Business Credit: What you need to know
Before you can establish credit for your business, you must legally register it as a business entity. You’ll want to consider the business structure that’s right for your business type to build credit with the business credit-reporting agencies.
Business credit reports are created when vendors, suppliers, or creditors report a business’s accounts and activity to a business credit bureau. This activity helps to generate the information that informs your business credit scores. Some scores also consider information from the owner’s personal credit file and business repositories, such as the Small Business Financial Exchange.
Any eligible business may benefit from establishing and building good business credit. But business credit typically comes into play when you want to borrow money and pay vendors and suppliers on terms.
Your business’s credit can affect a variety of decisions, including the following:
-Your eligibility or rates on loans, including Small -Business Administration, or SBA, loans
-The business’s insurance premiums
-The net terms and credit limit you receive from vendors and suppliers
-Your ability to raise money from investors
-Whether you qualify for contracts with other organizations
Your personal credit is connected to you by your Social Security number. Your business credit history is linked to you by your Employer Identification Number (EIN) or Tax ID Number, which is also how the government recognizes your business for tax purposes.
In many cases, you won’t be able to complete business transactions if your business doesn’t have credit. Lenders will use a business’s credit history when figuring out whether or not to loan the business money. You’ll also need credit in order to get business insurance. In many instances, you won’t be able to buy goods and services for your business without access to credit.
In some cases, you can, but you really shouldn’t. The IRS has strict rules about mixing personal and business expenses. Perhaps most importantly, if you use personal credit to run your business, you put yourself and your family at risk if your business fails or experiences money trouble. Creditors will then come after YOU, as you will be personally liable for the expenses incurred by the business.
We can arrange Personal Loans, SBA loans, traditional bank loans, business lines of credit, equipment financing, business acquisition loans, refinancing, and merchant cash advances.
Business lines of credit and credit cards might be similar, but they serve different purposes. Generally, a business line of credit is better for expenses that take more than a month to pay off, while a credit card is better for small expenses that you can quickly pay off.
A business line of credit also gives your business access to cash, which can cover more expenses than a credit card. That’s why it’s useful when it comes to financing payroll, rent, and utilities.
But a credit card can give you instant access to financing. While some lenders offer cards that you can swipe like a credit card, it often takes at least one day to receive a line of credit withdrawal.
Credit cards might have higher interest rates. But interest doesn’t apply if you pay off your balance in full each month. That’s not necessarily the case with a line of credit.
A small business line of credit and a term loan also serve different purposes. Generally, a line of credit is useful when you need to finance ongoing costs, while a term loan is better for large, one-off expenses.
Term loans are typically available in higher amounts and come with fixed interest rates. There are also more options for startups and borrowers with bad credit.
But you’ll need to apply again to receive additional funds. And in an emergency, term loans can take longer to receive than a line of credit. And lenders that promise a 24-hour turnaround are often more expensive than slower options.
A business line of credit can be a great asset to small business owners that regularly need access to funds. It’s a particularly great source of working capital for businesses struggling through an off-season or an uncertain economy.
An origination or success fee is a fee that covers the cost of processing a loan, and it’s charged after funding. Like all loans, the amount of the origination fee varies from lender to lender.
NCR Business Solutions origination or success fee is between 7% & 12% of the loan amount, and this is deducted from the loan after the funds are distributed to your bank account. For this reason, make sure you borrow enough money for the loan amount you need and enough to cover the origination fee. There are a lot of things to consider before you apply for a personal loan. The most important, however, is making sure you don’t borrow more than you can pay back. If you’re ready to apply for a personal loan, contact us today to talk about your goals for taking out the loan and to see how much you qualify for.
Most lenders are requiring 3 consecutive payments before posting a trade line to an account. Those Trade lines will take 3 months to post.
There are many factors that go into how much business funding you can receive. Some of those factors include time in business, industry, and monthly sales volume. Most of the time an eligible customer qualifies for a Merchant Cash Advance that is on par with its monthly credit and debit card sales.
In order to qualify for business funding, you will have to meet some minimum requirements. You must have operated your business at the same location for 12 months or more and you must provide anywhere from 3 to 6 months of bank statements. You may not have any outstanding bankruptcies or tax liens that are not on a payment plan.
Let us get you to qualify
Your eligibility and loan offer is based on an overall assessment of your business's health. The lender evaluates the credit history of the business owner and the business to determine approvably and the loan amount.
Most personal loans are unsecured, meaning they aren’t backed by collateral, like a house or car. Your ability to get a personal loan is based solely on your financial history, like your credit profile and income. Some lenders offer a personal loan with collateral, also known as a collateral loan when your credit history and income do not meet their minimum requirements. By offering collateral, you may be able to receive a personal loan with a lower rate or larger loan amount, depending on your situation.
Interest rates on small business lending products vary widely depending on the duration of the loan and the credit history of the borrower. Because of the nature of some alternative lending products, such as loan terms as short as four months, these products tend to have higher rates than traditional bank loans. Rates on commercial and industrial bank loans have remained below 5% since 2009. Personal credit cards tend to have much higher rates, at around 15% - 21% . Alternative loan products can have annual rates from 15% for a 36-month peer-to-peer loan and up to 45% for a four-month institutionally backed loan.
A personal loan is an unsecured installment loan. Unsecured simply means the loan is not backed by collateral such as a home, boat, or car. They’re typically available from a bank, credit union, or online lender and like other installment loans are paid back in equal monthly payments with a fixed interest rate. Unlike credit cards, which tend to have high-interest rates, personal loans have a fixed repayment term and often have lower interest rates, especially if you have good credit.
Much like looking for the right mortgage lender for you, you’ll want to compare offers from multiple personal loan lenders before locking in your choice. Most lenders perform a “soft” credit inquiry to show you pre-qualified offers. This allows you to compare each lender’s offerings without affecting your credit score.
Since there is no collateral, qualifying for a personal loan is ultimately determined by your credit history, income, other debt obligations, and monthly cash flow. While each lender varies, they typically look for a minimum acceptable credit score that falls within a range of 600 to 700+ At NCR Business Solutions, for example, you must have a minimum credit score of 680, and not surprisingly, the higher your credit score the more likely you are to receive lower rates.
Depending on the lender and your personal financial situation, personal loans typically range between $10,000 and $50,000, with a maximum of $100,000 and repayment terms between 24 and 60 months. The higher your credit score and income, the more money you can potentially borrow.
The main reason lenders ask for documentation is to help verify your identity and income. When documentation is needed, typically you’ll be asked to provide your Driver’s license / Pay stubs / Bank statements, etc...
A merchant cash advance, also called an MCA, provides alternative financing to a traditional small-business loan. With an MCA, a company gives you an upfront sum of cash that you repay using a percentage of your debit and credit card sales, plus a fee.
A merchant cash advance isn't technically a loan. Instead, an MCA provider is purchasing your future sales at a discount.
This type of financing is designed for small businesses that need capital immediately and can be used to manage cash-flow shortages as well as cover a variety of short-term expenses.
Instead of a traditional interest rate, merchant cash advance companies charge their fees as a factor rate. Factor rates typically range from 1.1 to 1.5, varying based on the provider’s assessment of your business.
* Fast access to cash
* Flexible repayment terms
* Strong credit not required
* You choose how to use
* No collateral required
* Very, very expensive (70% – 200% APR)
* Minimum daily payment hurts cash flow
* Doesn’t help build business credit
* May lock-in merchant processor
* Must accept credit cards
Having A Lawyer On Retainer Can Be Advantageous For Your Business, Especially When Issues Unexpectedly Arise.
It is highly recommended that you have an experienced business lawyer on retainer for your business. Often, business owners hire attorneys on an ad-hoc basis, retaining them as different matters need to be handled. However, having a business lawyer on retainer can provide multiple advantages.
For example, when an urgent issue arises, there is no need to search for an attorney that you can trust. Even then, it may take the attorney some time to properly examine and get to know the intricacies of your business. A true retainer is also for exclusivity. Having an attorney on retainer means that the retained attorney will give your business’ needs a priority over their regular business. The retained attorney will be able to prioritize the review of your contracts when the need arises.