Commercial Credit. Builder Program

Transcription

1 Commercial Credit Builder Commercial Credit Builder Program Our Goal is to Help You Obtain More Money to Operate and Grow Your Business, Restore the Limited Personal Liability Protection Back into Your Business Structure and Make Your business Bankable. Aaron Silverman Commercial Credit Builder

2 Table of Contents Introduction What is Commercial Credit? Why is Commercial Credit Important? How does Commercial Credit Work? - The Foundation Rule How does our Commercial Credit Building Program work? What sets Compound Profit apart from other Credit Building Companies? - The Business Essential Tools Frequently Asked Questions 2

3 Introduction A large majority of applicants for small business loans are declined. Many applicants are declined due to paperwork. Or rather the lack of paperwork results in the denial of the application. The SBA and lending banks have requirements and guidelines to verify a business s viability to repay a loan. These guidelines include a range of items from verifying the company is registered with the State to analyzing financial statements and projections. Banks scrutinized every loan, because according to the SBA 24% of Businesses fail in the 1 st two years 56% of Businesses fail in the 1 st four years 11.9% of SBA loans defaulted in 2008 Our Commercial Credit Builder Program is much more than establishing Commercial Credit for your Business; however, we work the basics as well. YES, we work with you to Obtain Money to Operate and Grow Your Business Establish and Build Trade and Cash Credit Lines Restore the Limited Personal Liability Protection Back into Your Business Structure Improve Cash Flow by using Credit instead of Your Company s Working Capital Show You How to use Other People s Money to Grow Your Business Establish and Build Credibility with Your Suppliers and Vendors Establish Profiles with the various Business Credit Bureaus Help You obtain Bank Loans These steps are essential to the long term FINANCIAL SUCCESS of your business; however, they are only the first steps towards building your Corporate Profile and becoming Bankable. At Compound Profit, we believe your Corporate Profile is just as important as your Commercial Credit. Therefore, our Commercial Credit Builder Program is designed to go the extra mile in order to overhaul your entire Corporate Profile. We developed a program to make you attractive to Banks and other Lenders. 3

4 Your Corporate Profile is more than a score issued by the Business Credit Bureaus. Banks and other lending institutions look at much more than your company s Business Credit Scores when they make lending decisions. Your specialized Commercial Credit Builder Coach will Help Your Business become Bankable, Teach You how to Strengthen Your Small Business Financial Exchange (SBFE) Profile, Review Your Business Plan to ensure it meets Lender s Requirements, Instruct You on how to Develop Financial Statements and Projections, Teach You how to Work On Your Business instead of work in Your Business, Give You a Non-Disclosure Agreement (NDA) for Your Business Plan to Protect Your Business Idea, Teach You how to Create a Business Continuity and Recovery Plan, Show You how to Build Credibility within Your Industry and to Your Customers, Teach You how to Properly Brand Your Company, And Teach You how to Build, Maintain and Protect Your Personal Credit Score. These items will be discussed in more detail throughout this Commercial Credit Builder Whitepage, so let us jump into the Commercial Credit Builder Program. What is Commercial Credit? Commercial Credit is the measure of a business s credit worthiness. Your company s Commercial Credit Scores enable vendors, lenders, banks and other creditors to determine your company s lending risk. There are two types of Commercial Credit: Trade Credit and Cash Credit. Trade Credit is given by suppliers in the form of Net Term payment options meaning buy now and pay later. Net Terms are usually 15, 30, 60 or 90 4

5 days. If you arrange a Net 30 payment option with your supplier, you have 30 days to pay the bill from the invoice date. Cash Credit is given by credit card companies and banks in the form of unsecured and secured lines of credit and loans. Once you establish Commercial Credit, your company can and will receive multiple types of Trade and Cash Credit: Auto Building Supplies Office Equipment Gas Cards Credit Cards Vendor Bank Loans And More Essentially, Commercial Credit is to your business as your Personal Credit is to you; however, there is a major difference between the Commercial and Personal Credit. Unlike Personal Credit, you cannot repair Commercial Credit once it is damaged. Federal laws govern Personal Credit; whereas, there are no laws governing Commercial Credit. This means you only have one chance to establish strong Commercial Credit. This is one of the reasons Compound Profit is here to help. We know the steps to smoothly navigate the Commercial Credit Building process. Why is Commercial Credit Important? Before we dive into the details of this section, let us take a look at an example of how Commercial Credit can have an immediate impact on your business. A Contractor is hired to build a porch for a residential home for $1500. The Contractor needs $1,000 worth of lumber to complete the project. The problem is his compressor recently broke, and it will cost $200 to replace it. Now he needs to purchase the lumber and a new compressor to complete the job. 5

6 Money is very tight for the Contractor, and he cannot afford the $1,200 outof-pocket expense. The homeowner paid half of the project ($750) up front, so the Contractor has $750 but needs $1200 (lumber + new air compressor) to start the project. The Contractor goes to the Lumber Store where he has a Commercial Account and orders his lumber with 1% Net 30 terms. He has 30 days to pay for the lumber and will receive a 1% discount if he does. The job will only take one week, so he will have final payment in time to pay the Lumber Store. The Contractor purchases his new compressor for $200. Of the original $750, he has $550 remaining and everything he needs to do the job. He completes the job and receives the balance of the payment owed ($750). Now he has $1,300, so he pays the Lumber Store the $1,000 balance for $990 (because he received a 1% discount for paying within 30 days) and pockets his $310 profit from the job. Strong Commercial Credit enabled the Contractor to complete a job he did not have the financial resources to start; PLUS, he received a discount for doing business with the Lumber Store. The example showed how the Contractor was able to use Trade Credit to grow his business. MONEY is one of the reasons Commercial Credit is important. With Commercial Credit your company will be able to receive more MONEY to operate and grow. Remember, in addition to Trade Credit, Commercial Credit will also give you access to Cash Credit such as unsecured and secured bank loans and lines of credit. Would an extra $50,000 help your company grow? There is no limit to what your company can receive in forms of Trade and Cash Credit. Another benefit of Commercial Credit is LIABILITY PROTECTION. As your company builds its Commercial Credit, you stop giving your Social 6

7 Security Number (SSN) on credit applications and start giving your company s Employer Identification Number (EIN). Commercial Credit enables you to Purchase/Lease Equipment without a Personal Guarantee Limit Personal Liability from Business Expenses Separate Commercial Credit from Personal Credit Separating your Personal Credit and Commercial Credit is an often overlooked benefit of Commercial Credit. This protects your Personal Credit for when you need it in your Personal Life. In addition to providing MORE MONEY and LIABILITY PROTECTION, Commercial Credit SAVES your business money. As you build your company s Commercial Credit, creditors are able to assign a credit risk to your company. With a good credit rating, your company will receive: Better 30, 60 and 90 Net Terms with Vendors Better rates on Credit Cards Better rates on Bank Loans Better pricing with suppliers How does Commercial Credit Building Work? The Catch 22 of Commercial Credit is your Business cannot receive Commercial Credit until it already has Commercial Credit. This puts you, the Business Owner, in a tough spot when you attempt to open Commercial Accounts. There are distinct steps a Company needs to take in establishing Commercial Credit. The first part is called The Foundation. As I like to say Build It, and the Money will come. It is really nothing more than making sure the proper paperwork is in the proper place. The key is to know when each item needs to be completed and not overlook or bypass steps. Here are a few of the items of building The Foundation. The Foundation 7

8 Registered Business Name: The first step toward building Commercial Credit is incorporating your business. There are six basic business structures Sole Proprietor, Limited Partnership, General Partnership, LLC, S-Corp and C-Corp. Sole Proprietors, LPs and GPs are pass-through tax entities, so there is no taxable difference between the business and the owner(s). Commercial Credit cannot be built with these business structures. LLCs can be structured as pass-through entities, so it can be harder to build Commercial Credit for a LLC. However, it can be and is done every day. S- Corps and C-Corps are the preferred business structures to build Commercial Credit. Obtain Employ Identification Number: Every business needs an Employer Identification Number (EIN also commonly know as Tax ID). Even if you do not have employees, your EIN will identify your company, your business accounts, tax returns, documents, etc. You will write this number in place of your Social Security Number on Commercial Credit Accounts. Business Bank Account: Every Company needs a Business Bank Account. Just as important as having the account is how you have it set up. The Business Bank Account needs to be the exact same name and address you registered with the State. This holds true for every Business Account you open. Your business name must be spelled exactly the same with the same address listed. You cannot use a PO Box or Virtual Office to build Commercial Credit. You need to use the physical address registered with the State for building Commercial Credit. For every account with a different name spelling or address, you will at times need to prove it is the same company. It is harder to change these records once they are already created, so be vigilant when setting up Business Accounts to verify all information is accurate and consistent. Listed in White Pages/National 411 Directory: 8

9 For some Vendors their only step in deciding to issue credit to Commercial Clients is calling the Business Phone Number listed in the 411 Directory. As long as the phone number is listed and answered in a professional manner with the company s name, the company will be issued Commercial Credit. For other Suppliers, Vendors, Banks, etc, this is the first step in a long list of items checked before issuing Commercial Credit. Business Phone Numbers are not always automatically listed in the White Pages or 411 Directory. You need to verify your company is listed and take the steps to list your company if it is not listed. Register with Business Credit Agencies: There are numerous Business Credit Agencies, but the three main players are Dun & Bradstreet, Equifax and Experian. D&B is by far the largest player in the Commercial Credit market. A D-U- N-S Number does not automatically give your Business Commercial Credit. You need active vendor credit lines that are reporting to the Credit Bureaus in order to start and then build your Commercial Credit Profile and Score. Many Banks use the Small Business Financial Exchange (SBFE) to make their lending decisions. Equifax is the third party provider that maintains the database for the SBFE. Other than working with Equifax to make sure you have an account, your SBFE Credit Score is automatic. We teach you how to maximize your SBFE Credit Score. Once The Foundation is built, your business is ready to start building its Commercial Credit Score. We use the Rule to build your Score Rule There are certain milestones along the Commercial Credit Builder process that need to be reached. To maximize their Commercial Credit Score, a Company needs a minimum of 5 Vendor Lines, 3 Revolving Accounts and 1 Bank Loan reporting to the Commercial Credit Bureaus. 5 Vendors: 9

10 Vendors and Suppliers often extend Trade Credit. They offer 30, 60 and 90 day Net Terms (some companies offer other timeframes). Once you establish a strong Commercial Credit Score and Profile, some companies will give you a discount for doing business with them, and your Net Terms may be 1% 30 day Net as in the earlier example. YES, a strong Commercial Credit Score can actually save your Business money when it uses a Commercial Account versus a cash account. When selecting a Vendor to start building Commercial Credit, you need to find a Vendor that: 1. Reports to the various Credit Bureaus 2. Extends Commercial Credit to companies without a Commercial Credit Profile. However, there is a problem with finding a Vendor that reports to the Credit Bureaus. 500,000 businesses extend business credit; only 6,000 report to various bureaus and agencies. Our program eliminates the guesswork in determining which Vendors report to the Credit Bureaus. 3 Revolving Credit Accounts: There are two types of Revolving Credit Accounts: Retail and Bank. Retail Accounts are credit cards through retails stores, and Bank Accounts are credit cards through banks. We work with you to obtain two or more of each focusing on bank credit card accounts. Did you know? There are over 500 Business Credit Cards and only 40 unattached to Personal Credit. That statistic is a little outdated, so the numbers are even worse in today s credit climate. It is harder to find Commercial Credit Cards that do not appear on your Personal Credit. Most Bank Credit Cards require a Personal 10

11 Guarantee. Although they are Personally Guaranteed, they do not appear on your Personal Credit Report unless you miss payments. This is important, because it preserves your Personal Credit for when you apply for the Bank Loans. All banks will run your Personal Credit when you apply for a Business Loan. As a Small Business Owner, this is unavoidable; therefore, you want and need to preserve and protect your Personal Credit as much as possible. 1 Bank Loan Bank Loans and Lines of Credit are the financial resource goal of every Small Business Owner, because they are flexible and inexpensive when compared with other sources of money. All Banks will look at your Personal Credit; however, not all of them will require a personal guarantee when you apply for a loan or line of credit. Each Bank offers different commercial loan products, so you need to shop around for a Bank that fits your needs. Compound Profit is here to navigate the Commercial Credit Building process with you, and we teach you what to ask and what to look for. How does our Commercial Credit Builder Program work? Our Commercial Credit Builder Program is designed to help your business obtain Commercial Credit in 3-6 months instead of the several year process it can normally take. We ensure your Company is established and active with Dun and Bradstreet, Experian and Equifax. We will also create profiles with several other Commercial Credit Bureaus. Your Commercial Credit Coach will work with you for one year assisting you in creating a solid Commercial Credit Score/Profile and becoming Bankable. Another goal of Compound Profit is teaching you how to use the necessary tools established during the year promoting continuous business growth. Once you purchase the Commercial Credit Builder Program, you complete a Company Questionnaire, and we assign you a Commercial Credit Coach 11

12 who develops a customized approach to establish and build your company s Commercial Credit Score and Profile. Once The Foundation is built, your Commercial Building Coach will move onto building each Level of The Rule. In Level 1 your Commercial Credit Coach completes Vendor applications for your Company. We select Vendors that match the type of products your Company typically uses. Your Company needs to use the Commercial Credit Accounts we help you establish in order to build Commercial Credit, If you already have Vendor accounts, we will attempt to have them report to the Credit Bureaus. With Level 1 Vendors, you will typically have 30 day Net Terms which means you have 30 days from the invoice date to pay the amount due. In order to obtain the highest PAYDEX possible, we advise you to immediately pay the bill when you receive it. D&B s PAYDEX Value Chart gives 80 out of 100 possible points for a payment made the day it is due. Your company needs to pay the bill 30 days before the due date to receive 100 out of the 100 possible points. Level 2 starts once your company establishes a reporting payment history with the Trade Credit Company from Level 1. As trade lines are established and requirements are met, lines of credit and credit cards are applied for. Your Coach will work with you to receive Retail and Bank Credit Cards. Level 3 of The Rule in the Commercial Credit Builder Program is to obtain a Bank Loan. Remember the SBFE mentioned earlier? It is the reason applying for the Bank Loan is the final step. SBFE considers items such as the daily average balance and cash flow of your accounts. During the first few months you are enrolled in the program, your Coach will teach you how to strengthen your company s SBFE Credit Score as much as possible before applying for a Bank Loan. If your company is unable to obtain an unsecured loan or line of credit, your company will obtain a secured loan/line of credit. Your Commercial Credit Coach will teach you how to convert the secured loan into an unsecured loan. 12

13 The Final Step in the Commercial Credit Builder Program is to maintain and continue to grow the Commercial Credit Score and Profile we helped you build. What sets Compound Profit Apart from other Credit Building Companies? There a number of companies that will build Commercial Credit for your Company. There are even some that will sell you a quick How To guide with less information than this Whitepage. Although our Foundation and Rule Commercial Credit Builder Program exceeds what other companies offer, we drastically enhanced our Program by including several extra Business Essential Tools. Our goal is to help you Obtain More Money to Operate and Grow your Business, Restore the Limited Personal Liability Protection back into your Business Structure and Make Your Business Bankable. I have already covered the first two parts of the Goal, and the Business Essential Tools are designed to Make Your Business Bankable. The Business Essential Tools 1 hour Business Plan Consultation 30 minute plan review 30 minute phone call review NDA Agreement Business Plan EBook Branding Special Report Social Networking and Blogs as Business Tools EBook Business Continuity and Recovery Plan EBook Coming October 2009 Building, Maintaining and Protecting Your Personal Credit Score EBook Coming November 2009 Business Plan EBook and Consultation: Your Business Plan is a major factor in your Company s ability to receive Bank Loans and Lines of Credit. A Bank will not loan you money if you do not have a plan for success or financial projections. 13

14 Our Commercial Credit Coaches will not write your Business Plan for you. We believe you, the Business Owner, are the most knowledgeable person to write your Business Plan. You should understand your and your business strengths/weaknesses and the industry better than someone you can pay to write your Business Plan. Our Business Plan Consultation goal is two-fold. The first is to review your Business Plan ensuring it meets Lender s requirements and help you strengthen your Business Plan. The second is to review your Financial Projections. The Bank needs to know you have a plan for success to utilize and repay the money. The Banks also wants you to have financial projections that show the cash flow to repay the loan. We are not CPAs or Tax Attorneys, and we do not verify the accuracy of your projections. We analyze them to determine if they make sense and contain the proper data. For example, if your business has an office and electricity is not listed as an expense, your Commercial Credit Coach will point out the discrepancy. The Business Plan EBook is designed to teach you how to work on your business instead of work in your business. Many Small Business Owners are the bottle neck of their business. When the Owner has a sick day, the Business has a sick day. When the Owner takes a vacation, the Business takes a vacation. Many times this cannot be prevented when a Small Business opens. The problem is this becomes the normal operating procedure, and the Small Business Owner is run by the Business instead of the other way around. The Business Plan EBook is designed to help you start thinking about Leading your Business instead of Managing your Business. Branding Special Report: The Branding Special Report will teach you how to Properly Brand Your Business. The simplest form of Branding is a Business Card, and it is an essential Business Tool. Almost as common, and just as important as the Business Card, is a business website. Your Company needs somewhere to drive customer inquiries for more information. 14

15 In the Report, I discuss the importance of an address. A member of the Networking Group I started, Joe (name changed), owns a tree cutting service and has a website for his Company, Joe s current address is JoesTreeCuttingService@yahoo.com. To Properly Brand his business, I told him to change his address to Joe@JoesTreeCuttingService.com. With the Yahoo! address, Joe advertises for Yahoo! every time he sends an . If he changed his address to my suggestion, he would be advertising his business website every time he sends an . Also, his new address provides instant credibility and a professional appearance. Plus, I discuss, as a Small Business Owner, you and your Company are one in the same. This is important when dealing with customers, Vendors and even Commercial Bankers. Social Networking and Blogs as Business Tools EBook: The Social Networking and Blogs as Business Tools EBook is geared towards teaching you how to BUILD CREDIBILITY within Your Industry and to Your Customers. Social Networking is a channel to interact with your potential, current and past customers. You have instant access to promote your products and sales and build credibility with them. Today s customer has unprecedented access to information, and they conduct research before they make a purchase. They are more likely to become your customer if your Company is providing that information. Another Business Owner in the Networking Group created a Twitter account soon after the meeting where I presented Social Networking and Blogs as Business Tools. Within one week of joining Twitter, a potential client he met on twitter requested a bid on a project - very quick return on his time. By Blogs, I am not referring to the one or two paragraph updates of a daily blog. I mean Ezine type articles written about your Industry. Ezines are Electronic Magazines that are normally distributed via to subscribers of the Ezine. 15

16 You need 5-10 well written short Articles. These Articles are then posted on your Company s website, submitted to Ezine Article websites, ed to potential, current and past customers as touch points, Networking websites, etc. The purpose of the articles is to build credibility. Once you publish the Articles on your Company website and Ezine article websites, you are a published author. It does not take much to be a published author; however, being published gives you credibility. Once you create and publish the Articles, you need to include them as an addendum to your Business Plan and list the fact you are a published author in your Business Plan. The #1 question your Business Plan must answer is Why are you the right person to run the Company? Credibility helps establish you as that person. Business Continuity and Recovery Plan EBook: This EBook is still being written and will be available for distribution to all active Commercial Credit Builder Clients in October It will teach you how to develop a Business Continuity and Recovery Plan. In general, people do not like to plan for the worst case scenario. As a Small Business Owner, you have a responsibility to your employees, spouse, family and anyone else that depends on your Company for a livelihood. You must have a plan in place just in case the worst case scenario actually occurs. A Business Continuity and Recovery Plan can be a stand alone document; however, I recommend you include it as an addendum to your Business Plan. The purpose of a Business Continuity and Recovery Plan is threefold: 1. Instructs how the business will operate in the event of a natural disaster. 2. Details a plan on how to operate or sell the company in case something happens to you and you are unable to run the business. 3. Tells potential Investors, Lenders, etc how borrowed money will be repaid in the event either of the first or second situations occur. 16

17 Building, Maintaining and Protecting your Personal Credit Score EBook: This EBook is still being written and will be available for distribution to all active Commercial Credit Builder Clients in November The EBook will teach you how to Build, Maintain and Protect your Personal Credit Score. Frequently Asked Questions Q: How much Money will my Company receive? A: This varies from Company to Company and Industry to Industry. Your Company s cash flow will also impact the amount. Credit Lines range from $250 and up with Trade Credit on the lower end and Cash Credit on the higher end. Q: Can I just do this with my Personal Credit? A: Yes and no. You can but you miss all the benefits of Commercial Credit, and you run the risk of quickly ruining your Personal Credit and draining your Company s financial resources. No, because your Personal Credit has limits on the amount of money you can receive for your Company. With Commercial Credit, you are not penalized for having too much credit; it actually benefits you and helps you receive more credit for your Company. Q: I do not need Trade Credit; I need Cash Credit. Can I skip to acquiring Cash Credit? A: No. Trade Credit is a step in the Commercial Credit Builder process. Cash Credit companies want to see a track record before issuing credit, and Trade Credit is the starting point. Without Trade Credit, you are not able to build Commercial Credit free of your Personal Credit. We work with you to decide which Trade Credit Vendors are the best fit for your Company. Mostly we work with office supply Vendors, so you will have extra office supplies that will eventually be used. We try to match your Company with Vendors that supply what your Company uses everyday. Q: Do you offer a Guarantee? A: Yes, we offer a Guarantee. We guarantee you will have multiple Trade Credit Accounts and multiple Cash Credit Accounts within twelve (12) 17

18 months. If we are unable to meet that goal, we will refund your money and you keep all Credit Accounts that have been established and all the educational matter we provided you. 18