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Deciphering Small Business Credit Reports

Small Business Credit Reports And How They Work

A business credit score is a mathematical model that is used to depict a business’s risk of defaulting on an account within the next 12 months. 

Business credit scores reflect the likelihood that a customer will pay the merchant back as agreed. Merchants use business credit scores to help them make decisions as to who to lend money to and at what interest rate and terms.

Business credit scores are very different from personal credit scores, for many reasons. Firstly, a business credit score reflects the business’s likelihood of defaulting on an obligation, not the business owner’s personal likelihood.  Most business owners have their own consumer credit scores established. Their business also has its own score, based on how the business obligations are being paid.

Consumer and business credit scores also differ in their fundamental makeup.  Consumer credit scores outline a consumer’s risk of going 90 days late on an obligation within the next 24 months.  Business credit scores reflect the business’s risk of going 90 days late on an obligation within the next 12 months.  

Consumer credit scores range from 350-850, with 850 being the best. Credit scores of 800 and above are considered excellent credit. Scores of 700 and above are typically considered good credit while scores of 600 reflect average credit.  Consumer credit scores of 500 reflect below average credit and scores of 400 or less reflect poor credit.

Consumer scores have five main components.  Each of these components carries a different percentage of the overall credit score makeup.  The largest aspect of the score relates to payment history, which accounts for 35% of the overall credit score.

With consumer credit scoring, the consumer’s available credit or their use of their accounts is the second largest score factor, affecting 30% of the overall score.  The length of time the credit file has been open for accounts for 15% of the overall score. The credit mix and the amount of new credit that the consumer is applying for each account for 10% of the overall consumer credit score.

Business credit scores typically range from 0-100, with 100 being the best.   Business credit scores are based on one factor only: whether or not the business pays its obligations on time.  The business’s score directly reflects how that business pays.  

There are three main agencies offering business credit profiles and scores. These agencies all have their own unique credit scoring formula.  Despite their differences, most of their score ranges remain between 0-100. The three reporting agencies who are best known for offering business credit risk scores are the previously discussed Dun & Bradstreet, Business Experian, and Equifax Small Business.  

Dun & Bradstreet

The main credit score used in the business world is known as a Paydex score, provided by Dun and Bradstreet.  The exact definition from Dunn& Bradstreet (D&B) is: “The D&B PAYDEX® Score is D&B’s unique dollar-weighted numerical indicator of how a firm paid its bills over the past year, based on trade experiences reported to D&B by various vendors”.

The Paydex score ranges from 0-100, with 100 being the best score a business can obtain.  A score of 80 or higher is considered “good” or healthy credit. A business can obtain a good business Paydex credit score by ensuring payments are made promptly to suppliers and vendors. 

D&B also offers a predictive credit score, the Supplier Evaluation Risk Rating (SER). This rating predicts the likelihood that a company will file for bankruptcy and cease operations within the next 12 months.  This score ranges from 1-9, with 1 being the lowest risk and 9 being the highest.

D&B’s other supplier risk score is the Supplier Stability Indicator (SSI).  This model predicts the likelihood that a supplier will encounter a large and significant financial or operational stress over the next 90 days.  This score ranges from 0-10 with 0 being the lowest risk and 10 the highest.    

Every business must first have a D.U.N.S number before Dun & Bradstreet will assign a Paydex score.  The Data Universal Numbering System (DUNS) is a business identifier code provided by Dun and Bradstreet.  This business identifier code was developed in 1963 to support Dun and Bradstreet’s credit reporting practices.  

Today the DUNS number is widely used to identify businesses lending for issuing new credit. It is also used by the European Commission, United Nations, and the United States government.  More than 50 global, industry, and trade associations recognize, recommend, or require DUNS. The DUNS database now contains over 100 million entries for businesses throughout the world.

The DUNS number is a nine-digit number issued by Dun & Bradstreet and assigned to each business location in the D&B database, each having a unique, separate, and distinct operation for the purpose.  The DUNS number is a randomly assigned number used to identify the business.  

Unlike national Employment Identification Number (EIN), a DUNS number may be issued to any business worldwide. Certain U.S. government agencies require that a vendor have a DUNS number as well as a U.S. Employer Identification Number (EIN). 

The Office of Management and Budget, a United States federal agency, announced in the June 27, 2003 issue of the Federal Register (68 FR 38402) that a DUNS number would be required for all grant applicants for new or renewal awards submitted on or after October 1, 2003. 

The DUNS number supplements other identifiers, such as the EIN, and is required whether the application is made electronically or on paper.  Other agencies, such as some United Nations offices and Australian government agencies, require certain businesses to have a DUNS number. A DUNS number is also a way in which separate corporate entities, having no official relationship, can be branded as one by sharing a single DUNS number among the affiliated companies.

A DUNS number is sometimes formatted with embedded dashes to promote readability, such as 15-048-3782. Modern usage typically omits dashes and shows the number in the form 150483782. The dashes are not part of D&B’s official definition of the DUNS number.

Numerous other business numbering systems exist independent of DUNS—for example, the International Suppliers Network system. However, few, if any, register as many international businesses as DUNS.  Today the Dun and Bradstreet’s unique DUNS number is the most widely used worldwide method of identifying businesses.

Dun & Bradstreet credit reports provide access to the Paydex score and a great deal of other valuable information.  The business’s name, address, and phone number are on each report, along with the business’s history, including incorporation date, shares of business owners, and even information on directors, including resume details. D&B also lists any affiliations with that business and other businesses, other branches, even subsidiaries.  

D&B reports also include financial information such as known sales for the company and net worth (if known).  They list the financial condition of the company, their own rating, the DUNS number, and a breakdown of what the Paydex score represents along with the actual score.

Dun & Bradstreet further lists in their reports details on payments the business has made for each individual account, including their full payment record, their upper-credit limit, how much they currently owe on each account, how much is past due, what the terms of the account are, and when the account was reported and last updated.

Extra information S&B provides includes detailed financial information for the business.  This information might include current assets, liabilities, working capital, net worth, sales, new profit and loss, and more.  D&B will even detail the actual assets and liabilities if these are known. Also included in D&B reports are public record information, including judgments, bankruptcies, other public filings, other liens, UCC filings, and government activity for that business. 

D&B reports also list payment details for each account. They also add detailed commentary to the report indicating payment patterns.  The term “Antic” indicates that payments are typically received prior to date of invoice (Anticipated). The term “Disc” means payments are received within the trade discount period (Discount). The term “Ppt” indicates that payments are received within terms granted (Prompt).  “Slow” confirms that payments are beyond vendor’s terms and are being paid late. The term “Ppt-Slow” indicates that some invoices are paid within terms, while others are paid beyond terms. The symbol (#) indicates that no manner of payment was provided.  And some accounts even provide payment commentary such as “credit refused” or “cash advance”.

One of the most important sections of the D&B Business Credit Report is the payment summary section. There are two scores in this section that are critical to the report and can separate a good report from a bad one. While the two scores – the PAYDEX score and the PAYDEX score key – are related, they deal with separate issues that the business owner needs to know and understand.

The PAYDEX score is a statistical measure of your business creditworthiness, basically the business’s ability to pay its debts, very similar to a person’s personal creditworthiness. A PAYDEX score of 80 is similar to that of a 700 personal FICO credit score. 

A business will need a PAYDEX score of 80 to obtain the most favorable financing. This score simply reflects the business pay all bills on time. To obtain a PAYDEX score, a business will need at least five trade accounts reporting to their file.  The business credit score itself is calculated by using as many as 875 payments. 

It is important for a business owner to have those accounts report favorable payment history. If bills are paid on time, the business credit score will be positive.  But if payments are made late, the PAYDEX business credit score will drop. The PAYDEX score will adjust according to how early or late the bills are paid, if bills are paid, then that business can achieve a score that is over 80.   

How timely bills are paid (the main indicator of the PAYDEX score) is a good indicator to lenders of how likely that business is to pay its bills at an agreed-upon date in the future. Lenders look at this score carefully when deciding whether to give a business a loan or not.

Another important aspect of the Paydex system of which most business owners are aware is a Paydex “weighted average” score. This score gives more weight to the trade accounts that report higher amounts of credit extended and less weight to trade accounts that are reporting lower dollar amounts of credit.

This leads to a great tip.  If a business owner is having any trouble “meeting all their credit payback obligations”, in other words if they know they are going to have to pay a bill late, it is important for that business to be sure to pay the “largest dollar” creditors first. This way, their reporting, which carries more weight in the business Paydex score, will remain positive.

If this scenario does come about, it is always best for the business owner to contact those creditors they can’t pay and let them know that they are not being ignored.  

The business owner should let the creditor know that they have hit a snag and will make it up to them as soon as possible, preferably even giving a date for payment.  From a creditor’s point of view, the only thing worse than not being paid what’s owed to you is not even being told that you’re not being paid what’s owed to you.

Business Experian

Experian’s business credit scoring model is designed for companies that provide goods and services to small businesses.  Experian’s business model has many names but is best known as Intelliscore. This model is the second most commonly used in the business world today and is growing rapidly in popularity.

Experian’s most recent score system is known as Intelliscore Plus, which they boast of as the next level in credit scoring. This method was released in 2008.  Intelliscore Plus takes into account hundreds of variables to offer a business score between 0-100, with 100 being the highest.  

The 0-100 is a percentile score that reflects the percentage of businesses that score higher or lower than the specific business being looked at. For example, if the business has a score of 20, this means that company scores better than 19% of other businesses.  That also means that 80% of other businesses score higher than that business.  

Intelliscore Plus is advertised as a highly predictive score that provides a very detailed and accurate reflection of a business’s risk.  Intelliscore actually predicts a business’s risk of going seriously delinquent, or over 91 days late, or having a major financial issue such as bankruptcy within the next 12 months.   

Intelliscore is already being widely used.  Many of the largest financial institutions worldwide use it, along with over half of the top 25 P&C insurers and most major telecommunications and utility firms.  Industry leaders in transportation, manufacturing, and technology have also been known to use Intelliscore as their primary risk indicating model.

In performance tests it has been found that 74% of accounts found to be risky were also in the lower 20% of the credit score range.  

This means that Intelliscore’s lowest credit scores did indeed account for almost 2/3 of the accounts that actually were risky.

Intelliscore now even has indicators that allow for different scoring depending on the business size.  The new Intelliscore Plus has over 800 aggregates or factors that affect the credit scores. Scores are assessed on the more than 7.2 million businesses in Experian’s database.  And with Intelliscore, Plus Experian is using technology such as their BizSource and TrueSearch for increased data depth and better matching of business records.

Experian first takes a business and looks at data segments such as firmographics, public records, collections, and trade information, then places each business in one of three different models.  The first is their Commercial Model, for small, medium, and larger businesses. Second is their Blended/ Owner Model, where the commercial data is then linked with the owner’s information. Thirdly there is the Intelliscore Plus, or their percentile score.  In segmenting business records this way, Experian can use more specific scoring for each individual business.

Intelliscore Plus, just like FICO, has multiple facets to the entire score makeup.  The score is still based on the payment history of the business, but many other factors tie into percentages of the overall score.  The Historical Behavior or payment history accounts for 5-10% of the total score. Current payment status, trade balances, and percent of accounts delinquent account for 50-60% of the score makeup.

The business’ credit utilization affects 10-15% of the total score.  This has to do with the amount of credit that has been extended to the business in relation to the balances they currently have on those accounts.  The company profile, age of business, industry risk, and size of business assessed by number of employees accounts for 5-10% of the total score. And 10-15% of the total score is determined based on the derogatory items, collections, liens, judgments, and bankruptcies that business has.

When Experian is assigning a business a credit score they take many factors into account.  They refer to these factors as predictive data and use this data to better determine a business’s lending risk. Multiple factors affect the score, including average balances on accounts, how recent are the delinquencies, what number and what percent of accounts are current versus delinquent, the percent of balances seriously delinquent, the overall utilization ratio, and any balances on leases.

Firmographics is what Experian refers to as the background information of a business.  This factor considers the risks inherent in the business’ specific industry and how many employees the business employs.  Firmographics also takes into account the length of time the business has been reporting to Experian. They have found that a business with a longer-standing Experian credit file is typically less at risk of defaulting.  Inquiries are also considered with Firmographics.

Experian also provides consumer credit reports. They provide options for reports that reflect information about the business and the business owner called “blended” reports.  They promote this as an added business, as studies have shown that consumer reports don’t offer the most comprehensive assessment of risk on their own.  

With blended reports Experian considers both factors from the business and from the consumer credit of the owner or personal guarantor.  Factors taken into account are the number of accounts recently delinquent, number of derogatory payment accounts, number of accounts with 90% utilization, number of bankcards with 100% or more utilization, number of inquiries, and real estate inquiries.  

Experian credit reports offer many details along with their scores, including business credit summaries and key facts about the business.  Each report also provides business contact information, corporate registration details, and uniform commercial code filing data. Details relating to the business payment history are also included in the reports, including summaries of collections and payments, bankruptcy, judgment, and tax filings, even banking, insurance and leasing information.

Equifax Small Business

Equifax’s main business credit scoring model is the Credit Risk Score.  This score was created to enhance risk assessment throughout the account life cycle by predicting the probability of a new or existing small business customer becoming seriously delinquent on supplier accounts, or bankrupt, within a 12-month period.

Credit scores range from 1-100, with a lower score indicating a higher risk of serious delinquency.  The score predicts the likelihood of a business incurring a 90-days severe delinquency or charge-off over the next 12 months.

With Equifax, scores of 90 and above express that obligations are being paid as agreed.  Scores from 80-89 indicate payments are being made 1-30 days overdue, while scores of 60-79 represent payments being paid 31-60 days past the agreed-upon due date. Credit scores ranging from 40-59 indicate payments being made 61-90 days overdue, while scores between 20-39 mean obligations are being paid 91-120 days overdue and scores between 1-19 mean obligations are being paid 120+ days past the due date.

Equifax also provides a business credit score for suppliers known as the Small Business Credit Risk Score for Suppliers.  This model is designed to help credit grantors improve their risk assessment and reduce delinquency rates while helping to improve profitability.  The score utilizes unique bank loans, lease information, credit card data, and supplier, Telco and utility credit history, public records and firmographic data from their own Equifax Commercial database.   

The Small Business Credit Risk Score for Suppliers credit scores range from 101-816, with the lower score indicating a higher risk.  If the business had a bankruptcy on file, they would have a 0 score. There are four major factors affecting the score.

These are how many years the business has been in business, whether there is evidence of judgments or liens, the length of time since the oldest financial account was open on the report, and whether the business has a 45% or higher trade utilization ratio.   

Equifax also offers a Business Failure Risk Score with many reports. This Risk Score predicts the likelihood that the business will fail or file for bankruptcy within the next 12-month period.  This model helps identify businesses that pose a greater risk for failure so that suppliers and credit grantors can take appropriate actions.  

The Business Failure Risk Score considers information gathered from supplier trade information, firmographics, and public record information from Equifax’s Commercial database. Business Failure Risk Scores range from 1000-1880, with a lower score indicating a higher risk.  With this Risk Score a 0 indicates the business has filed a bankruptcy. 

There are four reason codes indicating the top factors that affected the score.  Unlike other risk scores, this unique score indicates the likelihood that the business will cease to exist within the next 12 months.    

Equifax provides many details on each business for which it produces credit reports. Each report has a profile of the company with the business name, address, and phone numbers.  Inquiries the business has made into other credit is also displayed, along with the business’s credit score. Each report also lists the Risk Score and key factors affecting that score.

On the reports you can obtain for your own business Equifax provides a payment index explaining the credit score breakdown.  There are even graphs that track your current utilization and the number of days you paid beyond the given terms.

Public records information is displayed, along with a credit report summary section including information on the number of accounts, how long credit has been active, number of charge-offs, total past due, most severe status within the last 24 months on any accounts, the single highest credit extended, the total current credit exposure, and the median and average open balances on accounts.

Equifax reports also show any recent credit activity for the business, financial information such as information on business cards, loans, and other credit extended by financial institutions.  The reports also show the amount of credit usage and reflect any trending that Equifax has identified.

Equifax reports provide many details for each financial account listed on the business report.  The account number and current account status is listed. A breakdown of the Equifax report status descriptions is available on the table above.  

Each account also shows the date the account was last reported on and the date it was opened.  It also lists the date the account was closed. All financial accounts listed on Equifax reports show the current credit limit for the account, the balance owed, and a full 24-month payment history is also available.

Equifax also reports details on non-financial accounts.  These details include account number, account type, date reported, and date opened, date or last sale and the payment terms, the high credit and current credit limit, the account balance, past due amount, and aging categories if applicable.  Public record accounts report the registered name, filing date, incorporation date, incorporation state, status, registry number, and contact name and address.

Each Equifax report has an additional information section with alternate company information, including DBA names, addresses, phone numbers, and the parent company if applicable.  In this section they list guarantor information, comments from the business owners or credit grantors, and recent inquiries.  

If you would like to establish business credit for your business or have questions we’d love to speak with you. Schedule a free 30 min consultation with us at wiseguysinties.com/schedule.

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5 Things to Consider When Using Business Credit Cards for Personal Use

Typically, most people will tell you to avoid using Business Credit Cards for Personal use, but who wants to be typical? You can and should use Business Credit Cards for personal use just as long as you take into consideration these 5 things

1. Do Not Comingle Business and Personal funds.

You’ve got to keep ‘em separated. Many business owners make this simple mistake. They use the business credit cards for groceries or the personal credit cards to buy office supplies. Add to the mix that most people don’t keep their receipts and you’ve got a real mess on your hands come tax time. 

My attorney tells me to avoid transferring funds between my business accounts and personal accounts without the appropriate documentation. There are many other steps you can take to avoid comingling your business and personal funds. I recommend that you educate yourself and hire competent legal professionals to help you.

If you ask 10 CPAs if you can use Business Credit Cards for personal use, you’ll likely get answers ranging from ‘No’, ‘Yes’, or ‘It depends’. Well that clears it up. If you’re not educated you are at the mercy of those who are.

You may be asking yourself, ‘I thought you just said that you could use Business Credit Cards for personal use’. Yes, you can, but there is a right way and a wrong way. Comingling funds is the wrong way and it can lead to your creditors piercing your corporate veil (the liability protection a business provides its owner) and coming after everything.. 

2. Understanding The Power of Write-Offs

There are over 400 write-offs in the IRS tax code for business owners. Learn the ones that apply to your business to reduce your Adjusted Gross Income (AGI) and keep more of what you make.

Most people pay their taxes and then spend the remainder of their money on all their bills. Learning how to write-off your cell phone bill before you pay taxes will reduce the amount you owe. There are also write-offs for the gas and maintenance of your vehicle, and even a portion of your mortgage, utilities and groceries can be written off plus so much more.

Here is where you can use your Business Credit Cards to pay for legitimate business expenses for personal use. Take the time to learn about tax and legal strategies related to your business and seek help from competent legal professionals to help you convert as much of your personal expenses into legitimate business write-offs.

I have learned that asking for permission is the same thing as seeking denial. I can’t emphasize enough the importance of educating yourself on tax and legal strategies for your business. That way you can go to your CPA or Tax Attorney and tell then what you legally want them to do instead of letting them tell you what to do.

3. Understand the Difference Between Informal and Formal Lending

Did you know you can legally borrow money from your business but there are risks involved if done the wrong way? There’s a difference between informal and formal lending. That means there is a right and wrong way to borrow money from your business

Informal lending is when you make a loan from your business to yourself without the proper documentation. The IRS could consider this a distribution or dividend and tax you on the amount.

Formal Lending is when your business lends money to yourself but there is documentation such as a promissory note with an interest rate, regular payments as well as collateral (depending on the amount borrowed). The accounting (or books) must also record the loan appropriately.

Business owners who fail to understand the legal ramifications of informal loans can seriously jeopardize their business. If the business has partners or investors and an informal loan was made, then the partners investments are also at risk.

Here is another area where you can use your Business Credit Cards to make a legitimate formal loan for personal use. Imagine if your business extended you a loan or line of credit based off of the equity in your home. You could set up an enforceable promissory note, file a deed of trust with the county, and setup regular payments at a minimum legal interest rate. The best part is that you’d be paying your business back with interest.

It goes without saying that having the appropriate education on formal lending can save you and your business money. I also recommend consulting with competent legal professionals when making legal decisions especially those of a financial nature. 

4. Be Aware of Credit Line Limits and What You Can Afford

Don’t bite off more than you can chew. There are many creative ways to legally use Business Credit Cards for personal use but you must not over extend yourself or your business.

Business Credit Cards come with credit limits anywhere from 10-100 times that of personal consumer credit cards. When you combine that with the fact that Business Credit reporting and utilization do not show up on personal credit reports; it makes it tempting to use or borrow large amounts to consolidate personal debt or make major high-ticket item purchases.

Your business credit score is only affected by on-time payments. If you overextend yourself, you could find it difficult to make your minimum monthly payments. When payments are late or missed, your business credit score will drop. Your creditors may send you to collections. If you’re thinking about having your business file for bankruptcy, think again. If the Business Credit Cards were used for personal expenses or you have an outstanding loan to yourself from your business, the debt could be applied to you personally and you’ll be expected to pay your creditors back every penny plus interest.

Be responsible. Be ethical. Pay back what you owe. If you can’t afford it, then don’t do it. There is no shame in admitting that you need a little help with your finances; especially since they don’t teach this stuff in school. Get educated and seek out help from competent professionals that can help you set and keep a budget.

5. Understand the Impact of Leveraged Credit on Your Credit Score

We’ve already established that when done right you can use your business credit cards for personal use, but how can we use our personal credit to build and grow our business. You can build up your personal credit so that you can give your business a personal guarantee. 

Many business owners leveraged their personal credit to start their business, only later to find that their credit score dropped due to high utilization. Using Business Credit Cards to transfer that debt from your personal credit cards to your business credit cards helps your personal credit score go up by lowering your personal credit utilization.

Many business owners will use this boost in their personal credit score to secure new personal credit cards, a personal line of credit, or a personal loan. This is okay but consider that there may be a better way to use your personal credit.

Personal credit cards compared to Business Credit Cards give you less available credit and when you consider that you should to keep your utilization under 30%. Business Credit Cards also have lower interest rates than personal credit cards. We’ve already established that business credit cards have 10-100 times higher limits than personal cards but even more important is the fact that there is no utilization restriction placed on Business Credit Cards.

Consider a $20,000 personal credit card versus a $20,000 Business Credit Card. If you exceed $6,000 on the personal credit card, it begins to adversely affect your credit score. You could use all $20,000 of the Business Credit Card and as long as you make the minimum monthly payment on-time it will not adversely affect your business or personal credit score.

If your credit score is 680 or better and your utilization is under 30% and if you can show that you have verifiable income. You could give your business a personal guarantee and secure Business Credit cards with limits of $25,000 up to $150,000.

There is a synergy between your business and personal credit that when used together the right way and eliminate your personal debt, improve your personal and business credit scores, and build and grow your business as far as your dreams will carry you. But if you choose the quick and easy path and just ‘wing it’ you could find yourself and your business in a heap of trouble.

Get educated today and work with the right professionals like Wise Guys In Ties and learn about the many ways to use your Business Credit Cards for personal use. For more information contact me today at 888-524-9273 and schedule a 30-minute free consultation.

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Accounts Receivable Financing and Purchase Order for Individuals with Bad Credit

We have gone through 5 different business loans you can use with bad personal credit. Including Revenue-Based Lending, Merchant Cash Advances, 401K financing, and more.

The last 2 types of small business loans that may work for you are Purchase Order and Accounts Receivable Financing.

Accounts Receivable Financing

Most major companies including Fortune 500 companies utilize some form of Accounts Receivable (AR) financing. But you don’t have to be a Fortune 500 company to access this funding program. You can get AR financing even with bad personal credit.

With AR financing, you use the receivables you have with other businesses or the government as collateral to qualify for financing.

Also with AR financing, you can get advanced as much as 80% to 95% of your receivables within as little as 24 hours. As soon as your receivables are paid by those who owe you, the funds are released to you minus the lender’s fees.

Personal credit as well as other cash flow or collateral requirements are non-factors in qualification, because personal and business financials are not even reviewed during the qualification process. 

If you have receivables with another business or the government, you can be approved. Most rates are less than 2% of the receivables that you have outstanding. You can be approved for between $10,000 and $20 million, depending on the value of your receivables. 

This program can be a real lifesaver to free up cash flow for many different types of businesses. A doctor’s office for example, can get immediate funding on payments from Medicare, Medicaid, and insurance companies using this program that they often need to wait weeks or months for. 

The same is true with construction companies, factories, and other industries that are often hired to provide products and services; when they must produce and then wait to get paid.

REQUIRED TO QUALIFY: Account receivables with the government or another business

LOAN AMOUNTS: $10,000 – $1,000,000

Purchase Order Financing

Purchase Order (PO) Financing is very easy to qualify for as you won’t need financials or good credit to get approved. For approval, lenders will typically do a quick review of your outstanding purchase orders that need filling. 

If the purchase orders are valid and the suppliers you are dealing with are credible, you can be approved regardless of personal credit history. You can obtain financing for up to 95% of the value of your purchase orders. And rates are typically less than 4%.

PO financing uses your purchase orders as collateral for funding. There are a few different types of PO Financing currently available to help businesses. So, you can qualify for PO financing even with horrible personal credit. With PO financing the lender will collect on the outstanding purchase orders for the business saving them both time and money. 

Sometimes you might have large orders to fill but don’t have or want to use your cash flow to pay for the supplies needed to fulfill those orders. PO financing is a short-term finance option that provides capital so you can pay your suppliers upfront, so your company doesn’t have to deplete its cash reserves. 

REQUIRED TO QUALIFY: Purchase orders totaling $10,000+

LOAN AMOUNTS: $10,000 – $1,000,000

As you can see there is no shortage of money only a shortage of knowledge of where it is and how to find it. These seven small business loans for folks with bad credit can be the difference maker between either going out of business or growing and building a thriving successful small business. For more information on how you can obtain these types of financing as well as get help for your business even if you have poor personal credit, contact me today at 888-524-9273 and schedule a 30-minute free consultation.

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401K Financing and Securities-Based Financing for Individuals with Bad Credit

We’ve gone through Revenue-Based Lending and Merchant Cash Advances, but that may not be the right type of business loans for you.

Maybe you have a 401K or a Security Based Asset? See how you can use both to obtain a business loan.

401K Financing

If you have a 401K, you may qualify for 401K financing. This is financing that you can obtain where you use your 401K as collateral. You can borrow as much as 100% of the value of your 401K and in some cases up to 200%. And approvals are not based off of your personal credit or cash flow.

With 401K financing you can save thousands of dollars in interest and fees plus protect your personal credit. With 401K financing, you can obtain business financing for up to 200% of the value of what is in your 401K. This can help to lower your business’s overhead while aggressively growing your retirement account at the same time. You can literally leverage your 401K to expand your business.

Don’t confuse 401K financing with borrowing from your 401K through your company’s HR department. The IRS allows you to borrow up to half of your 401K’s value not to exceed $50K in any given year. That amount must be paid back at the prime rate with every paycheck. Many people use this as an excellent option to get some quick cash. 

The 401K financing strategy is approved by the IRS, which means there’s no tax penalties when you get funded. Interest rates are usually under 5%. And best of all, you keep your 401K money where it is, invested and continuing to earn interest, all while you still get a 401K financing loan. No other collateral or any cash flow is required for approval. 

This program works great for startup businesses that find it difficult to qualify for business loans due to a lack of time in business. And even if you don’t have a 401K, you might have family members, friends, partners, or other investors who may want to supply their 401K as collateral in exchange for equity in your business. 

This is a great low-rate, low payment, funding option that you can obtain for your small business without a personal credit check or monthly revenue that is perfect for helping you as well as others safely invest in your company.

REQUIRED TO QUALIFY: 401K with a value of $10,000+

LOAN AMOUNTS: $10,000 – $1,000,000

Securities-Based Financing

Securities-Based Loans are a great option for many business owners with limited or undocumented income. This program is very similar to 401k financing. 

With securities-based financing you can acquire financing for up to 90% of the value of your stocks or bonds with rates as low as 5%. Your stocks are used as collateral; however, you still earn interest on your investments because you still retain ownership of your stocks or bonds in your name. And you keep 100% of your stock’s or bond’s appreciation.

There are no personal credit checks, no tax penalties, no pre-payment penalties or other collateral or cash flow requirements for qualification. As long as your stocks or bonds qualify, you can get a securities-based loan, even as a startup business. Fortunately, most stocks and bonds are accepted for this program.

Securities Based Loans are non-recourse and non-recorded loans where the borrower retains full beneficial interest. Non-recourse means the lender cannot come after you personally in the event of non-payment. 

Securities-based lending generally involves a revolving line of credit that is secured by your eligible investment portfolio as collateral. At the end of Securities Based loan periods, the borrower receives back the same number of shares originally pledged as collateral. Securities-Based Loans funds may be used for virtually any purpose that you can think of to build and grow your business. This is a wonderful way for you or even for others to invest in your business. 

REQUIRED TO QUALIFY: Stocks or bonds with a value of $10,000+

LOAN AMOUNTS: $10,000 – $1,000,000

We’d love to help you grow cashflow for you business, and establish business credit, even without your SSN, this year. Schedule a time with us today at: calendly.com/bizcred/consult

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