Corporate Credit
Oct 17, 2014
Corporate Credit
OPERATING CAPITAL
AN AMPLE SUPPLY OF CAPITAL
Capital = MoneyYour Money Tends to be limited Intrudes on Personal Life needs and desires Risks Loss of previous successes
Other People’s Money Wider sources and deeper pockets Ability to separate Personal and Business Life
BUSINESS CREDIT = OTHER PEOPLE’S MONEY
BUSINESS CREDIT = TIME TO TURN INVOICES TO CASH
BUSINESS CREDIT = ABILITY TO HANDLE THE UNEXPECTED
WHAT IS BUSINESS CREDIT
• Business Credit – Is also known as Trade Credit or Corporate Credit
• Trade Credit is the single largest source of lending in the entire world, even more then banks loan to businesses
• Trade Credit is when one business sells a product or service on credit terms to another business
• Why would so many businesses extend credit terms? It allows them to sell more goods and services Their clients want credit Their clients need credit
PERSONAL vs. BUSINESS CREDIT
PERSONAL CREDIT PROFILE
• FICO/Beacon
• Scores from 350-850
• Credit score determines
Loan/lease approvals
Interest rates
Insurance rates
• Three major credit bureaus
• Tracked by S.S.N.
• Consumer Protection Laws
• PRIVACY
BUSINESS CREDIT PROFILE
• Paydex/Intelliscore• Scores from 0-100
• Credit score determines
Loan/lease approval
Interest rates
Credibility of business
• Four major credit bureaus
• Track by
E.I.N./Name/Address
• No State/Fed Regulation
• NO PRIVACY
PERSONAL vs BUSINESS CREDIT
PERSONAL SCORE
• 35% Payment History• 30% Balances Owed• 15% Length Of Time• 10% Types of Credit• 10% New Credit
# Recently Opened # Recent Inquiries Time since recent
Open Time since last Inquiry
BUSINESS SCORE
• 100% Payment History• Not all vendors Report• VERY Interpretive by
Bureau• ‘High Risk’ & ‘No Credit’
Lists
Factors Affecting Score Compilation
BUSINESS SUCCESS
Two-thirds of new employer firms survive at least two years, and about half survive at least four years.
Major factors in a firm’s remaining open include: • An ample supply of capital• The owner’s education• Large enough to have employees• The owner’s reason for starting the firm in the first place,
such as freedom for family life or wanting to be one’s own boss
Sources: Business Success: Factors Leading to Surviving and Closing Successfully by Brian Headd, Center for Economic Studies, U.S. Bureau of the Census, Working Paper #CES-WP-01-01, January 2001; Advocacy-funded research by Richard J. Boden (Research Summary #204)
BUSINESS ENTITY
Business credit can be built with any business entity, including a sole-proprietorship or partnership, however a Corporation or LLC is recommended.
• Corporation or LLC - many individuals incorporate to separate their personal and business liability
• When the owners or officers apply for credit, many times they provide a personal guarantee which now links them personally, defeating the purpose of the corporate structure in the first place
• By having a business credit profile and score, there will be many opportunities in which no personal guarantee is required
Mystery of Business Credit
Why is Business Credit so Widely Used?So Widely Misunderstood?
So Hard to Achieve?
No Laws Protecting the Business’ Rights from inaccurate information on the credit report
• Lack of information provided by business and the government
• Must research who are companies that offer credit• Must research who the companies are that report trade
experiences• Must research companies who don’t require a personal
guarantee• Must research companies that don’t require a personal
credit check• It can take hundreds of hours of research to find all this
MYTHS OF BUSINESS CREDIT
• Credit reporting agencies are serving you• Good credit is built automatically• No news is good news• Good personal credit = Good business credit
WHAT IF NO CREDIT?
• Costly• Limits options• Limits growth• Puts personal assets at risk• Forces you to deal in cash• Increases likelihood of failure
Business Statistics
(Small Business Advocacy Stats)
• 23.7 million business in the United States in 2003
• 99.7% are small businesses less then 500
employees
• 572,900 new companies were formed in 2003
• 584,800 business closed in 2003 a drop of 11,900
• 1.08 new businesses are formed every minute
• 1.2 businesses fail every minute
• A change of share ownership occurs every 6
minutes
• A company changes control every 15 minutes
Business Credit Activity
In any ONE Minute There are:251 Suits/Liens/Judgments Filed
246 Telephone Number Changes
58 Address Changes
81 Officer Changes
82 New Business Openings
83 Name Changes
7 Bankruptcies
This Volume of Activity is vulnerable to MISTAKES:
• Wrong names on Applications• Clerical Errors• Wrong or Misread SSN, EIN• Payments Applied to Wrong
Vendor/Business
WHY DEVELOP BUSINESS CREDIT & INCORPOPRATE?
You as a Sole Prop
LIABILITY
Personal
Life &
Assets
Business
Life &
Assets
CREDIT CREDIT
LIABILITY
SAFE, SECURE, FLEXIBLE & EXPANDABLE
You and a Corporate Entity
LIABILITY
Personal
Life &
Assets
Business
Life &
Assets
CREDIT
RISKY & LIMITING
W2-Individual Sole Prop Entity
Corporate Entity
Personal Credit Only
Personal & BusinessCredit NOT Separated
Personal & BusinessCredit Separated
Business Creates:- More Inquiries- Higher Balances- More Late Pays- Less Available Credit
Business Credit Stats Apply To Business
Personal Credit Control Biz Qualified For Credit
Personal Credit Score Out Of Control/Drop
Credit Score Control
Avg. Statistics Apply
Avg. Statistics Apply To Personal Credit
Avg. Statistics NO Longer Apply
Personal Credit And Business Growth
GROWTH TARGET
STEADY STATEPersonal Credit Brake Applied
Revenue Curve
Personal Credit
Curve
Personal Credit No Longer Supports Business Credit Needs
More Inquires = Lower Score
Higher balances = Lower Score
Less Available Credit = Lower Score
Late Payments = Lower Score
The ‘Braking Factor’
BENEFITS OF BUSINESS CREDIT
• Reduces the need for personal credit checks• Reduces the need for personal guarantees• Access to lines of credit for business expansion• Increase your monthly cash flow• Save money by lowering the interest you pay• Prepare for current and future lending needs• Save time with major convenience of purchasing
with open lines of credit instead of cash• Establish a business image and credibility• Greatly increase your ability to succeed long term• Achieve compliance with the business credit
market • Peace of Mind, knowing business creditors cannot
attach your personal assets• Get Personal Credit back to averages for higher
score• Separate Personal and Business Credit
• No Business Credit
• Burdened/Poor Personal Credit
• Not Able To Pay Yourself
• Every $ In Goes OUT Again
• Personal Assets On The Line
• Loans Declined
• NEED $
• Available Biz Credit Lines
• Limited Personal Guarantees
• Strengthened Cash Flow
• Qualified For More Credit
• Personal Liability Reduced
• Sleeping Easier
• $s Remaining In Pocket
Build The Business Credit
Bridge with NBSS
HOW?
Profile Basic Credit
Report &
Score
More $
1 2 3 4
FROM THIS TO THIS
What Business Credit Can Do For You
HOW NOT TO BUILD CREDIT
• Don’t “buy” good credit
• Don’t only rely on personal credit
• Don’t start without being in compliance
WHEN TO ESTABLISH CREDIT?
• Before your credit profile is created
• Before you need it
• Now!
BUILDING BUSINESS CREDIT
BUILDING BUSINESS CREDIT• Be in Compliance• Establish lines of credit• Build trade references & payment history• Get listed with the bureaus• Continue to work with vendors and up limits• Follow a structured program and work with the
experts
CREDIT BUILDING TIMETABLE• Not easy, but possible to do on own• Need to start today• 3-4 year process (possibly never)• Our expertise accelerates the timetable to less than 1
year
ESTABLISHING BUSINESS CREDIT
• The following are ways to establish a Business Credit Profile:
• How: Business credit profiles can be built without
trying, if you are willing to wait years for it to happen on it’s own, however there is no guarantee you will ever have a score • Problem:
Business owners can operate their companies for years and never build a business credit profile or score - we have one client who set up his company 22 years ago and was still using his personal credit before coming to us
If you don’t have the knowledge of how business credit is established and maintained you may never have it
DON’T FAIL IN COMPLIANCE
ESTABLISHING BUSINESS CREDIT
• How: You can try to work directly with each business
credit bureau to obtain a score and profile,
• Problem: DON’T FAIL IN COMPLIANCE If you have not prepared your business properly
before going to the bureaus you can put your business in a HIGH RISK status
High risk is a status companies can be placed in with very little opportunity to get out
High risk will stop companies from granting your business credit and those who already have granted credit may cancel your account
Most bureaus will not work with you, they just want to sell credit reports
Continued
• How: You may use your personal credit to obtain
credit for your business with companies who report to the credit bureaus
• Problem: DON’T FAIL IN COMPLIANCE This will start the process of building a business
credit profile, yet you are still using your personal credit and have the possibility of lowering your personal credit score
You are still personally guaranteeing the debt Once again if you have not prepared your
business for the bureaus you may end up in high risk
There is also no guarantee the profile will ever provide a score
ESTABLISHING BUSINESS CREDITContinued
SOLUTION
• Work with National Business Support Services, LLC, a separate company from the credit bureaus that will work for you and educate you on how the system works
• Will verify and certify the business’ requirements that lenders and credit bureaus require, in order to stay out of the no credit status
• Will provide you with lists of businesses who will grant your business credit without the need for personal guarantees or credit checks
• Will insure you develop and establish a business credit profile
• Will list your business with several business credit bureaus and not just one
• Will make sure you are in COMPLIANCE
Credit our Clients Are Enjoying By Participating In Our
Credit Builder Program!
Computer Line of Credit -------- $25,000 Equipment Lease ------------------$15,000 Hardware Store Credit Line ----$15,000 Electronics Store Credit Card -- $7,500 Department Store Credit Card - $5,000 Printing Company Credit Line -$2,000 Office Supply Credit Card ------ $1,000 Corporate Gas Card --------------$1,000
Auto Lease and Loans – Cadillac, Ford, BMW, Mercedes, Hummer, GM Trucks and
more
All Without Personal Guarantees or Personal Credit Checks
HOW DID THEY EARN THAT CREDIT?
FIRST: We Made Sure They Were IN COMPLIANCE Smaller lines of Trade Credit
• No Personal Guarantee• No Personal Credit Check • No Business Credit Check• Reports to Bureaus +ve and –ve
ActivityLarger lines of Trade Credit• No Personal Guarantee• No Personal Credit Check• WITH a Business Credit Check• Reports to Bureaus
Banks & lending Institutions• With a Personal Guarantee• With a Personal Credit Check• With a Business Credit Check• Reports to Bureaus
Tier 1 Credit:
Tier 2 Credit:
Tier 3 Credit:
THE BUSINESS CREDIT BUILDER PROGRAM
• The Business Credit Builder is for those companies
who have a need to establish their business credit
profile and obtain various lines of credit for their
business
• The goal of the program is to educate business
owners and assist them in developing a business
credit profile and trade credit with various
companies around the country.
THE BUSINESS CREDIT BUILDER PROGRAM
Deliverables
Detailed Research Report for compliance and problem areas
Credit Profiles with the Major Business Credit Bureaus
Open Lines of Credit with Various Companies
Calls from your Credit Coach to walk you through the steps of the Credit Building program
• Access to our Business Resource Center online with Complete status of your business in the credit
builder program Access to research and education materials
YOUR NEXT STEP TO SUCCESS
• START TODAY – USE OTHER PEOPLES MONEY TO GROW YOUR
BUSINESS– Obtain the education needed to grow your business
• CONTACT NBSS FOR A FREE CONSULTATION:– Review your Business Credit Situation and
requirements– See where Business Credit would benefit your
Business– Assess how your Personal Credit is being affected by
your Business activities.
Incorporate In Nevada
Nevada Business Solutions Group, LLC
5550 Painted Mirage Road, Ste 320
Las Vegas, NV 89149
(Office) 702.818.1705
(Fax) 702.818.1706
www.nevadabusinesssolutions.com