Does your CPA know these 20 steps to help you get a small business loan?
So now for the fun stuff. Building Business credit is like building personal credit. It takes some time, effort and energy. There is a definite strategy and if you take your time and follow the steps that I outline, you will be successful in securing a business loan or working capital.
Here is the challenge. Virtually every business owner that attempts to get a small business loan tries to shortcut the process. I guess it’s the nature of the beast. Everyone wants everything yesterday. However, unlike building personal credit, which just sort of happens, building business credit in order to get a business loan is a proactive process. I’ll also warn you again that there are no shortcuts. Now this first stage is kind of boring, I admit. But this is like the foundation of a building. Build on sand and at best you’ll have something that is very shaky. Dig a deep foundation and have the proper cornerstones and there is no limit how much working capital you can get for your small business.
There are 20 items. Follow the step-by-step instructions and make sure your business completes all twenty items and you will build strong business credit scores which ultimately leads you to getting the business loan you need to grow your business.
- You entity must be open, active and in good standing with the State. (Hint: double check the status especially if you incorporated in a state that is not your state of business.)
- Double check to make sure that your EIN (Employer Identification Number) matches your state filing. Exactly.
- Did you know that the day you opened your bank account is actually the day your business started. Please make sure the business name on the bank account matches your state listing.
- And any and all business licenses that are necessary must be secured, filed and up to date.
- And if you do use a DBA, make sure it’s filed properly with your state and must be on all of your state, federal and banking records.
- Did you know that you need a separate business phone number? Please don’t use your cell phone as your main “business” number if you ever hope to be taken seriously (and this goes for the home phone as well). And your voicemail message. Please make it a business message. It’s not cute when a lender hears a kid’s voice or yelling in the background. If you want to get some serious money and credit, be serious about how you look to those that have your fate in their hands.
- Now make sure your business is listed in the 411-directory (and not with just your local carrier). If you’re only listed in local directories the national lender may not find you when they check.
- Get your credit file opened with Experian. You need a good credit history and a good score. More on this later on.
- Dun and Bradstreet (D&B). Same as above.
- Ditto for Equifax. I’m going to show you how to get this done easily. And one more thing. Nothing against D&B but please do not buy their package to get your credit built. It’s not necessary and guess what? I’m showing you how to do it for free.
- Please make sure you have no lates or derogatories on your business reports. Be creditwise and manage your files.
- Did you know that you need a physical address for your business? Make sure that it’s at a location where if there is a “check” on it’s location, even if it’s through Google maps, the lender can see it’s a real location. Can it be your home address? Well sure, if you work and run your business out of your house.
- You need a bank rating of at least a low 5. I bet you didn’t even know that the bank rates your account. Did you? Now don’t worry. You’re in good company if you you’re in the dark on this. I’m going to make you a pro by the end of this process.
- NSF’s. Yikes! At sunwisecapital.com I can’t tell you how many great businesses that we have to decline because of too many NSF’s. Yes, life happens. Receivables and payables don’t always align themselves. But please figure out how you can always keep enough in the account to stop the bounces. Your goal is to keep it clean for one year!
- Tax returns are important. It’s one thing to get an extension for the current year. But there is no excuse for being behind. Think about it. No lender wants to lend you money when good old Uncle Sam has the ability to go in and swoop in and take it all? Right? Though so.
- Check the Public Records on your business. No liens, judgments, lis pendens, etc.
- You’ll need at least 3 business credit cards (and I mean in the business name only – not a business car with your name on it that tells the world that you are personally guaranteeing that card). And make your payments early (what a novel concept)
- On top of that you need 5 Vendor Credit lines and you guessed it; payment made early.
- Almost there. You want what is called Comparable Credit, which is a larger loan from a non-bank lender (like Sunwise Capital) with payments made early. Bet you can’t guess whom you can talk to about that (hint, hint)?
- And last but not least you want to secure a small bank business loan and if you didn’t guess – with payments made early.
So now that you know what you have to do, let’s do it…