Gerri Detweiler, Business & Credit Expert, Author, Speaker

Scaling Up Services - Gerri Detweiler

Gerri Detweiler, Business & Credit Expert, Author, Speaker

Business and credit expert Gerri Detweiler is education director for Nav, which provides business owners with simple tools to build strong business credit and match them to financing. She’s been interviewed in more than 3500 news stories and answered over 10,000 credit questions online. Her articles have been widely syndicated, and she is the author or coauthor of five books, including Finance Your Own Business: Get on the Financing Fast Track. She has hosted her own radio show and testified before Congress on consumer credit legislation.

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[00:00:01] You're listening to Scaling Up Services where we speak with entrepreneurs authors business experts and thought leaders to give you the knowledge and insights you need to scale your service based business faster and easier. And now here is your host Business Coach Bruce Eckfeldt.

[00:00:22] Welcome everyone this is Scaling Up Services, I'm Bruce Eckfeldt and I'm your host and our guest today is Gerri Detweiler and she has business credit and financing expert at now. And we're going to learn a little bit more about how you can finance your growth how you can get better cash into the business to help grow and scale. So with that Gerri. Welcome to the program now. Thank you Bruce. I always like to start with learning a little bit about the guests themselves. So why don't we hear a little bit about your background how you got into focusing on finance and helping individuals and companies with finding cash finding capital to help finance businesses and operations.

[00:00:55] Well I literally fell into my what I'm known as which is a credit expert and after college I was in D.C. and I fell into a job with a consumer advocacy group and we were doing really cool things like testifying in front of Congress on legislation to tell consumers how much their credit card costs before they got it in the mail which used to be a thing you didn't know and working on legislation to give consumers free credit reports and scores for the first time and just really really interesting stuff so I wrote my first book The Ultimate Credit handbook and it was the first mass market book that talked about FICO scores way back in the day and more recently about 10 years ago I was introduced to small business attorney and rich dad adviser Garrett Sutton and Garrett travels the country talking to small business owners and he said You know I have a lot of my clients and people I talked to who are spending a lot of money trying to build business credit and sometimes it's a rip off and what can we do to help them. So we collaborated and eventually we wrote my latest book finance your own business together and in the course of that I shifted over to focusing on small business and I interviewed the CEO of NAV and I loved what they were doing and when the book came out I ended up joining them full time. So now I devote myself full time to educating small business owners on business credit and finance. But I will say also that I was self-employed for about 16 years and in the service business as a consultant and freelance writer. And so I have experienced the headaches that many small business owners go through in terms of cash flow it seems like the bigger the client the longer they take to pay. So I I've been there as well.

[00:02:25] Yeah good. So I'm excited for this. So what don't we talk about kind of credit in general and then we can kind of dig in to know sort of business credit or credit related to businesses and talk about you know kind of services because I think there are some particularities when it comes to service businesses. So let's just gonna lay out credit so though know explain how credit works right now. So you mentioned Fico. You mentioned you know that the kind of scores that you get around credit. Give us a quick kind of overview of how the credit rating system how you get credit and how that works.

[00:02:54] Yeah. So there are three major credit bureaus Equifax Experian and TransUnion they all collect information about us as consumers how we pay our bills. They package and sell it to employers insurance companies to credit card companies et cetera FICO is the they're the recipe for the credit score. They don't have any credit data at all. I find people are very confused about that. In addition a few years ago the bureaus started their own competitor to fake or called Vantage Score and vantage score is used by some lenders it doesn't have the market penetration that FICO does because Spike has been around since the 1950s but it is used and you'll often see a vantage score when you're getting a free credit score from a service like NAB or if you have credit karma or something like that you'll see advanced scores it's cheaper to provide a free score when they don't have to pay if I go for that score. Got it. But here's the biggest the number one misconception I hear about FICO scores. People always want to know what's my real score what's my true score what's my write score. And we have three bureaus. But in addition Flaco has many different models. They have over 40 different credit scoring models. So it depends on what the lender is using and the lenders and also customize it. So that's why when you check your checking your own credit score and then you go to the car dealer and they pull up a different credit score it could be the same bureau same data but different scoring a goal why is this difference because they're trying to predict how you're gonna be an auto loan and maybe the one you're looking at is from your credit card company and they're trying to predict how you're going to pay a credit card.

[00:04:18] So there's no single score. So they're like different algorithms so basically the fight go is really a set of algorithms or calculations. And it basically pulls the raw kind of credit data and then we'll wait it and kind of the math will be slightly different depending on the application. Exactly. Exactly. All right. So so so the bureau's out there or or you know if I goes out there you have these bureaus there's lots of different kind of algorithms against it.

[00:04:45] So I guess what goes into the credit score that has kind of raw material generally the two major factors that they're going to look at is your payment history and your debt and on payment history they're going to look at a lot of weight will be given to negative items so if you don't have negative items like collection accounts bankrupt these late payments charge offs things like that. That helps a lot but you do need a few accounts reported. So I have to I have seen consumers who just have maybe more. My dad's a perfect example he got a letter from his insurance company saying he didn't get the best discount on his auto insurance because this credit and it's just not because he doesn't have good credit because he is house paid for his car is paid for he doesn't have much right. There's not much data there to go on. So and then the debt side it's really how people ask me all the time. I have one hundred and fifty thousand dollars in credit card limits. Doesn't that make me look like a risk because I could run out and charge it up tomorrow. And sure this vehicle doesn't care what your credit limits total what they care is how you're managing them. So they'll look at their credit limit compared to the balance. And as you start getting closer and closer to that balance and your credit limits even on one card like a retail card with a low limit that can bring down your credit score.

[00:05:49] Got it. So it's like it's a ratio percentage not not an absolute.

[00:05:53] Exactly. And there's no there's no magic number. You'll see 30 percent you'll see 50 percent. What I say is most consumers can get away with a debt a debt usage ratio of about 25 percent which means your your balance on your credit report is about 25 percent of your credit limit. But if you have a short credit history like you're younger for example than I find you might have to stay below 20 percent because just because a little bit of swing could have more of an impact.

[00:06:18] Got it. And the other one you mentioned I think is interesting is that if you don't have any history that's actually not good.

[00:06:24] You don't have you're not you don't have any any debt or any credit you say or any credit act of that that actually reduces your score.

[00:06:31] Right. Because they just don't have enough data to predict how you're going to manage future debt. So really ticks people off especially people who you know follow the debt is always bad crowd but you can use your credit card like a debit card and just paid in full each month. And that's you know that helps you build credit.

[00:06:47] Yeah. So that's personal credit. How do companies deal with business credit because we're not talking about a business entity and I don't know if there's a difference in terms of how credit is considered between the different types of entities but how do they look at business credit.

[00:06:58] Yeah. And before I jump into let let me just mention one thing related to personal credit that I see all the time with small business owners and this is one of the biggest sort of mistakes or gotchas. They use a personal credit card for their business and maybe they separate. They don't put anything else on their credit card but their business purchases. Great. But then what can happen is that activity is showing up on their personal credit and even if they're paying it in full each month the high balances that are getting reported because your credit card company doesn't wait to pay your bill off to report to the bureaus they report at the end of the closing billing cycle when they say here's how much you owe. And so those high debt usage ratios I give you a quick example I was in a I was speaking at a workshop for small business advisors and when the adviser said the Ace and I had a client who financing fell through at the last minute. So she put about one hundred and twenty five thousand dollars in debt on her personal credit cards. She paid it on time each month. But her credit score went way down because the balances in comparison the credit limits a year end her business was successful she was able to refinance with an SBA loan. She paid that debt off and her credit score jumped one hundred and twenty five points. It can make a big difference in what you say putting personal credit card.

[00:08:05] I mean there's a difference between just opening a credit card in your name personally and actually going to a bank and saying I want to have a credit card openly against the business.

[00:08:14] Now you may need to know do you have to do a personal guarantee on that card but still run it so run it as a business card or how do you set. How do you set up a credit card to be a business credit card.

[00:08:23] Yes. So most of the major issuers will all them now offer a business credit card and they do have an article if you just go to. And we can put this in the show now too. But now NAVCOM forward slash report that lists all the major credit card issuers a few of them do report to personal in all cases but many of them don't. They only report if you don't pay because you will sign a personal guarantee. There will be a credit check and you're and you personally. That's what they're looking at. And there will be a personal guarantee. But if you paid on time doesn't impact your personal credit at all so that's you know that's one way to go. The other thing I get the question is well can I get a small business card without a personal guarantee and usually what happens is you need your business to get to the point where you've a couple million dollars in revenue at least a couple of years. All sort of you're not making the financial decisions anymore because you have a CFO doing that. And then you can apply for what's called a corporate card and so a corporate card is a step up from a small business card. And that's where your CEO is now going to have a personal guarantee because the company is financially large and stable enough to carry it the rest themselves.

[00:09:22] Yeah. So if they feel like there's there's enough credit risk worthiness of the company itself to actually put it against and then Dallas does that require any kind of reporting or anything in terms of financials from the company point of view to the.

[00:09:33] Yes. Yeah. You're getting to the stage where it's going to be there's going to be some negotiation and it's going to be. Yes. It's not based on you anymore it's based on the company's financials and business credit bureaus which you just asked about they don't. They may report some financial information if it's available to them. But generally just like income on your personal credit report isn't a thing. And this is credit it's not generally considered very reliable information. So if a lender wants to see your income from your business they're going to want to see bank statements tax returns and other official documents.

[00:10:05] Yeah I got it. So how does the business credit bureau I mean are there do the three major bureaus also report on business entities or as they're separate.

[00:10:13] They do yes. So on the business side TransUnion only as consumers so there's no trans union for business but Equifax Experian both have commercial credit agencies and those are completely databases are completely separate from the consumer. And then there's also Dun and Bradstreet which you may have heard of Bruce. They've been around forever. They only had four U.S. presidents work for them. Abraham Lincoln worked for them as a reporter back in the day. So they've been around forever and what's really interesting to me see coming from my background where 20 years ago I do a workshop and someone say Well I've never heard if I go scores I don't know what this is now I talked to business owners and the large majority of them if I do a poll in a workshop it'll be 70 percent don't know business credit it's just forge them and one of the reasons I believe is because there's no federal regulation and actually no state regulation either a business credit there's no disclosure requirements so they don't have to give you a free copy. They don't have to tell you if you've turned down based on it there's no notification required so you may get turned down for financing and never know that your business credit played a role in that decision because they don't have to tell you that.

[00:11:18] Interesting. OK. So that's so that's kind of credit score credit worthiness. So let's talk about options available to business owners in kind of tier it a little bit if we want.

[00:11:26] So if I'm a business owner and I'm looking at I need capital or I need cash to help finance the business I guess my first question is how important is the use of that capital in terms of figuring out which resource or which rich source of capital I should be looking at.

[00:11:40] How much do you consider that in that question.

[00:11:43] You know usually when I'm talking to a small business owner what I want them to put first in mind in terms of what you're going to get. Think about your revenues your time in business and your credit both business and personal. Yes the use of capital is important. If you don't want to borrow short term money when you need long term money or vice versa. Right but there's so much going on right now in the small business fintech world that I think we have to think a little bit in terms of a faster for the small business owner because now you can go online and literally some of these online lenders make a decision in seven minutes. So it is you're thinking more like what can I get. How am I going to use that right. How much can I get. And that's the most common question I hear from a small business owner. But I do think stepping back and like you said thinking how am I going to use it. And more importantly how is this going to help me make money. How would this help me scale up if you're just thinking in terms of well how much can I get. Let me throw some money at a problem or a challenge in my business.

[00:12:51] Then you're probably not thinking about it the right way and the sort of short term versus the long term I think is one of the bigger ones which is you know if I'm if I've got a contract opportunity and I know it's going to take me 60 or 90 days to collect on an invoice and so I need kind of a bridge financing to be able to get me to that payment date versus if I've got to go out and buy you know a bunch of equipment or you know invest in some resource that is going to you know pay for itself over 24 months or 36 months you know matching kind of the return but you know the return. How do I make money on that. With my the structure of that of that debt or of that credit I think is key. Like you know what. You don't wanna do a short term short term vehicle if you really need something that's going to last for 36 months and vice versa. There's no point in taking a long term debt scenario if you're going to get paid in 60 days and 90 days. That's the one that I think a lot of people kind of end up struggling with they're not thinking about is like what what is the what's the runway or what's the timeframe look like.

[00:13:48] Yeah exactly. And some of the very short term types of financing they build in the cost right upfront so you know no matter what you're going to pay that cost upfront some of the longer term financing you may for example let's say get a line of credit. You tap it when you need it. Let's say you're going to need 50000 this month but then you're not going to need more for another few months than a line of credit might make sense because you pulled the money when you need it. You only pay for what you're using as opposed to something where you get a fixed amount of money for a short fixed period of time and you're paying right up front for that money even if you haven't tapped.

[00:14:22] Yeah yeah yeah. So it's it's a much more flexible tool now that flexibility has some cost to it or how I guess how do these compare in terms of you know net fees you know net interest fees cost of capital well cost is a really fun issue to tackle it's financing.

[00:14:39] And the reason is with consumer financing when we're comparing any type of financing we always compare the EPR there's always an annual percentage rate and it's standard across all consumer lending. There is no such requirement on the business side. So other than a brand new law that just was passed the first Truth in Lending Act for business just passed in California has not been implemented yet. Other than that there's really no requirements for any kind of consistency so it can be very confusing. I'll give you a quick example. There was a story in Forbes of a hair salon owner. She was looking to expand she got a term sheet for some financing now and the term she had said 15 percent. So in her head she's thinking 15 percent EPR. Well that financing was run through a calculator that translated the cost to TPR and we have free calculators anyone can use at the NAB Web site for that.

[00:15:25] And the EPR. Well take a guess. Bruce take 50. I'm going to say 19 percent. It was actually over four thousand percent last year. Yeah. Wait so explain. Yeah yeah. Because it wasn't clear. Most of them Wolf will explain it in terms of I don't and I don't remember exactly what they were they were getting their 15 percent from that might have been at 15 percent daily. I don't know his name but it just was not. And there's no uniformity and then a lot of these new to at some point.

[00:15:54] I mean I windows loan shark laws start to apply down some of these things you know you would think so.

[00:15:59] But here's the deal with small business. Most states and the federal government have left small business out of these requirements because the theory is that small business owners are sophisticated enough to hire professional advisers to help them review contracts and make good decisions. But we all know 98 percent of small businesses America one people etc. And there's there their time star. Oh be cash starved. They don't. They don't really drive. That's where you make the late they. Exactly right. Yeah. Click. I'll see you 15 percent. Yeah.

[00:16:33] So one thing I just encourage small business owners is to really look at the costs. If you don't understand it. Talk to your accountant or adviser a small business about cetera by your coach your consultant whoever you're working with to get a second opinion and make sure you understand it we do offer free calculators that now you just go to NAVCOM forward sized calculator and you can plug in the numbers and translate it to an API. So at least then you can compare sometimes high cost financing higher cost financing does make sense. But sometimes business owners getting this financing and thinking it's cheap and then they discover oh hey if I'd put that on my 18 percent credit card I would have been better off.

[00:17:08] But it's basically short term and paid it off really quickly. You can often get you know you can get 30 days without you know without a whole lot of cost. What about other fees because I think that's the other thing I've seen come up as you know you'll have these percentage rates but then there's you know a 250 dollar application fee or you know these other things that start creeping in which or the other thing I've seen as fees for paying things off early or you know in particular when you're a structured you know a term loan of some sorts. Do you see that come up how do how do you or what advice or checklist do you give people in terms of checking those those issues.

[00:17:39] Yeah absolutely. So on the front end you could have an origination or an application fee or both. You could have a draw fee. So every time you take money off out there is a cost that includes a fee associated with it and then you could have a prepayment penalty. Now some will say we don't have a prepayment penalty but like I mentioned earlier they front load the interest. So you're going to pay that or the costs stayed up and they say it's not interest because they say it's not a loan but they say it's an advance but they front load the cost. So no matter what if you pay it back in 10 days or 100 days you've already baked that cost in and that's very common in the merchant cash advance and business cash advance world where you're getting an advance on the credit card or Amazon or PayPal sales that you're expecting to make in that in the near future.

[00:18:23] Got it. Got it. Okay. So let's let's just kind of walk through some of the different options typically that come up so if I'm a small business owner and I'm you know I have need for a truck a capital to help finance the business. Where do I start or what's the what are the kind of general categories that I can start looking at.

[00:18:40] Yes. If you've been in business so let's go back to that revenue time in business and credit if you've been in business for at least two years you have at least one hundred thousand dollars in revenue and you have decent personal and hopefully business credit. You're going to have a lot of options. It's when you don't meet any of those three that your options start becoming more limited. So it's a great example is if you don't have great credit what are you looking at. Well you might be looking at invoice factoring where they're advancing new money on an invoice that you're owed and they're they're really concerned about your client's credit as opposed to your credit. This is one of the reasons that merchant cash advances or business cash advances are so popular because they're just looking at your credit card sales over the last year three six nine months and they're going to advance you because they expect a certain amount of credit card sales to come in in the future and they're going to pull right out of those sales before the money even hits your account.

[00:19:29] So they actually get paid the credit card fee and then or the credit card transaction then they give you the remainder.

[00:19:35] Yeah. You get what's left after their fee comes out. So those don't those don't care about good credit. Then we have some lenders like some micro lenders CTF eyes that are more credit you know. And listen I talk to small business owners all the time whose credit is challenged because their business goes through ups and downs and sometimes they can take a paycheck and sometimes they can't. Right at the client slow to pay they they don't get paid. And no credit challenges are a very common scenario and I you know understand or appreciate that we of course have the other sort of I wouldn't call them outliers because they're very popular but ones that we don't think of as traditional financing of things like crowdfunding where they don't care about your credit at all. So it's really based on how well you can sell the concept or whenever you're you're trying to sell. So that would be one thing if you have it all through your strong revenue time and business and credit then really you have the opportunity to look at some really good financing like bank financing or SBA guaranteed financing. Now the challenge we have these days and Fed research has borne this out. They look at small business lending in many different ways. The challenges that many banks have pulled back on smaller dollar lending which for many banks is anything either 500000 hours or less are 250000 dollars or less so you may think well why wouldn't my bank want to give me one hundred fifty thousand dollar loan. And the Bank's thinking it's going to cost me six grand to underwrite that long. So I want to make a one point five million dollar loan not a hundred thousand loan so don't take it personally.

[00:21:05] It's just the transaction and the turn traffic. Transaction costs the deal costs are fixed. They'd rather spread that over a much bigger loan than than deal with smaller loans where it's just going to eat away at their profit.

[00:21:16] Right and there are compliance costs as a federally regulated and state regulated financial institution. They have a lot of compliance costs that maybe some alternative lenders don't. So that's where the alternative lending has just really really popped up. But if I were a business it was two years in business that know good revenue and good credit I would look first to a traditional financial institution but also check out SBA guaranteed financing and SBA. Many business owners don't know if they do it a microloan program that's 50000 hours or less so that's worth checking into. There's not a ton of financial institutions that offer it but it's worth checking into on the SBA stuff.

[00:21:50] The one the one thing that I've heard a lot of people give me feedback is that the process can take a while the documentation and the application process is kind of complicated as that. Is that true or is it can you navigate that fairly efficiently.

[00:22:01] It's very true. It's it's absolutely very true. But we do it now. We're a marketplace and we do partner with one intermediary that works tries to get it done in 30 days or less using technology. But this is you know a government developed program. So if you if you need it in 15 days though that's its problem. Now you're probably not looking at that so then so let's say you need it in 50 days. So you're looking maybe at an online fintech lender. And if you have those qualifications you you can shop around for a little bit lower costs but it won't be presented as an API. So you do want to again use a calculator to translate whatever they offer you to see what the API is because you EPR a 50 75 percent is not uncommon at all. Well the other thing is one thing you touched on earlier if your needs are relatively small and by relatively small I'm saying maybe 50 grand or less you might be able to tap a business credit card 0 percent for 18 months. A lot of us think of credit card debt as really terrible just about that right.

[00:22:59] I think because it's abused by individuals more times than not. But yes absolutely fair it's fair.

[00:23:06] Now if it was that high of loss rates like if everybody was they wouldn't be in business right. But you see a typical loss rate of maybe two to four percent on a credit card portfolio better. So think about your credit card too in terms of emergency cash and just compare the cost it may or may not be the right decision and you don't want to. Here's what happens with credit cards. You're working isolated you don't have anyone you can really talk to about how you plan to use this money. And so you don't use it in a way that's going to make money. And so then you end up deeper in debt and scrambling for the next thing. So your coach your accountant your adviser whoever you trust to look at this and you know bounce it off of them and they may say do you really need to go to that conference or would you be better off putting that money towards something else. And that is where you can get some helpful feedback to decide if it makes sense to pull out the credit card or not.

[00:23:57] Ok. So what other option so if we talked about the sort of traditional bank financing SBA version of that what are some of the other vehicles that I can look at.

[00:24:06] So online lines of credit and term loans are very very popular. Also invoice factoring and invoice financing. So that's where they're looking at the invoices that are coming into your business and advancing your money for a short period of time so that you can get access to that money. I met someone at a conference and his company and I think I mentioned earlier I used to e to do consulting for some large financial institutions and these were companies that I have their credit card and they expect me to pay in 30 days but they would take six months to pay me for you know the consulting work that I did for them. I did talk to a guy who all his company does is factor or advance on invoices to companies that do business with Coca-Cola. Yeah. No. Right. You know you're a good risk. Great. He knows they're gonna pay so all he does is find companies that are doing business with them and need their cash faster. Government contracts have gotten better. Typically government contracts often pay in 30 days. But I've talked to business get a government contract and then suddenly they have to get a different insurance policy that's expensive. They have to staff up there to get new computers. You have to put money in before you make money. And that's workers. And then I want to mention one type of financing. This is the number one type of financing utilized by small businesses but it kind of flies under the radar and you don't find out about who you need and I'll give you a quick example.

[00:25:23] Our co-founder Levi King his first business he's founded five different businesses in different industries. But his first one was sign manufacturing in Idaho. So he built and manufactured neon signs. And what he was raised on a farm and taught not to use credit. And then when he finally was cash flow was always a problem for him right season. And he didn't have any credit. He couldn't get a loan. He tried to get an SBA loan they laughed at him. So. So he finally wanted his supplier said well you know you can get credit from us let you get that concrete or the plastic or the you know the steel that you need and that pay for it for 30 days. And he was like a light bulb went on. Well that's called vendor financing or trade financing. And they don't charge a lot of times they don't charge for it you might lose out on a discount if you paid upfront but you don't charge for it. And as you build credit with them you can get it up to sometimes 60 90 hundred and twenty day terms. You get the item you need for your business and pay for them later. So that's one type of financing. If your business uses some kind of raw supplier material that may be helpful to improve your cash flow at a very affordable cost because they want your business I mean ultimately they want you to be successful because they want you to grow and they want you to order more in the future.

[00:26:35] So that's their incentive. They want to. They want to make sure that you you're able to scale your company it's going to scale their company.

[00:26:41] Yeah. Yeah exactly and I don't point to there's a list of vendors that are really easy to get trade credit with even if they don't check personal credit and they have catalogs with anything a business could use even if you're a consultant you get your shipping boxes or the curing cups for your office and they I have a list of those at NAVCOM forward slash venders then ask vendors and they're a great way to to not only start experimenting with trade credit but also to start building your business credit because just like your personal credit your business credit you need accounts that report not everybody does. So you start building its credit by getting this vendor credit that's super easy to get. And then as you build those relationships and your business credit is stronger and that opens the opportunity for additional types of financing.

[00:27:22] Yeah yeah I've even seen people double them up. They get a they get a vendor credit or they get a vendor term you know say 60 days and then they'll pay for it with a credit card that gives them another 30 days. I think you've got a stack know by themselves you know 90 days of the process if they do it right.

[00:27:37] Yeah well I'll I'll just mention that like with credit card cash advances again. I've seen plenty of horror stories of credit cards I don't want to be cavalier about and I really want people to get good advice but a lot of the credit cards you can get a zero percent cash advance and you can have that money deposited in your bank account so you say your vendor doesn't want to take a credit card if they extend your terms right because they don't want extend you to everybody and then pay the merchant. So right. So you get the money and your credit card is 0 percent put in the bank account then pay those accounts and like you said you could buy yourself 18 19 months that way at 0 percent but as long as you know I think it's important as a strategic one time kind of getting some got a new product you know run egg or situated.

[00:28:18] Yeah I think it's you know it's an ongoing practice it's not super sustainable but yeah. But I look at you get scrappy a little bit.

[00:28:25] Exactly. You do get scrappy and I'll give you another quick story. I was on a workshop for accountants and one of the accounts reach out to me afterwards and she said well I sell paint or jewelry on the side. And she said a local jeweler is liquidating and I can get it. I can get a ton of this. And I know I can sell it right but I need the cash. And for her because she wasn't really a position in that business for any kind of financing that wasn't really a track record there a zero percent credit card could be a great idea I could give her 12 months to to move that jewelry online and she had enough experience that she knew that that was a good opportunity. So when you think about financing it usually falls into one or two buckets the one is the crisis something's happening and oh crap I got to make payroll I got to pay my business taxes or whatever it is or to it's the opportunity like she had where oh this is a great opportunity I need to act quickly I need to get this money fast so I can buy this jewelry and someone else doesn't get it. And then I can sell it. So the one message the thing that I try to hammer home for business owners especially those who are scaling and growing is prepare for the financing before you need it. Because if you wait until the last minute you're going to get online at midnight and you're going to end up with something that's probably not as good as what you'd gotten if you prepared. So how do you prepare. Yeah exactly.

[00:29:40] How do you make sure that you're in it gets you're well positioned so that when you need to make that move you're going to get the best deal possible.

[00:29:46] Yes. So you've checked your business and personal credit so you know that you know where you stand and you've been working to build strong business and personal credits because you don't know which one the lender is going to check. Then you have a business bank account and you're up to date in some way on your financial so you could provide information about revenues. Many online lenders now and even some traditional financial institutions now are asking to hook up to your bank account like Reed only they can't. He got the money but to see your revenues settle down could prove it. But if you have a business bank account that's not going to happen. So that's that's a must there and I looked at some recent survey data that we did at Nav of our customers and 30 percent of those in the survey who had a just a one person just end business did not have a business bank account. So that's you get a business make account. And then of course the time in business is important and that's a function of what it is. But sometimes people will start a business sort of just experimenting and they start consulting on the side you know pick a fixed day. You make sure you have a license with the states that they know you're doing business and then you can use that as your date going forward and it'll be consistent.

[00:30:51] Yeah I've seen some people that you know have some sort of quasi dormant LLC and stuff on the side that they they keep just just to just to be able to have a founding date that shows the business has been around for a period of time even if it's not super active. So when they have new businesses that they're starting up they can actually use an entity that has some history that has you know two or three years of business history on it.

[00:31:12] And that's a pretty powerful strategy and if they've gone one step further and gotten one of those vendor accounts and bought a few things and paid them off each month they'd have a business credit history that would be more extensive too. And that goes a long way with a lot of lenders. That's one of the first questions going to ask time investment.

[00:31:27] It's about another one when we're dealing with assets and the folks that are selling off businesses and to start new businesses or do do other things on the side you know setting up those entities. You know obviously with any kind of covenants and constraints they have with their card company you know acknowledged set that up because I got to help you a lot. You know what. Once you do it exit and you're you're looking at building a new business having that in place can be really awful. Anything else that business owners can do to kind of be prepared or be in a good position when they need to go out and get financing.

[00:31:54] Yeah well I have a free guide which we can put in the show notes if you like. And it lists all the major types of business financing what the basic qualifications are in terms of credit revenue and time in business and then also you know includes questions you can ask yourself to prepare for financing so that you're ready when you get it. But if this is the eat your broccoli advice right now businesses get prepared do your finances. It's not the fun part of the business but if you carve out just even literally 15 minutes once a week to go down that checklist and get prepared. Then when it happens you're going to feel a lot more confident and you're probably going to get better financing that way. Great.

[00:32:33] Gerri this has been a pleasure. If you want to find out more information about you about Nav what's the best place to get that.

[00:32:38] So Nav shows free business and personal credit in one dashboard and then we have a marketplace of over 100 and 10 different financing sources that we help match borrowers to. And we will. Our basic account is completely free no credit card required but we can offer a free month of premium to your listeners as well so they can go to and put in the coupon code podcast and we will be happy to upgrade them for months so they can see the full detailed credit reports as well.

[00:33:05] Great. Thank you for that. This has been a pleasure. I really appreciate it. Great conversation. I've learned a lot and I think our listeners have a much better sense of how to kind of navigate the financing side of business so this was very helpful. Thank you Bruce

[00:33:18] You've been listening to Scaling up Services with Business Coach Bruce Eckfeldt. To find a full is a podcast episodes. Download the tools and worksheets and access other great content. This is a Web site that scaling up services dot com and toll free to sign up for the free newsletter scalingupservices/newsletter.