more effectively in your business.

While a strong credit profile is very important, it is important to have one at all 3 agencies and it is unnecessary to pay for this expedited service with D&B.

A $499 Gift from D&B

Todd Taskey — Mon, 23 Jul 2007 04:35:00 PDT

Every Little Thing...In One Place

Todd Taskey — Tue, 10 Jul 2007 05:10:36 PDT

Have you ever gone into a place of business and all the little things were done correctly? You could tell it was a special place, because of the little things. Those little things make the ordinary a little bit extra-ordinary.

We often tend overlook those little items in our own business, which is why an outside observer or industry expert can be so helpful.

If you are a restaurant owner, many of those little secrets I found on this brilliant blog, it is worth a visit...

Have a great July!

Do You Want to be a "Low 5?

Todd Taskey — Tue, 10 Jul 2007 05:11:37 PDT

Your business entity must have a minimum of one bank reference. It would be great if your business bank account was at least two years old, but more importantly to place your business in a good lending position it should have an average daily balance of at least $10,000 for the last three months. This is called the magic "low 5" rating.

Your business banking reflects how you manage your cash flow. Lenders want to know that your cash flow is capable of handling the business debt and expenses on a consistent basis. Accounts that show NSF returned checks can be deal breakers!

If a funding request amount requires a $2,000 a month payment, lenders will want to see at least a "Low 5" bank rating. Your "Bank Rating" is based on your average daily minimum balance over the last 3 months.

Here is how "Bank Rating" works. It is based on your average daily balance over the past three (3) months, so your rating would be:

Low 4 for $1,000 - $3,999
Mid 4 for $4,000 - $6,999
High 4 for $7,000 - $9,999
Low 5 for $10,000 - $39,999
Mid 5 for $40,000 - $69,999
High 5 for $70,000 - $99,999
Low 6 for $100,000 - $399,999… etc.,

I hope you see the pattern here.Having the $7,000 balance gets you rated at a "High 4". But having $10,000 gets you a rating of a "Low 5" and that really changes things. Not having it will not stop the process of building a favorable business credit rating, but it can slow it down. If you don't have the $10,000, consider borrowing it from family or friends. Remember, you are not going to use it, it will sit in the account so you never go below that important level. Just let it act as your base line in the business account so that your balance never drops below that amount.

The NY Fed has some very good, detailed information on the credit process for small business loans.

Remember, make sure that your business bank account is reported exactly as your legal business entity name and at the same physical address as your business, not a Mail or P.O. Box.

For more detailed information on why this is critical and how it fits into your master plan of intelligent business funding, request your free copy of our CARE Report.

5-3-1 The Secret Combination to Business Capital

Todd Taskey — Wed, 04 Jul 2007 09:04:55 PDT

With a business entity, you need to demonstrate to the business-lending world that you are worthy of business capital (plenty of it) at good rates. The secret combination to unlocking this type of capital is 5,3,1.

Your business will need to have 5 trade references, 3 credit rating files (one at each agency) and 1 bank reference. Lets take a very quick look at each and why they are important to your business.

5 Trade References

If your trade references do not report to the credit agencies, you do not have trade references. There are over 500,000 vendors who will extend credit, but only 6,000 automatically report to the agencies. Obviously, you need to work with some of these vendors.

Does this mean you need to change your most important vendor because they do not report? No. However, I’m willing to bet you do not care who you buy your office supplies from, correct? Now that you have established that account, do not pay it on time, pay it early. Automatically, you’ll improve your business credit score over time because they are reporting you as an early payer. Get the picture?

3 Business Credit Agencies

You need to have an account with each agency, D&B, Experian and Equifax. Equifax reports are developed only from information provided by your trade references, business credit card accounts and leasing companies. Equifax is developed from information provided by your business credit card accounts and leasing companies. (Hopefully you are getting the idea that a real business credit card is an important business capital tool).

D&B is trickier because they have a very aggressive and relentless sales force. With that said, you need to deal with them, but you also need to know HOW to deal with them. I would not suggest you call D&B until you have read Point #10 in our CARE Report – twice! Get it HERE.

1 Bank Reference

Banks are very tricky, but a “low 5” bank rating will help you more than you can know as you build your credit. The CARE Report shows you why and a neat little trick to have you looking great to potential lenders relatively quickly.

I keep referencing the CARE Report because it goes into much more detail that this Blog allows. There are almost 20 pages of strait forward information on how to turn your business credit into a completive advantage for your company. It is a great business tool and one we’re proud to make available to you at no cost - request a copy here.

How to Really "CARE" about Business Capital

Todd Taskey — Sun, 24 Jun 2007 16:37:46 PDT

One of the most common financing mistake I see business owners make it simply not knowing how to set up their business to maximize their business credit rating – and improve their funding. They never establish a business credit score separate from their personal score, and without the proper foundation you are doomed from the start.

So, step one is very simple, create a corporate entity separate from your personal identity. Once accomplished, you have a legal entity separate from yourself. Lets understand what it will take to get you the maximum funding in the shortest amount of time and at the best possible rates.

While others may try to convince you it is possible in a few weeks or a couple of months, it is not. Sorry to burst your bubble, but that little reality could save you $500 - $2500 in bogus credit service fees. If someone promises you great credit, unlimited capital or anything else that seems “too good to be true”, rest assured it is.

Your business sense is probably a pretty good guide here. Don’t let your desperation for capital cause you to make a poor business decision. Building credit is a process. We can guide you through this process, but there is no magic wand that will give you great credit and access to bunches of capital instantly – sorry.

Keep in mind that access to well priced capital will be critical for your business. It will either be a chronic problem or a competitive advantage for you so you should begin the process of stronger business credit right now.

There are 11 key steps to building your credit and you should know what they are and how they will affect your business as you apply for financing. You can learn about all of them in our report: Capital Access and Rate Enhancement. It is a must read and we’ll email you a copy if you’ll click HERE and request CARE report in the subject line.

As you’ll learn in the report, you’ll need A) 1 bank reference (the report will show you a little trick worth it’s weight in gold), B) 5 trade referenced that report directly to the credit agencies and C) a credit file at all three rating agencies, D&B, Experian and Equifax.

Some out there will try to sell you on the idea that all you really need is a D&B number and a Paydex score. That may be true if you only aspire to “trade credit”. However, to get favorable lease terms and bank lending, D&B alone will not cut it.

While this sounds like a lot of information it’s covered in complete detail in our CARE report, which you can request HERE.

What Ancient Rome can Teach You About Funding Your Company

Todd Taskey — Mon, 18 Jun 2007 09:15:35 PDT

I am currently reading a wonderful book titled The Birth of Plenty by William Bernstein which describes the historical economic progression of many different societies from ancient Rome to our own today.

According to Bernstein, before any economy can truly develop and reward its citizens, it must have Property Rights, Scientific Rationalism, Efficient Communication & Transportation and accessible Capital Markets. The availability of capital is a critical component for companies to grow, create products and employ its citizens.

It is a fascinating exercise to see how the combination of these four requirements has allowed other economies to flourish and to witness its impact on our own. However, when I take a hard look at how many of these four requirements are readily available to our clients, it is the last one, access to capital, that many seem to need more of.

It is not the fault of government policy, economic development or market maturity that is the cause of the problem, however. The blame lies squarely with our client, the business owner. Not out of specific intent, but rather ignorance of how to properly position themselves, or better said, their company, to have access to the capital they require.

While we are able to help well over 75% of our clients get most or all of the funding they require. Most business owners often accept a financing amount lower than they would hope for and at potentially higher rates that if they were better prepared with a stronger business credit profile.

Although thrilled to have even some capital, almost every client we work with would benefit significantly from a better understanding of how to position their company in advance of their capital need in order to maximize their funding amount and improve their financing rate as well.

My next six Blog entries will cover the following areas required for you to maximize your access to capital and enhance your potential financing rate.

1 - Proper business structure for maximizing capital
2 – Strategic use of your credit profile components
3 – Secrets to your bank relationship, the keep to great credit
4 – Financing you can maximize now
5 – Creating trade accounts to automatically build your credit
6 – Business credit accounts, the key to cheaper capital

I believe we can help change the landscape of small business financing and make more capital available to more business owners at better rates than exist today. My new executive summary: Capital Access & Rate Enhancement: How to Position your Company for Maximum Funding in Minimum Time, will be an important first step in this direction.

If you do not want to wait for the next several blogs or want more detail than these postings will offer, click here and my office will email your copy today.

How to Ruin Your Personal Credit with One Signature – or Two or Three….

Todd Taskey — Wed, 20 Jun 2007 05:38:06 PDT

You know credit is an important part of any business, but it is critically important for the small business owner. It seems like almost every day I talk to a business owner who “had great credit before the business started.” Sound familiar?

There are two common mistakes I see business owners make that will quickly deteriorate your personal credit rating.

1 - No separate business entity

Most business owners have taken the steps to create a legal entity (S-corp, C-corp, LLC) and establish a federal tax ID number (not EIN number). However, most do not maximize the advantage of this separate entity when they seek business financing.

This happens either because you do not believe you can or do not know how to establish credit in the name of your company. While there is a lot to know about business credit agencies, vendor reporting, business lending banks and the rest, it is fairly simple to create a great credit score one you understand how the system works.

Without a separate business entity, however, you have no option but to personally obligate yourself for the debts of your business by signing for every loan or credit personally. Think of the “business credit card” you have. While it may have the company name on it, you are personally obligated for the charges you make because you used your social security number and signed personally when you applied.

If you apply with your company name and use the company tax ID number where the social security number goes, you have established credit that is in the name of your company only. There are only 40 business credit card companies (out of 500) that will offer their credit card with no social security number requirement.

2 - Signing personally

This happens as a result of point #1. Without a separate entity and strong credit to assign lending risk to, most business owners have no choice but to sign personally for most or all of the credit they need to grow their business.

This causes 1) Sleepless nights with growing debt you are personally responsible for 2) Quickly exhausting your personal credit limits which will negatively impact your personal credit score 3) Personal responsibility for the debts of your business.

When you reflect on your current credit strategy, there is almost nothing positive about personally signing for business credit. At the root of this problem is the fact that most business owners are so busy working IN their business they allow very little time to work ON their business.

Because of this, we have created the Capital Access & Rate Enhancement Program™ which is a trademarked process that can help any business owner position their company to have access to credit that is in the name of their company only. It can also allow you to gradually shift the debts you now personally guaranteeing to the company.

Access to capital and strong business credit will either be a constant problem or a competitive business advantage; with our unique process, the choice is yours.

I'll provide updates here as this program develops.

When Paying "More" is Better for Your Business

Todd Taskey — Wed, 20 Jun 2007 05:41:42 PDT

We provide money to small business owners for many different reasons. While the purpose of funding needs differ, one similarity is a desire for “low cost money”. As a self proclaimed “cheap skate”, this seems like a logical starting point, but I have considered this position over the years and my thoughts have developed.

The objective of “low cost money” is not to pay more than necessary and that is where we should begin our analysis. The comparison point for most is whatever the bank charges for money, usually prime plus two or three points. For reasons we will discuss, this is not a logical barometer at all.

When we look at a traditional bank, their primary responsibility is to accept minimal risk when making a loan (to protect their shareholders). They do this by saying “NO” to most business loans and when they actually do make a loan, they require personal loan guarantees, over 100% collateral and income/debt ratios that are not practical for most business owners.

Why? Because they work on such narrow margins, they can never afford to make a mistake and therefore shift 100% of the risk in their business loan to you, the borrower – business owner. In their environment, they can only make safe, secure loans because they are not paid enough to accept more risk.

By creating an open marketplace with multiple small business funding companies, we often create an environment where you, the business owner, decides which form of business funding is best and what cost is appropriate for your business.

A couple months ago a client with below average personal credit needed funding to purchase another truck for his business, and he wanted the loan to be in the name of his company, without any personal guarantee (we do this all the time).

His initial Paydex Score was not above 75 as many of our lenders require, but one lender was willing to fund his truck at prime plus ten. We almost did not present the offer to him because we were confident we could help him raise his Paydex Score and get an offer (or two) at prime plus three or four.

“Waiting will cost me too much money - I need the truck and I need it tomorrow” was his reply. His response helped me realize that business owners are more qualified to determine the best price for their funding, not me and certainly not a bank.

Another client in Arizona needed funding to purchase two full containers of tires from China. He spent months locating every bank in town that would not loan him money before he found us. His only other alternative was a “business friend” who would provide the funds in exchange for 20% equity in his company! While his investors wanted a part of his company, our funding company just wanted “more” money (as compared to a bank).

An auto dealer in Colorado agreed our money was much less expensive that giving 33% of his profits on every auto carrier to a “friendly investor”. A restaurant owner in Ohio accepted funding to expand her banquet facilities and their sales boomed. Our money ultimately cost them less than 15% of new profits over six months.

A florist in California used our funding to bridge a slow period rather than permanently lose a campus location where he was two months behind his rent. Spending “more” in the short term was more appealing than losing 40% of his sales over the long term.

These examples and the dozens of others each month confirm that YOU, the business owner, are the best judge of the appropriate cost of funds. In most situations, cost is not the key; access to capital is the key. Given that, a smart business owner who knows their business well is the most qualified to determine how well priced the money is. Not by the cost of funds, but by the opportunity it creates for future growth and profits.

Small Business Alert

Todd Taskey — Tue, 24 Apr 2007 04:36:02 PDT

There are plenty of legimate business worries for most of us without low life scam artists trying to take advantage. Unfortunately, they are out there so a periodic update of things to keep your eye on may help save you a few bucks and a bunch of aggravation.

IRS Warns of New Tax Scam
Scam artists are trying to lure taxpayers into disclosing sensitive information on a site falsely claiming to be a member of the "Free File Alliance." The Alliance is a partnership between the IRS and 19 tax-software companies that offer free online federal tax-preparation services and electronic filing to about 95 million taxpayers.
The IRS says the only way to access the genuine Free File program is through its Web site.

BBB Concerned Over Loan Scams
It has been going on for years, but the BBB is trying to raise awareness of a scam that victimizes business owners regularly for up to several thousand dollars. Fortunately there are several warning signals that can tip you off to this type of scam. Get more details on the BBB web site.

Phony Invoice Scam
The loan scam preys on people desperation and dreams; this one focuses on busy and inattentive business owners. Seems like every year I get a phone Yellow Pages invoice and I spoke with a client last week who got a fake invoices for toilet paper.
If you have a bookkeeper or assistant paying your bills you’re more likely to make this mistake. Its been going on for years, probably because someone still finds it safe and profitable to be a criminal this way. Full story here.

Sometimes the best way to make money is to avoid giving it away…

Small Business Loan - Not Without a Good Paydex Score

Todd Taskey — Wed, 20 Jun 2007 05:47:16 PDT

If you have refinanced your home or have shopped for a loan, you are probably familiar with your FICO or Beacon score. This score represents your personal credit worthiness and a good score will save you thousands in interest costs while a poor score will have the opposite effect - if you can get credit at all.

In the world of business credit, your business (assuming you are incorporated) must have a credit score before it can get any significant credit without your personal guarantee.

If you have aspirations of growing your business, you will need access to capital and it is critical that capital is in the name of your company. If you are required to personally guarantee a “business loan” see it for what it is – a personal loan based on your personal credit with your personal guarantee of repayment.

This will eventually exhaust your ability for personally credit, sink your credit score, cause sleeplessness, and most importantly keep you personally responsible for the debts of your business. Under these conditions, it is very difficult to build and grow a successful business.

Most of the business owners I talk with do not know there are techniques that will allow them to build credit in the name of their business, nor do they know that personal and business credit never intersect. Poor personal credit will not have an impact on true business credit. Our CARE Program report (Request copy here) will describe this in detail.

This is where your Paydex score comes in. Dunn & Bradstreet is the rating company most widely accepted from vendors who will extend credit. You'll also need a credit file at Experian and Equifax. Much like your FICO or Beacon score, your business credit files will determine your ability to get a business loan, working capital or a line of credit without personal guarantee.

If you visit the D&B website, you will find a lot of information that is not particularly well organized. You can go at it alone and find the appropriate paperwork, complete it properly, avoid an aggressive sales staff and their big up sell, and avoid the two or three mistakes that will cause D&B to simply close your file without issuing a Paydex number. If you are successful, you will have a Paydex number but will still need to figure out how to convert that score into working capital or a business loan to grow your business.

The world of business credit is much different than that of personal credit and is open to the influence of someone who knows how to work within the system. Access to capital can be a significant competitive advantage for your business and a qualified consultant with connections to small business lending companies and alternative funding companies should make you more effective with less time, effort and frustration on your part.

For more insight on how the world of small business lending works, request your CARE report today.

Business Loan? Not Without These 2 Steps...

Todd Taskey — Wed, 20 Jun 2007 05:51:15 PDT

Protecting your personal assets from business creditors, litigants and lawyers is critically important in today’s world. Yet, many business owners are so busy with daily operations they leave themselves exposed to financial disaster because they do not take a couple simple steps to provide protection.

The fact that you are busy will seem like a stupid excuse once you are involved in a lawsuit that threatens your lively hood as well as your retirement. Here are two steps you can accomplish this week.

1) Incorporate properly

Your attorney or CPA can provide advice about weather to be a “C” corporation, “S” corporation, LLC or some other corporate status, but the important point is to establish some type of entity (other than yourself) that can assume the risks of your business.

If you have not taken this step, do so quickly. If you have, make sure your corporation is in good standing with your state. Did you register properly? Have you made annual filings that may be required? Have you conduced annual shareholder meetings and are you keeping corporate minutes?

To have an entity other that yourself, you have to prove the entity has complied with these minimal requirements in order to provide the protection you expect from your company. If you have not or you are not sure, move it to the top of your “to-do” list. There are several companies that do a fine job of this right online

2) Your tax ID number

Many business owners under utilize their tax id number because they suspect it is only necessary for their tax filings. In reality, it is a great tool to establish credit in the name of your company only.

The next time you fill out a credit card application of any kind, put your tax id number where you typically put your social security number. This, then, will cause your company (not you personally) to be approved or denied credit.

Visit your local Staples, Office Depot or Sam’s Club and request a credit application. Use your tax ID number and you’ve just established your first bit of credit entirely in the name of your company.

While this may be a small first step, it is an important step to establishing credit in the name of your company. With proper care and effort, your business credit can grow in size and strength. This will be critical when you look for bigger funding to fuel your future growth.

Protect Your Personal Financial Life From Your Business

Todd Taskey — Tue, 20 Mar 2007 06:31:42 PDT

In the spring of 2004 Valeri begin her restaurant venture with optimism and dreams of financial success creating a location that would welcome regulars and visitors alike. A modern bistro that would give her professional fulfillment and local notoriety. By the fall of 2006, her optimism had faded to dread as the bank foreclosed on her home, which she used as collateral on her small business loan.

Valeri’s mistake was not in following her passion; in fact many will say her life is richer for the experience. Her financial life, however, is far less rich as she needlessly exposed her personal financial life to destruction by providing a personal guarantee when signing for her business loans. In the end, this was her biggest mistake.

Most business owners rush into their ventures and needlessly expose their personal assets and financial future to potential disaster should their business ever fail. Continually signing for leases, business credit lines, inventory financing or working capital may provide and immediate cash infusion but will causes the following.

1 – Sleepless nights.

Capital is required to grow almost any business, and for owners not content with slow growth funded by company cash flows, outside financing is required. Though personal guarantees may be required on initial business loans, continually financing your business by providing personal guarantees will cause stress beyond which many can recover.

2 – Personal credit squeeze.

Regardless of how quickly your business grows or how strong your cash flow, at some point you will maximize your personal credit capabilities. The result will be a rapid and steep drop of your personal credit scores as you loose the ability to obtain a competitive mortgage or even gets competitive rates when you buy your next car. Eventually, you will be unable to provide additional funding for your company.

3 – Personal exposure.

Most dangerous result of providing a personal guarantee on your business financing - you never escape the personal responsibility to your lenders. This exposure jeopardizes your personal financial future!

There are options. There are steps almost any business owner can take to get additional funding for their business in the name of their company in a way that does not require a personal guarantee. There are even effective strategies that will allow you to transfer existing debts in a way to escape a personal guarantee.

This funding shifts more risk to your lending company and has the potential to raise lending rates, but as Valeri and countless business owners can attest, it is insurance money well spent.

My next 3 blogs will be in fairly rapid succession as we look at the necessary steps to arrange your business affairs in a manner that does not jeopardize your personal financial future.

“I Quit”… From Your Own Company?

Todd Taskey — Tue, 20 Mar 2007 07:01:48 PDT

Do you allow your company to push you around and take advantage of you? I’m not talking about long hours without proper compensation, that is part of the deal when you run your own company. I’m talking about when your company shifts unnecessary financial risks and legal exposure to you simply because the company has not taken the time to protect you personally.

Last week a small retail merchant told me his company would not spend $600 to begin the process of shifting company debt from his name to the company name. Another merchant in Kentucky who has a successful transportation business is not incorporated because his company would not spend the time and money to do so, therefore he is completely exposed personally to a number of legal threats. A small food service chain owner actually signed a personal guarantee for over $350,000 of expansion capital because the company would not pay a slightly higher rate on the borrowed money.

My advice to each of these owners is very simple: Quit!

The irony in each of these situations is that the owner is the decision maker and he/she decided to put themselves in a dangerous personal situation simply because they would not spend some of the company’s money to protect themselves personally.

Would you work for a company that would not pay a couple thousand dollars more in financing costs to keep you from personally guaranteeing a loan to fund company growth? How would you feel if your boss asked you to be personally, legally accountable for the actions of the company and its employees because they would not spend the money properly organize and incorporate the business?

What if one day you were asked to assume the debts of your employer because they wanted to save $600 in legal fees?

While these sound like ridiculous questions, these are the default decisions many business owners are making every day. Take a look in the mirror and see where and how you are personally exposed in an effort to save your company a few bucks. We see it every day.

The most successful owners I deal with have the ability to distinguish between the company and themselves, in other words they see themselves as executives within the company rather than as an extension of the company. If you will make this mental adjustment, I’m convinced you will make better strategic decisions and eliminate much of the risk of business ownership.

I know life is going 100 mph but if you are exposed or if you are not sure, email and request our white paper on the top areas of business exposure. It may save your business life.

Is Mom Right About Business Credit Also???

Todd Taskey — Sun, 24 Jun 2007 16:44:03 PDT

My mother always told her children, “To much of anything is not good for you”. My favorite retorts were always, “what about clean oxygen” or “drinking pure water”?

Well, last month a contestant in a radio station promotion died from drinking too much water to quickly. As it turns out, my mom was correct about a lot of things.

I bring this up because having access to unlimited business capital initially seems to fall into the category of “more is better”. However, the way you are probably going about it can be lethal to your business.

Most business owners personally signed for all of the business loans and credit they have for their business. Their personal guarantee causes two significant problems. First, it will eventually squeeze you financially - both personally and professionally. We’ve had clients unable to refinance their home because of their personal guarantees on business debt. Excessive personal debt, even if it is for your business, will drive down your credit score making capital almost impossible to obtain and expensive if you can.

Secondly, and more importantly, with your personal guarantee, you loose the power to walk away from any business failure. You have given your business to potentially devastate your personal financial life on top of everything else.

What ‘s the solution? You need to develop a long-term plan to build, develop and enhance your business standing and borrowing ability. Business credit, just like your relationships and reputation takes a while to build. It is not an overnight process, but the long-term benefit to your company will be well worth the effort.

Where to start? Visit Dunn & Bradstreet, the company that provides business credit reports and a lot more as you will see. After you visit their site, and are frustrated by too much poorly organized information, send me an email and I’ll forward our report on building strong business credit.

It’s not glossy, sexy or exciting stuff, but if you want an easy, turn key, step-by-step guide to positioning your business to have access to working capital, equipment leasing, credit lines or other forms of business capital, it is a must read.

We’re putting finishing touches on our updated version now, and will be happy to forward you a copy as soon as it is complete. Send an email request and we'll get a new copy to you as soon as it is ready.

Expensive Business Handcuffs

Todd Taskey — Wed, 31 Jan 2007 04:55:14 PST

Every week we help a couple dozen business owners get the working capital they need to grow and expand their business. From the evidence sited in earlier blogs, I’m convinced this is a great business environment and the only limiting factor for many business owners is your access to working capital.

You probably already realize that your access to business capital will be either a significant asset or major liability to you as you grow your company. Your access to capital will have a major impact on your future growth and your business credit (not personal) is your key to unlocking that capital.

There is a record amount of business capital available today, yet many business owners can’t access it because they are handcuffed by poor or non-existent business credit. For many, the only way to fund growth is to provide a personally guarantee for the funds they need. Any prudent businessperson will self impose limits on this type of “business funding” when they recognize it is nothing more that pouring your personal funds into your company.

We use several different funding sources to help clients get the business capital they need to fund future growth, and many of them do not require a personal guarantee or any collateral. With all these options, however, I constantly see business owners handcuffed by poor personal credit, the lack of any real business credit or other mistakes that could have been avoided with some minimal advance planning.

The solutions are relatively simple and yet the problems they cause most business owners are so expensive, we’ve decided to extend our expertise a bit further to provide some real solutions that you’ll see here over the next several months. For now, here is tip #1: Don’t waste $1 with online “credit repair” or “credit building”.

My unscientific study has proved to me that 95% of the credit products found on the Internet are pure crap. Many will charge $2,000, $2,500 or more to do little and then disappear with your money. Recognizing this and needing solutions that will allow us the opportunity to do better work for our clients, we are actively researching for a workable solution that provides real results at a fair price.

Our resolution for 2007 is to be an even more effective financial partner. As we continue to provide effective business funding, we also want to extend our expertise further down the line so the process of obtaining capital is easier, cheaper and quicker for our clients. The key to this will be strong business credit.

Stay tuned…