Is Bankruptcy A Deal Killer?
Is Bankruptcy A Deal Killer?
Your chances are 60 percent that you can get it removed before 10 years–the same statistic as with foreclosures. It once took me eight frustrating years.
You can’t remove foreclosures, bankruptcies and tax liens yourself. Please get an attorney. One client who had claimed bankruptcy thought all her loans were in there as well. I had to tell here the three things that aren’t included: Student Loans, Child Support and IRS tax liens. Her attorney never told this to the woman.
Don’t rely on others to take care of your past mistakes–be proactive. Find a good attorney right away.
Lates are pretty easy to remove. When you apply for personal credit always read the agreement’s fine print. You’ll find that you have signed your rights away. Banks have the right, if you are one or two days late that you were late 30, 60, or 90 days. If possible, go to your creditors and tell them you want a copy of the original application. See if you did in fact sign your rights way.
One way to use the copy of your agreement against the credit companies is to remove lates. People can leverage their knowledge to clear up credit.
Can you ever get credit without a personal guarantee? No, because with The Patriot Act you must now sign your personal signature regardless because of this law.
In addition, if you talk to any banker they will want to know what they can hold as collateral to limit the risk of you defaulting on the loan. You will either have to have personal credit, assets or something that will guarantee the credit.
I’ve never seen a lending corporation that did not ask for a guarantee. Even Enron, when they were going down, were still using their pension plan as a guarantee to continue to get money. You have to have something; obviously, if you don’t have property, then you will rely on your personal credit until you do.
This alone can get you several thousand dollars if you work a system correctly.
Benefits Of A C-Corporation Versus LLC
Many people feel overwhelmed by the C-Corp, but it can be one of the more powerful entities, especially for building business credit. You might be thinking that a corporation must be more tedious to maintain than an LLC. In the end a C Corporation will outlast the LLC. Some business owners don’t want to file a “resolution” for the corporation, to say nothing of the minutes of meetings.
The truth is, even if you have an LLC you should be doing this.
I have found a program called www.managemyminutes.com, which is really easy and allows you to fill in information required for documentation. It even has prompts, and walks you through the process so you can keep your records. Then as soon as you enter the required information it can print out minutes and resolutions. You print them and add them to your corporate file, and you’re done.
For a mere $199.00, having this company do it for you is a no brainer. People who do this through an attorney usually pay them from $500 to $3,000 dollars. It even provides standard contract templates that you can use. And you can set it up so it emails you reminders – at the end of the year, for example, saying you need to do your statement. It will notify you when it is due.
It seems that many people are also afraid of C-corps because they think they need to be a big company to call their business a corporation. In reality, in most states you only need one person to have a C-corporation; while some others do require at least two.
The other benefit to an Entrepreneur is how it enhances your benefits. A C-corporation can cover up to 100% of certain expenses, and give you a tax write off.
For example, God forbid, if you get cancer; because your business is set up as an LLC, you are going to be responsible for 20% of the bill.
There are a number of things that the C Corporation can do that the LLC cannot.
Questions to Ask Before Incorporating
Questions to Ask Before Incorporating
Q. Which entity should I set up?
A. You should consult with your own team members about the best asset protection, based on the nature of your business.
I’ve found the C-corporation the easiest and most useful entity for building your credit file.
You should educate yourself about the pros and cons of the different entities by reading the book Incorporate and Grow Rich.
Q. What state is the best one to incorporate in?
A. Many people receive conflicting information about which state to incorporate in.
First learn about each state’s individual laws, and the time necessary to set it up. Most state paperwork can be completed online; or try the Socrates Incorporation software available at Office Depot.
To build credit, you should set up the entity in your home state. There are some benefits to setting up in Nevada, for example, but getting more credit for your corporation is not one of them.
It’s true that Nevada has no income tax, but in your home state you can build credit. You can probably build some credit with your LLC, but not cash credit.
You may be able to get some supply lines, and maybe a little cash credit; but you’ll only get credit in your home state. This is a key consideration; open it in your own home state for credit purposes.
Q. What should I name my business?
A. The next critical step in setting up your corporation is choosing its name. I don’t recommend using your personal name or initials for several reasons. For one thing, it can increase your chances of getting sued.
We recommend a neutral name.
For example, many companies call themselves “So and So Investments” using their initials or KLC Real Estate Properties, Inc. Use a name instead like Allied Management, LLC or Allied Management Inc.
Save yourself some time by seeing if the name is available on the Secretary Of State website, so you don’t fill out all the paperwork and try to file it, only to find that a name is unavailable.
What Can You Do To Improve Your Personal Credit Rating?
Anyone going through this process needs to have an updated copy of their credit report with their credit score, but you really want to get your credit scores, not just your credit report. Credit reports show your file, but do not compile your score for you.
I recommend http://www.GetMyFREECreditReports.com. For between $9.95 and $14.95 you get scores from the main credit bureaus: Trans Union, Equifax and Experian. These scores’ average determines your FICO score–the ultimate determinant of your personal creditworthiness.
To develop your business credit rating, begin with your personal credit and learn where you’re starting from.
Things may need to get worse before they can get better during the business credit application process. Even with strategies to control it, expect your credit score to drop up to 20 points from the inquiries you’ll be getting as you apply for credit.
Many people tell me they don’t want their good credit score to drop.
I’d rather lose 20 points on my score and gain $400,000 to grow my business than have a higher credit score and no cash.
Of course, down the line you can make up those 20 points. Research shows, that your chances of getting the “inquiries” removed from your file before their time is due is 50% no matter what you do or pay. Credit bureaus will send a request for confirmation of the inquiry to the creditor that requested it. The creditor has 30 days to investigate the inquiry and report back to the bureau.
There are ways to challenge the system that you can learn.
For example, one friend has $2 million in business credit, accumulated in a little over ten years. He discovered he had accumulated over a dozen inquiries. Every four months he set time aside to go after them himself and was able to take six or seven of them off. Then he could get another $200,000 in credit. Following this system got him to the $2 million dollar mark, showing that sometimes all you really need is patience.
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Why do 50 % of small businesses fail in their first year and 95% by their fifth year?
Why do 50 % of small businesses fail in their first year and 95% by their fifth year?
The answer is simple: they run out of MONEY!
Whether you’re starting out with great credit or not, you should establish a corporation. Then you can get secured credit cards to help build your corporation’s credit score.
These cards are issued based on an amount of cash you put into a secured bank account. Once you receive the secured credit card, use that cash to pay bills that you would normally pay monthly, such as rent or the phone bill. You can use the card to establish buying activity as well as keeping a track record of payments in order to get or increase your scores.
The credit bureaus will then report these types of cards and help you build credit under the business’ name.
Remember, you want your corporation to look good, so when you present yourself to somebody in a future business deal whether it is a lender or another investor, you want to show what credit you already have, and what your scores are for your corporation — not yourself personally. Many will be impressed by that, because not many people can do this.
I built a corporation in spite of this with a little effort and some patience. Then I added two people as credit partners and in one week I received $200,000 in credit. I did not have great credit, but I brought people on who did, and I was able to leverage their resources to get what I needed.
In business, understanding and utilizing the power of leverage of other people’s resources can get you far ahead of the game. If you have bad credit or you’re credit challenged for whatever reason, you can get a credit partner and build $200,000 just like I did.
So long story short – the answer is yes, you have to have good credit if you are building credit under your name. If you are building credit under your businesses’ name and following this process, your credit won’t matter at all!
The Real Difference Between Business And Personal Credit?
What’s the real difference between business and personal credit?
The real difference is that business credit will not be showing up on your personal credit report.
If you have business credit and it is showing up on your personal credit report then it really is not business credit after all. Many people think they’re getting a business credit card. Then it shows up on their personal credit report. It’s really just a personal card with a business name on it.
But it’s possible to get real business credit by using your tax ID number. There are a series of steps that need doing in order to reach this point.
There are only two credit applications that won’t reflect on your personal credit that don’t ask for a Tax I.D. number: Capital and GM. If the credit card applications do not ask for the tax ID number, you’re not filling out a business credit application.
You’re better off getting such “invisible credit,” because it won’t show up on your personal credit although you personally guarantee it to get business credit. In the future it will be unsecured, and guaranteed in other ways.
For example, if you get a line of credit on your home, the house is guaranteeing the loan, not you. By developing your business credit file you’re doing the same thing. Your business will guarantee the loan, not you!
Do you need to have good personal credit to get business credit?
This is one of the most frequently asked questions that we get and the answer is, yes!
But don’t be too quick to rule this out of your repertoire of opportunities to grow your business. You can learn how to get business credit whether you have good credit or not.
Getting business credit is like the old saying about making your first million. Making your first million is always the hardest. The second one is much easier. Once you do it once, you just repeat the process over and over again to make more money. The same is true for achieving success with business credit.
What The SBA Knows About Your Business…
These startling facts from the Small Business Administration website (SBA.gov) bear repeating:
- 50 % of small businesses will fail in their first year.
- 95% of small businesses will fail by their fifth year.
“Do I need to have good personal credit to get business credit?” is definitely one of the most frequently asked questions that we get; and the answer is, yes!
But don’t despair. If you are someone who said, “Crap, then this is not for me!” don’t be so quick to rule this out of your repertoire of opportunities to grow your business. This course is designed to teach you how to get business credit whether you have good credit or not.
Getting business credit is like the old saying about making your first million. Making your first million is always the hardest. The second one is much easier. Once you do it once, you just repeat the process over and over again to make more money. The same is true for achieving success with business credit.
Let me elaborate on this a bit more. When I started using this process I had a credit score in the five hundreds. In spite of this I was able to build a corporation, but it did take me eight months to do this.
Now, I have had the privilege of being able to do it for hundreds of people all over the world in all different types of situations.
If you apply the information that is taught to you throughout this course you will be able to be one of these people who are constantly getting an endless supply of money in order to grow your business.
Obviously, the better your credit score from the start the faster this process will be able to be done. I have found that if you have a least a 680 credit score, your chances of accelerating this process increase. However, if this is not the case not only will I teach you ways to increase your personal credit but also how to take on a credit partner that will help you get lines of credit.
Why Do Businesses Fail?
Here are some startling facts from the Small Business Administration website (SBA.gov):
50 % of small businesses will fail in their first year.
95% of small businesses will fail by their fifth year.
The main reason for these failures is money–and the largest single factor is poor or deteriorating credit
- How can I influence my business credit profile?
Knowing what information is most important gives you the inside edge and allows you to pay more attention to the important factors of business credit.
You can develop a strong business credit profile by:
Paying on time– Other companies’ payment experience is the most important information in your business credit profile. Always pay within the terms set forth by your suppliers. This is the most direct way to drive a positive credit rating.
Tip 1: Ensure all relevant trade experiences are represented, or you may not get the credit you deserve for paying bills on time, and for conducting more business. Check your profile often and make sure every vendor payment relationship has been captured.
Tip 2: Keep your personal finances in good order. If you’re the owner of an emerging business without a robust credit profile of its own and your consumer credit profile also may be subject to review. The condition of your personal finances can impact your company’s creditworthiness–although business and personal ratings are kept separate and distinct.
Tip 3: Keep your business credit profile in good order. If you see accounts that aren’t yours, mistakes your bank made, or false negative activity you’ve already addressed, address these inaccuracies. D & B subscribers can sign up with the online tool D & B e-Update, or call their Customer Service Center.
Tip 4: Keep your debt financing down. The capital structure of your business—the extent to which you use equity or debt to finance your operations—is key. If there’s a lot of debt on your balance sheet, in absolute terms or relative to your competitors, businesses are less likely to extend credit.
Tip 5: Contribute to your own profile. Some credit managers prefer detailed reports with lots of supporting information, so they can assess risk based on more data. Communicate as much information about your business as possible for a more robust report.
Compare the key financial indicators in your own report with those of similar companies so you can identify areas for improvement and build your profile for a satisfactory credit investigation.
How is your business credit used by other businesses?
Companies rely on your business creditworthiness to make critical decisions, including whether:
- to sell to you
- to lend you money
- you are viable as a partner
- to lease the equipment you need to grow your business
- to increase your line of credit
- to help you carry more inventory at competitive prices
- to give you favorable financing rates and terms
- you stack up favorably against other companies competing in your market space
What determines your business’s credit worthiness? A business’ creditworthiness is ultimately determined by what are known as the “4-Cs of Credit”– character, capacity, capital and conditions.
1. Character includes factors such as: size, location, and number of years in business, business structure, number of employees, history of principals, and appetite for sharing information about itself, media coverage, liens, judgments or pending law suits, stock performance, and comments from references.
2. Capacity assesses the ability of the business to pay its bills, i.e., its cash flow. It also includes the structure of the company’s debt—whether secured or unsecured—and the existence of any unused lines of credit. Any defaults must also be identified.
3. Capital assesses whether a company has the financial resources (obtained from financial records) to repay their creditors. In general, this portion of the credit report is the one most closely reviewed by the credit analyst. Heavy weighting is given to such balance sheet items as working capital, net worth and cash flow.
4. Conditions consider the external factors surrounding the business under consideration - influences such as market fluctuations, industry growth rate, political/ legislative factors, and currency rates.
A credit manager or loan officer will answer these questions by locating and reviewing:
- requests for credit information
- customer supplied information
- bank information
- trade information
These factors are also taken into consideration by other service providers, such as insurance companies to set premiums. More than ever, companies are using automated-decisioning, which means they input scores and ratings that summarize the 4-Cs into a financial model to determine the risk of doing business with you.
What Is Business Credit?
Small businesses are the major driving forces in our economy. So why then do 50 % of small businesses fail in their first year, and 95% by their fifth year? The answer is simple: they run out of MONEY!
Dun and Bradstreet, where lenders turn when deciding how much credit they are willing to give you for your business, compiled these most frequently asked questions about the important subject of business credit.
1. What is business credit?
Your business credit record is the primary way that companies evaluate whether to do business with you-and on what terms. Companies rely on your business creditworthiness to make critical decisions, including whether:
- to sell to you
- to lend you money
- you are viable as a partner
- to lease the equipment you need to grow your business
- to increase your line of credit
- to help you carry more inventory at competitive prices
- to give you favorable financing rates and terms
- you stack up favorably against other companies competing in your market space
This type of information is listed in your business credit profile, along with scores and ratings that are derived from your businesses past behavior to predict its future behavior. For example, your ability and willingness to pay your bills on time in the past is factored into your ability and likelihood of paying your bills in the future.
2. Why is business credit important to my business?
Good credit is the lifeline of your business. It enables you to obtain funding for things like expansion, capital expenditures, research and development and staffing. It is the principal contributing factor to your business’s future growth, not to mention the cash necessary for survival.
Good business credit also allows you to keep the cash you have to cover your cost of doing business; such liquidity lets you respond quickly to time-sensitive requirements, without halting or compromising operations.
It’s not just about getting access to financing; business credit has increasingly become the primary vehicle for setting terms on business loans, determining insurance premiums, even setting lease payments. Good business credit can earn you lower rates, strengthening your cash flow.
