Group Talk

Do you run a small business? Is your business insured? If not you could be risking your and your business’ future.

Learn about business insurance, and see why its today’s business lifeboat.

Expensive if You Don’t Use It – Cheap if You Do

The cost of doing business today is rising all the time, its true. Salaries and worker’s benefits are taking a bigger chunk of your profits.

Taxes are always a key consideration, and material costs are rising as well. Add to this insurance, and you have a real significant number on your cost of doing business column (on your profit and loss statement).

When looking at insurance you will be amazed as the amount of risks you are obliged to cover.

There are the obvious accidents or acts of nature risks, worker’s compensation, health and retirement plans, but then there are a host of other risks that can, and many should be insured.

It’s a maximum that all insurance is expensive if you don’t use it, but very cheap if you do.

The “Got To Have” Business Insurance Risks

Here is a list of basic insurance risks that every business should cover;

o Fire, Theft, Water Damage, and Malicious Damage to your business location

o All required worker insurance obligations, and for good worker relations, some perk insurance for employees, like some group private health plan, and retirement fund.

o Product liability if you are producing a product

o Transportation insurance for all your vehicles (full Casco advised)

o Fidelity insurance if your employees handle money. This may be a really indispensable pre-paid asset to your business.

The “Nice to Have” Business Insurance Risks

o Business interruption insurance

o 3rd Party Liability if you are producing a product for wide distribution

o Litigation insurance

o Damage due to civil disobedience and terrorist activity

o Business specific items

Buying Insurance

The choice of buying insurance is becoming a tiresome activity with so many options and prices (and insurance terms), that finding and using a good broker may be your best bet

The insurance broker has some advantages over using one company exclusively.

The broker can shop around, negotiate directly with underwriters (which you cannot do), and tailor make some policies for you.

The cost of using a broker may be easily absorbed by the lower cost of the insurance he provides you and your business.

You must make very sure of the broker’s qualifications, and demand a list of companies and underwriters he deals with.

Ask for a client list, and his inclusion in professional insurance societies. A search on the internet is also helpful. When you are satisfied, start using the broker to plan your business insurance risk profile and coverage plan.

Building business credit is one of the greatest opportunities for small business owners. It provides our business with the ability to obtain financing for unforeseen expenses, operations, expansion costs and investments.

There’s so much going on with corporate credit that there are several different fields devoted to servicing it, including business credit cards, small business loans, accounts receivable factoring, merchant account cash advance, lines of credit, equipment financing, secured/unsecured loans and many others.

These types of financing have been around for a long time, so you’d think that by now we would know all there is to know about corporate credit. After years of studying and applying every aspect of it, there are still many facets that remain secretive. And because it is so complex, we tend to simplify information about how it works in order to make it more understandable.

This has resulted in many myths about building business credit. Let’s look at the top 10 myths that have been circulating about business credit, beginning with, of all things, its starting line.

10: Sole proprietorships can establish corporate credit

A sole proprietorship is not considered a separate legal structure. Instead, it is considered a personal extension of you so you don’t have any protection from them. So every time you apply for credit for your business you will need to supply your social security number as the number that identifies your business.

As a result you are responsible for all debts and agreements you enter into in the name of your business; you’re also on the hook for all of your partners actions in the name of your business as well.

9: Using personal credit for business has no effect on the corporate veil

When you use your personal credit for the benefit or operation of your company it can lead to an “alter-ego” decision by regulatory or a financial organization, and a piercing of the corporate veil. This would directly endanger the owners personal assets and make the owner or owners directly liable for the penalties or repayment of any debts incurred by the business or corporation.

8: Obtain unlimited business credit for real estate investing

There are certain industries like real estate investing that are flagged as a high risk with the business credit bureaus. If you plan on investing in real estate then you will want to make sure that the company you are building corporate credit for is not “real estate investing”. Most banks will automatically turn you down because your company is operating in a high risk industry. You still will be able to invest in real estate but you may have to set up a business that does business development, business management, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investing from a separate division of the company.

7: Credit repair is illegal and cannot be done.

False. Consumers have every right to repair their own credit in accordance with the Fair Credit Reporting Act. If you choose to use a credit repair company be sure to verify its track record with the BBB. Also, if you are paying for the service before it’s rendered make sure the company is in compliance with the Credit Repair Organizations Act (CROA). *Non Profits and Credit Union Service Organizations (CUSO) are exempt from CROA.

6: All vendors, suppliers and lenders report to the business credit bureaus

Not true! There are over a half a million vendors and suppliers that are willing to extend vendor lines of credit to your business but less than six thousand of these companies report to the business bureaus. What’s even more alarming is not all of these companies report on a monthly basis either. Some only report to the business bureaus once every six months!

5: All business credit cards report to the business credit bureaus

Currently there are over five hundred business credit cards in the marketplace but less than forty will issue a card without requiring a personal credit check or personal guarantee. These select cards report solely to the business bureaus and not your personal credit reports.

4: Every business has a business profile with the business credit bureaus

A Dun & Bradstreet profile requires that a business owner first apply for a DUNs number and submit their business information. Corporate Experian and Small Business Equifax create a business profile report for your company once a lender or supplier that you have payment experience with submits a data record. There are many other business bureaus that require business owners to complete a registration process prior to creating a profile.

3: Buy a shelf corporation and get all the business credit you’ll ever need

Shelf corporations provide certain advantages when it comes to obtaining credit simply from the fact that a business that is five years old has a much greater influence to a lender than a business that’s been in business for a few months.

With that said a shelf corporation alone will not enable you to obtain all the credit you need because there are many other factors that are taken into consideration. For example, if you have a ten year old shelf corporation that needs a $100k business line of credit a bank will need to view your company’s bank rating, balance history, financials, tax returns, profit & loss statements and so on.

2: All you need is a strong paydex score to qualify for a business line of credit

While a strong business credit file does play a part in qualifying banks look at many other factors. This includes your bank rating, balance rating, NSF track record and personal credit scores.

1: All you need is an 80 paydex score to get unlimited business financing

This by far is one of the biggest myths in business credit because an 80 paydex score with Dun & Bradstreet is said to be like having a 720 personal credit score. While that may be true to some degree there are some important details that many fail to mention. For example, you can have four positive trade references reporting with $200 being the highest credit limit on all four accounts and still score an 80 paydex.

This is because DNB’s rating system requires a minimum of four positive trade references but if the four you have are small limits then this hardly qualifies your business to get approved for thousands of dollars of cash credit, lease credit and business lines of credit.

In addition, having only a DNB file is like having only one personal credit file with the credit reporting agencies. Let’s say all you have is a personal credit file with Equifax but have no file with Transunion or Experian. You would never be able to get approved for a mortgage because you don’t have a completed financial picture for lenders to review your creditworthiness.

This holds true for your business as well. In order to show a complete credit picture for your company then you will need to have a profile with the three main business bureaus.

Now that you know the myths surrounding the corporate credit industry I encourage you to share this information with other small business owners and put your company on the path to corporate credit success!

I work with all kinds of entrepreneurs. Some are glad to sign on the dotted line to guaranty a loan. Many don’t mind using their home or assets as collateral for their business because they believe in themselves and believe in their business.

But there are times – and circumstances – when someone doesn’t want to – or can’t – use their personal guaranty, their personal credit. Sometimes an entrepreneur can’t or won’t use their personal assets. So what can they do?

They can build business credit – often unsecured and without your personal guaranty. As long as business owners find the right ‘business credit coach’, it is very possible to set up business credit cards, lines of credit, loans, and business terms with vendors of all kinds. As I always say, when looking for these coaches, make sure you pick the right one. There are good ones and bad ones.

These business credit coaches offer a step-by-step process that results in a solid foundation for business credit success. The steps are proven to help you obtain credit and financing for your business… sometimes it is guaranteed!

Many have a systematic approach with highly predictable outcomes to ensure your long-term success. Many companies offer a web-based back office that carefully tracks your progress and measures your results helps you to know exactly what you have accomplished, what you are currently working on, and what is to come.

There are various levels: some offer a guidebook, others give you unlimited access to trained coaches throughout the program. The assist in preparing credit and loan applications and target the application to the best lenders nationwide.

A general list of offerings include:

1. Registering your business with Dun and Bradstreet.
2. Obtaining a DUNS number for your business.
3. Establishing a proper DUNS rating for your company.
4. Entering your business into the banking system.
5. Providing you with a list of vendors who report to
the business credit bureaus.
6. Providing you with a list of vendors who will grant business
credit without a personal guarantee.
7. Providing you with a list of business credit cards
to apply for.
8. Assisting you in obtaining a standard industrial classification
code.
9. Assisting you in obtaining a favorable Paydex score.
10. Assisting you in obtaining a favorable Intelliscore.
11. Assisting you in setting up the foundation for building
business credit.
12. Provide you with banking contacts that will grant unsecured
business lines of credit.
13. Set up of your Corporate Experian business Credit report
14. The business credit coaches will also be your first trade
account reporting to Corporate Experian.