Do the Credit Cards for your Business Report to your Personal Credit Reports?
Due to the growing difficulty in obtaining traditional business lines of credit from banks, many business owners are turning to credit cards for small businesses as their primary unsecured business lines of credit.
Unfortunately, the majority is turning to the wrong sources. They end up putting their personal credit on the line and all their business credit card debts show up on their personal credit reports.
This means that anytime you use your business credit cards, your personal debt/credit ratios are affected. Did you know that drawing a large portion of funds from these types of business credit cards can result in your personal credit scores dropping anywhere from 20-100 points overnight?
Some of the largest financial institutions offering business credit cards report to your personal credit. This negatively impacts your scores.
Do your current business credit cards report to your personal credit reports?
If so, you should consider obtaining several true business credit cards that do not report. This will shelter your personal credit for personal necessities such as auto loans, mortgages, student loans and personal credit cards.
Unsecured credit lines such as business credit cards have been around for a long time. They are no secret to the wealthy and savvy business owners. When properly structured, they do not report to your personal credit reports. They can be excellent cash flow tools, as the monthly debt service is usually lower than almost any other form of financing. The rates are usually very good, too–usually between 3-7% above prime.
So where can you find business credit cards that do not report to personal credit?
Well, the good news is there are credit cards that only report to the business credit bureaus. The bad news is the credit card issuers for these types of cards do not advertise this fact.
First, while there are hundreds of credit cards for small businesses available in the marketplace, only a handful of major companies issue and service all these consumer and business credit cards.
So when you see a financial institution launch a new credit card program with its own branded label, in most cases it always includes a partnership with a leading agent credit card issuer to provide and service the actual credit card products to its customers.
The agent credit card issuer is the company that actually underwrites, issues and services the credit card customer. As you may know, part of account servicing includes credit reporting.
You have two options if you want to locate these types of credit cards for your business. First, you can utilize a business credit service because they know firsthand which lenders are lending, which ones report to only the business credit bureaus, and whether you and your business will be a good fit for them.
Your second option is to do it on your own. But, you will need to know which lenders offer unsecured business credit without full income documentation. In addition, you will need to find out which ones do not report to your personal credit reports.
Finally, you should be aware of which credit bureaus are pulled by each lender so you can properly plan the series of applications. These are just a few of the questions to address prior to doing it on your own.
About the author
Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.
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Run a Home-Based Business? – Find the Licenses and Permits You Need
Whether you’re starting a business from home or looking to move into a home office, it’s important not to overlook the fact that your business is still subject to license and permit laws.
Why? One of the main reasons any business owner is required to carry a license is so that revenue can be tracked for taxation purposes. Businesses that sell taxable goods or services also need a sales tax license or permit. Licenses and permits are also used to protect the public and are required in federally regulated industries (aviation, firearms, alcohol businesses, etc.).
Other industry licenses signify specific expertise. For example, if you run an in-home hair styling business, you’ll need the same professional license that you’d need if you had a main street salon.
Regulations vary based on industry and location, so it can be intimidating to know where to start.
Find Your License and Permit Requirements
Select your state from the list to discover which licenses or permits you’ll need, together with information and links to the application process.
General Home Business License and Permit Guidelines
In addition to the Permit Me tool, it’s helpful to know more about the general guidelines that apply to home business licensing and permit requirements. While not all of these will apply to every business, some will:
1. General Business Licenses – Your city or county government website can help you get one of these. Basically it’s an annual license or permit that legally entitles you to operate a business in that locality. Typically a small fee is associated with this paperwork.
2. Professional and Trade Licenses – State governments require certain businesses or industries to obtain professional/occupational licenses, such as a child care operation or real estate license. You can contact your state's business license office – or check the website – for a complete list of occupations that require licensing.
3. Home Occupation Permit – Many city and county zoning and planning agencies require all home-based businesses to get a Home Occupation Permit. If a permit is not required in your city, the zoning office can tell you if your neighborhood is zoned for the home business activity you plan to conduct. If your area is not zoned for your type of business, you may need to file for a variance or conditional-use permit. This guide, Zoning Laws for Home-Based Businesses, has more information about zoning laws for home-based businesses.
4. Sales Tax Permit - If you intend to sell taxable goods or services (online or offline), you may be required to collect state and local sales taxes from your customers. If you sell your products in a state that charges a sales tax or levies a gross receipts or excise tax on businesses, you may have to apply for a tax permit or otherwise register with your state revenue agency. This blog also explains more about the process of getting a permit and collecting sales tax: Sales Tax 101 for Small Business Owners and Online Retailers.
5. Health and Safety Permits – Depending on your location and industry, you may need either a permit or an inspection from your local fire department, especially if your business requires the use of flammable materials or will likely involve the assembly of several people in one location, such as a child care business.
Air and water pollution by businesses is also monitored in some communities. You can check with your state environmental protection agency to see if these regulations are applicable. Health Department permits are typically issued by your county government, pending an inspection of the business premises, if you plan to sell food to the public or to other businesses. Additional permits may be required for food service or food preparation depending on your state.
6. Sign Permits – Some cities and towns have sign ordinances in effect that restrict the type, size, or location of signs placed on your property. Check with local authorities.
7. Construction Permits – If you need to make structural changes to your property to accommodate your in-home business, environmental and building permits may be required for construction. It’s a good idea to check your local government’s building and planning department before undertaking any construction.
8. Check with Your Home Owner’s Association (HOA) – While your local HOA won’t specify particular licenses or permits, if you do live in a planned residential neighborhood or complex, the HOA can restrict the type of business activities you conduct in your home. Read “Can a Homeowners' Association Ban Your Home-Based Business?” for the lowdown on the law and your rights.
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Franchise Lawyers: When To Use One
Are you headed towards the finish line? Are you at the point in your franchise business exploration where your yes or no decision on a particular opportunity is imminent? If so, read on…
In my capacity as a franchise ownership advisor, I’ve had several clients hear variations of the following declaration from their franchise development representatives;
“You are welcome to pay to have a franchise attorney look over our Franchise Disclosure Document as well as the franchise agreement, but everything in our agreement is etched in stone.”
In other words: the franchise agreement, (contract) is non-negotiable.
While that may be true, (for the most part) these documents are not that easy to read, especially since a majority of the wording is in legalese. The Franchise Disclosure Document (FDD), combined with the actual franchise agreement itself, can easily be 200-300 pages long. You probably won’t be able to digest all of it in one sitting.
Look at all of the items that are included in every FDD:
· The Franchisor, its Predecessors, and its Affiliates
· Business Experience
· Initial Franchise Fee
· Other Fees
· Initial Investment
· Restrictions On Sources Of Products And Services
· Franchisee’s Obligations
· Franchisor’s Obligations
· Patents, Copyrights and Proprietary Information
· Obligation To Participate In The Actual Operation Of The Franchise Business
· Restrictions On What The Franchisee May Sell
· Renewal, Termination, Transfer And Dispute Resolution
· Public Figures
· Earnings Claims
· List Of Outlets
· Financial Statements
That’s a lot of information for you to go through, especially if you’re new at reading franchise business documents. That’s why you need to hire a franchise attorney to look the franchise documents over. A franchise attorney knows what to focus on in the FDD and in the actual contract. They’ve probably written a few themselves. They can also lay out exactly what your obligations are going to be to the franchisor.
But, you don’t need to hire a franchise attorney right way. Follow these steps first:
· Figure out what your top skills are, business-wise
· Choose a few franchises in which those skills can be utilized
· Learn all you can about the ones you’ve chosen
· Visit* franchise company headquarters
Once you’ve done those things and are pretty much ready to move forward with your chosen franchise opportunity, hire a franchise attorney. A good one will make sure you haven’t missed anything in your research.
As far as I’m concerned, using the services of a qualified franchise attorney is the only thing that should be non-negotiable (in your eyes), if you’re buying a franchise.
One more thing
Are franchise contracts really non-negotiable?
According to Charles Internacola, a New York franchise attorney, they absolutely are:
“It is not illegal for a franchisor to negotiate the terms of your franchise agreement. While you must be reasonable with your expectations about the franchise agreement terms that a franchisor may or may not be willing to negotiate, review the franchise agreement with your franchise lawyer and develop an approach to address and negotiate some strategic points that may enhance your rights as a franchisee.”
Read about the seven things that Mr. Internacola feels are negotiable in a franchise contract on his New York Franchise Law blog*.
Finally, I don’t want you to get the impression that franchisors are out to get you. They’re not. They just want every franchisee in the system to be on the same page. Doing so can help preserve and even strengthen the brand.
They’re just trying to protect themselves. You’re doing the same thing by hiring a qualified franchise attorney.
*Non-US Government link
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Free Training Resources on Financial Management Available to Small Business Owners
Are you looking for financial and business management tips and advice to help get your business off the ground? If so, there is a new tool to add to your small business tool belt. Money Smart for Small Business is a brand new training for new and aspiring business owners that introduces you to the day-to-day operations, organization and planning of a business from a financial standpoint.
Money Smart for Small Business, created with you – the entrepreneur – in mind, is an instructor-led financial education curriculum to help you with financial management to better operate your business. It was written for entrepreneurs who have no prior formal business training and offers practical information that can easily be put in place.
Why Money Smart for Small Business?
The Money Smart for Small Business training curriculum is an easy-to-follow structured program that covers 10 key areas of finance needed to organize any business. The 10 financial-related areas covered in the training are:
- Selling and Succession
- Financial Management
- Organizational Types
- Time Management
- Tax Preparation
- Record Keeping
- Risk Management
- Credit Reporting
The training prepares you on the basics of financial management and lays a foundation for your ongoing training and technical assistance. It was developed mainly for new and aspiring entrepreneurs by the SBA and the FDIC, and is the latest in the FDIC’s Money Smart program.
The training gives you a full-range of business and financial resources, and gives you information about financial education programs provided by SBA and the FDIC to help strengthen and improve your ability to start, grow and compete in the global marketplace.
How does the Training Work?
Money Smart for Small Business starts with a core curriculum of the 10 modules that give you a first look at running a small business from a financial standpoint. The modules can be taught in any order and are designed to give you the most necessary information in an hour-long period. Each module has a scripted instructor guide, a participant manual and useful overhead slides that make it clear and easy to understand.
But the end of the training is just the beginning. Instructors are invited to consider organizing and hosting peer learning-type forums to give participating business owners the chance to meet regularly to support one another during their first year.
Also, instructors who lead the training curriculum will share their best practices, problem-solve common issues, and give their feedback to continuously improve the core of the training curriculum.
Is there Special Eligibility to Receive the Training?
Instructors who lead the trainings will likely find it helpful to have experience in conducting trainings, providing technical assistance or coaching small businesses. But no certifications are required to use or to order the training curriculum.
You should also know that the training is not intended for use by individual entrepreneurs on their own. Training on the Money Smart for Small Business program will be provided by a wide variety of organizations across the country such as financial institutions, small business incubators, city and county economic development offices, faith-based organizations, and similar organizations that teach workshops to entrepreneurs and small business owners. Training will also be provided by SBA Resource Partners, which include SCORE, the Women’s Business Centers and the Small Business Development Centers.
How Can I Receive the Training?
Money Smart for Small Business can be ordered free of charge directly from the FDIC.
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The support given by the U.S. Small Business Administration to this activity does not constitute an express or implied endorsement of any cosponsor's or participant's opinions, products, or services. All SBA programs or cosponsored programs are extended to the public on a nondiscriminatory basis.
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P2P Lending and Crowdfunding – Explore the New Frontier for Small Business Lending
Looking for capital to start or grow your business? Sometimes, even with a solid idea and business plan, finding third party financing can be a challenge for many small business owners.
So where are startups and growing businesses finding the funds they need?
According to a Kauffman Firm Survey, one-third of young firms do not use capital injections. Instead, they rely on owner investment or nonbank sources of funds, with the most frequently used source of startup dollars being owners’ and relatives’ savings (source).
But if you don’t have savings to fall back on, another financing option worth considering is peer-to-peer lending or crowdfunding (also known as crowdsourcing). Both combine lower interest rates or creative repayment terms that might just be worth looking into.
What is Peer-to-Peer Lending?
Peer-to-peer-lending (P2P) essentially involves sharing your idea to other people in hopes they will invest in your business. Sites like Prosper or Lending Club connect people who want to lend money with those who need to borrow money – often in increments as low as $25. Quite literally, you determine how much you need to borrow, define the purpose of the loan, and post your listing online.
What’s in it for the investors? Well, returns can be in the range of 10 percent across their portfolio, creating a steady stream of income, not to mention the altruistic payoff of helping businesses succeed.
Obviously, you can’t just cross your fingers and hope for the best when you post your listing. Some factors that can sway your investment-worthiness include these:
- Have a plan – It’s more than just describing what you’re going to do with the money; it’s important to share findings from market research, competitive analysis, financial forecasts, expected returns, and so on. Here are a few tips for creating a business plan (obviously you can’t share it all, so be sure to have a clear synopsis).
- Tell your story – What’s your background? What are your dreams for your business? This will help humanize and frame your case.
- Share your achievements and progress – What have you invested in your business already? At what stage is your business? What landmarks have you already achieved? Potential investors will want to know how invested you are in your business and that their investment in you will pay off.
P2P lending sites are also a useful way to structure loans from friends and family. Because the P2P service acts as an intermediary or broker, it can help remove any potential emotional complications from the transaction while giving the lender some reassurance that you will repay on time.
What is Crowdfunding?
Crowdfunding is a collective cooperation of people who network and pool their money and resources together, usually via the Internet, to support efforts initiated by other organizations. While P2P lending typically focuses on one individual lending to another, crowdfunding – as its name implies – aims to reach a funding goal by aggregating many small investors.
Since President Obama signed the JOBS Act in April 2012, it has become a lot easier for small businesses to raise money online via crowdfunding. Previously, small businesses were limited to seeking investment from SEC accredited investors only; now non-accredited investors (i.e. you and I) can invest in a startup to the tune of up to $1 million a year.
One example of a hugely successful non-profit crowdfunding venture is Kiva.org. Kiva works with microfinance institutions on five continents to provide loans to people without access to traditional banking systems, including U.S. businesses.
While Kiva requires that you repay the loan over time, most crowdfunding opportunities aren’t loans and, as such, don’t involve traditional forms of repayment and interest. Instead, borrowers offer a form of payback or reward to encourage people to make the investment.
One example is the funding model established by Kickstarter. If your business is of the creative kind – art, technology, film, photography, music – Kickstarter is a way to source funds from others. In exchange for investment (often as little as $25), borrowers “reward” investors with compelling returns. For example, a share in your business or even access to limited edition works, free products, invitations to parties and events, anything you believe is an attractive enticement.
Other Forms of Financing
Most startups don’t need a lot of financing. In fact, government data shows that 40 percent get started with less than $5,000. If your funding needs are small, consider a microloan (such as SBA’s Microloan Program), or use a business credit card to make larger purchases or bridge the gap until you’ve secured funding from other sources. You should also consider diversifying your funding sources, giving you a better chance of reaching your goals.
- 6 Tips for Borrowing Startup Funds from Friends or Family
- A Quick Guide to Microloans
- Why Should you Apply for a Business Credit Card?
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