No one starts a business to become a “business person.” We build our business around something we love. Cooking. Or construction. Or health care. Or hair care. Even if you’re a franchisee, you have to be passionate about the products or services you sell. Whatever the details of your enterprise, small business loans can help you achieve your dreams.You may be an expert chef or doctor. But most small business owners are not experts when it comes to borrowing money. So let’s talk about your business credit because business credit and small business loans go hand-in-hand. The better your credit profile, the more options you have. Options turn into opportunities to grow your business.
I want you to have as many options as you need – it’s why I founded my own business, United Capital Source. Here at UCS, our passion is helping people like you understand how small business loans work. That way, we can help you make smart, effective decisions when it’s time to borrow money.
BE PROACTIVE ABOUT YOUR BUSINESS CREDIT
The Small Business Administration, advises that “before you even start the process of preparing a loan request, you want to make sure you have good credit.”
Too many small business owners don’t realize there is such a thing as a business credit score. There is. And it’s not the same as your personal FICO score. Credit reporting agencies use a different list of criteria to determine your standing. Understanding what goes into your rating will help you get the best possible business credit score.
Building a strong business credit history is vital if you want your business to grow. To do that, you need to:
- Separate business and personal finances. Your business needs a separate bank account, credit cards, and a federal Employer Identification Number.
- Create a business profile with Dun & Bradstreet, and get a DUNS number from them.
- Create a business profile with credit reporting agencies such as Experian.
- Ask your suppliers to report your on-time payment history to the reporting agencies. They may not automatically do that.
- Make every effort to pay bills on time.
- Borrow money when your business needs it. But don’t over-borrow.
BE PROACTIVE ABOUT CASH MANAGEMENT
The revenue your business earns should provide the cash you need for predictable operations expenses. You should set some money aside to create a cash reserve. That reserve is money you can reinvest in your business. You want to make a profit, to pay yourself and improve your lifestyle. But it’s not a perfect world. Sometimes you need to borrow to get what you need. But small business loans should not be your primary source of working capital.
Daniel Hannaher of the SBA has some good advice:
- “Understand how cash flow keeps a business alive: Cash is king. A business can be profitable on paper, yet fail from lack of cash flow.”
- “Learn when it makes sense to use business credit. The wise use of business credit will help a company stabilize, grow and prosper.”
THERE ARE SMALL BUSINESS LOANS FOR EVERY BUSINESS
Choosing the right small business loans and repaying on time can help boost your business credit score.
Traditional business loans from a bank offer low interest rates and many years to repay. But you need great credit and an “established” time in business. You have to put up collateral, and possibly a personal guarantee. Many small businesses cannot meet those requirements. There’s a lot of paperwork. It can take two or three months to get approval and get your money. You may not be able to wait that long.
It’s somewhat easier to get SBA-backed business loans. But you still have jump through the hoops. And it’s still a slow process. At UCS, we offer a much faster alternative. With our SBA Marketplace loans, you can get funding within a week. But you still have to meet certain eligibility requirements, including good credit.
The bottom line here is that banks loan large sums to non-risky businesses. That’s one reason your business credit is so important. But the reality is, many small businesses have sketchy credit. And most small businesses have inconsistent cash flow. Besides — most of the time you don’t need a huge business loan.
Fortunately, there are many alternative types of business financing. You can use them to fill in gaps in your cash flow to pay everyday bills. Or purchase inventory. Or expand your business. To quickly handle emergency repairs, or replenish supplies. This money is called working capital. It is the lifeblood of every small business.
Alternative business loans give you greater flexibility. Here at UCS, we make the entire process quick and painless. You can apply and get you money within a day or two – sometimes hours. That way you can stay focused on running your business. It’s easier to get alternative loans, even if you have bad credit. That’s because they are based on other factors. For example:
- If your business typically has a lot of outstanding invoices (doctors and dentists know this problem), you can sell those receivables to a lender. You get your cash now, minus a discount. They collect the money.
- If you do a lot of regular credit card business, you can get a merchant cash advance. In that case you’re selling future receipts to a lender, again, at a discount. The lender takes a certain percentage of future transactions until you repay the advance.
- There are specialized loans to finance equipment.
- You can finance inventory purchases, using the inventory as collateral. Or use existing inventory as collateral for another loan.
- Short-term loans – with payback terms between 6 and 18 months – don’t require collateral.
- Business lines of credit and credit cards give you a ready source of cash.
Alternative financing options have higher interest rates than bank loans. Dramatically higher, in some cases. You may have to make daily or weekly payments. (UCS offers five different payment options.) Which is why you want to build a quality credit profile for your business. The better your credit, the greater your options.
Small business loans can help you manage your cash. That helps you manage and grow your business. So make financial decisions with your credit score in mind. Because the better your business credit, the better your chances of reaching your business goals.