Unsecured Business Line of Credit

To add to the capital of their business ventures, many investors are applying for financial loans to make it possible. Unsecured business line of credit is readily offered by lenders, if you are able to pass their requirements.

Unsecured business lines of credit, financial loans usually offered by big-time lenders like banks, is a credit line which does not involve any collateral. This is quite favorable for individuals who have no plans to put their assets and investments at risk in case something goes wrong; as with most cases with secured loans where many lenders asks you to pledge a security in the form of residential or commercial properties, equipments, or other assets with the same value as with the borrowed amount.

This kind of financial aid is quite risky to lenders since they don’t have any security if the borrower fails to pay for it - a reason for their stricter application requirements and being accepted for one is almost near to impossible. Here are some steps to get your started on a successful application of an unsecured business credit line:

1. State Your Business

First off, you need to establish an independent business existence for the venture. Your business must be registered as an LLC or a corporation with at least 2 years of successful operation. The reason why lenders prefer the operation time of 2 or more years is because of the risk of bankruptcy attributed to new small business ventures.

Also, you need to include a proper address of your business, and not a P.O. Box address (which is unacceptable for financial loans). An open communication line like landline and fax numbers registered under the name of your enterprise is needed as well.

All legal documents about your business should be at the ready. This includes permits, licenses, contracts, tax documents, and financial statements like balance sheets, income statements, and so on.

Some financial institutions might request personal information such as driver’s license, verification of personal and business-related bank accounts, personal income statements, and tax returns. Be sure to have these at the ready when the lender requests for them.

2. Register Your Venture To The Proper Agencies

You need to have a credit profile first before you actually apply for a loan. There are plenty of agencies that offer such services such as Dun and Bradstreet. Credit agencies are also a requirement, since they can keep tabs on your credit scores and rate them to be used with financial institutions when you apply for an unsecured business line of credit.

Also you need to have a Paydex registered under the name of your business venture. A Paydex provides reports to credit agencies, financial institutions, banks, and other lenders regarding payment records of certain companies or business enterprises. The Paydex score is from 0 to 100, where 0 being the lowest. The bigger the score you have, the more easily you can get any financial loans you wish.

3. Presenting Your Application

Aside from the requirements above, you need to have a decent proposal at the ready regarding your unsecured business line of credit. You need to state in detail why you need the amount, and where you plan to use it. This is also very important in establishing your credit scores as well. In truth, the lender is putting you in trust of the borrowed money, and is expecting you to use it wisely, and to make prompt payments according to your agreement.

Business Credit Cards: What You Should Know on Their Possible Disadvantages

Having the assistance of a credit card as you are starting on a new business venture may not be absolutely necessary, but it can surely help you a lot. It does not only give you a source for funds, but it also adds organization to your cash flow and in tracking expenses. Aside from this, most business credit cards offer many perks that can be of great benefit to your business.

But as tempting as these company credit cards may sound, remember that the common error of a lot of business owners is that they do not consider the disadvantages that these credit cards may include. Many have made huge mistakes in running their finances with such business credits that have often led to personal-liability. This is why you need to know about the disadvantages and learn what you can do to either handle or prevent them from ruining your business.

What are the Drawbacks of Business Credit Cards?

What a lot of small business owners do not realize is that when they are only initially starting out on a business and have not yet established a business credit score, their professional and personal finances can be blended. This is because most credit cards require a personal liability agreement from the business owner at least for the first few years when company is just starting out.

Therefore, the business owner can be held liable for any problems with the company’s credit account. For example, if your company fails to make payments on time then this could significantly dent your personal credit score despite the fact that this is not a personal transaction.

Other possible disadvantages that business credits may have include the large possibility for employees to abuse the use of company credits by charging personal purchases. Aside from this, fewer protections may come with it as compared to a personal credit card because the intended use of these credits are for company purposes and not personal. Higher interest rates are also usually charged by business credit cards as compared to personal credit cards.

What You Can Do To Control Mismanagement of Business Credits?

Despite the possible disadvantages that credit cards may bring, remember that these things can only happen if there is a mismanagement of your credit account. What you can do is set certain precautions so as to avoid such drawbacks from happening. Remember to register your company with a business credit bureau as they can help you establish a business credit score, which will later on help you forgo with the personal-liability agreement.

Also remember to manage your company’s financial transactions well. Build a favorable credit history by making the right payments and avoid making huge debts that your business cannot afford. More importantly, when you’re only starting out, remember that it cannot be avoided for you to be personally liable to debts therefore learn to use credits wisely. It would also be helpful to take extra precautions by placing minimal credit limits for employees and reporting abuse of your company’s credit account.

Remember that business credit cards can help your company a lot, but they are not flawless and therefore one has to be smart in using them. Remember to take the extra precautions and always be careful with your finances.

Through this, when you avail a credit card for your company, you can make it work for you and allow it to become a partner in making your business grow instead of giving you liabilities.

Secured vs. Unsecured Business Credit Cards: Which is Better?

Having a bad credit record can surely become a hindrance in establishing your business. Most likely, you will have difficulty in trying to persuade lenders to give you a credit account, which can be very significant for your company. Without a credit account for back up, you are placing your company at a very huge threat of running out of financial resources and even a possible pause in its operations.

But because your credit score may not be very constructive to your reputation, you may have very limited options –either you get an unsecured bad debt credit card or a secured credit card. In this article, let us know the difference between these two credit cards and how they can help your business, especially if you have bad credit.

The Difference Between a Secured and an Unsecured Credit Card

A secured credit card would basically require you to have a security deposit in the bank before you can use it. This amount of deposited money will be your guarantee of payment to your lender. Most secured credit cards though, hold credit limits amounting to a percentage of the balance that you have in your account so if your business may need to make large purchases that your balance cannot afford, then this may slow things down.

On the other hand, an unsecured credit card allows you to make purchases even without the collateral. But such a lose set-up may also charge high rates of interest and may have stricter penalty agreements for late payments as compared to that of a secured account. Despite this, a lot of people still prefer this type of account, as it seems to offer more flexibility and freedom to its users.

However, in cases mentioned above wherein you have a huge debt or a bad credit record, the chances are that signing up for an unsecured account might be too risky. After all, if you are not well disciplined in using your credit card, you might just end up adding more and more to your already escalating debt.

How Do I Choose Which Is Best For My Business?

Because of the fact that both types of credit cards have good and bad characteristics, the key to choosing which would be best in your situation is to consider the potential of your company to make the right payments as well as its needs. Bear in mind that you have already started off with an unfavorable credit score. So be sure that if you sign up for an unsecured credit card account, your business is making enough profit to put up timely payments to the lenders. Otherwise, the high interest rates will just further sink your business into bad debt.

Also, unsecured credit cards are only best used if the type of business that you have is really in need of a more flexible system of borrowing finances, such as that of manufacturing companies that need to purchase large quantities of materials in order to have production.

In such cases, unsecured credits are reasonable for use. But still, if you are just running a small business and fearful of possibly worsening your already damaged credit score, then opting for a secured credit account will be a much safer bet. With this, you can forego with possibly drowning yourself in escalating rates of interest that your company might not be able to cope up.

If you have bad credit, the choice for which credit card would be best for you will basically depend on your business. If your business has high demands for large purchases and if you as the business owner can make sure that you can most probably make your payments on time, then there is nothing wrong with getting an unsecured account.

But if your company does not always need to make huge purchases anyway and you want to be sure in improving your credit score by avoiding late payments and huge debts, a secured business credit card is highly advisable.

No matter which you choose, always remember that you can only improve your bad credit and pave way to the growth of your business if you handle your finances and credits well.

What You Should Know About Business Credit Card Debt Consolidation

In a lot of small enterprises, owning business credit cards can be very practical. They do not only become a handy source for finances, they can also provide the company with a more organized flow of finances as well as many additional advantages. But as helpful as these credits can be, they can also very easily become mismanaged and could lead the company to face serious financial debts.

Often, people who find themselves buried with too much debt are those who have two or more business credit cards and have remaining balances on all of them. In situations such as these and even before you find yourself with such credit problems; it is best to seek debt consolidation help for your business credit.

What Is Debt Consolidation and What Methods Can I Take?

Firms that specialize on assisting you and your business to get out of mounting debts do debt consolidation. What usually happens is that they take two or three credit cards that have outstanding balances on them and “consolidates” or combines them into one. This way, your monthly payments are lowered and they become easier for you to pay. At the same time, most debt consolidation programs would temporarily close (but not inactivate) your credit accounts to prevent the company from further accumulating debt.

But hiring a company to assist you in a debt consolidation program is only one option. You may also choose to consolidate the company’s debts yourself by getting credit cards offering 0% of interest rates for balance transfers.

This allows you to transfer balances from your previous credit card to pay off for your debt, while enjoying much lower rates by foregoing interests. However, with this, you must be careful to choose a credit card that does not charge you interest for a short period of time and that you are able to pay off all your debts before interests start being charged again.

Business debt consolidation loans are also another way to help your company get out of debt. You can save your company a lot of money by taking on a loan to pay off all your existing credit card balances, and paying off the loan after.

What Are Other Things I Should Consider?

Debt consolidation provides you with so much opportunity to fix your company’s financial problems, but before you decide on any method or sign up with firms for this process, take not of some things that you must consider.

Remember that a lot of existing debt consolidation firms as well as lenders for consolidation loans would still charge you a certain interest. And the longer it will take you to pay them, the higher your interest goes which means that this is no cause for you to be sluggish in transacting your payments. Also be very wary of the types of agreements that you sign up with, and make sure that you are really paying for your own debt and not just for the profit of the consolidation company.

Consolidating debts that your business credit cards have managed to accumulate is one very good way to get you and your company from getting stuck in the hole of financial troubles. This may temporarily decrease your credit score, but once you have paid off all your debts then it will just gradually improve.

Just remember to be wary with what methods to choose in doing so, and remember to make timely payments so as to prevent balances and interests from escalating.

Build Up Your Business Credit

It is very important to build up your business credit scores to be able to avail of financial loans to fund your small business. In truth, small enterprises are now clamoring about for loans to improve their business by using the money for improvements, or purchasing inventory to meet consumer demands.

Building up your business credit takes a lot time and effort, and requires a paper works by the dozen. Here are some tips on how to get started in giving your business credit rating a healthy boost:

Set a business identity first

The first step in improving your business credit is to get one in the first place. This can be done by registering your business as an LLC or a corporation. Next you need to provide all the necessary paper works required by lenders such as legal document like business permits and licenses, financial statements, references, contracts, and so on.

You need to keep in mind that when you register your business as an independent entity, you need to have a fixed address of your business, as well as open lines of communication. (Note that P.O. Box is not acceptable as a business address)

You might also need to register your business in a credit agency so they can keep tabs on your credit ratings and scores. These organizations will act as reference when you apply for a financial loan that requires a valid credit report.

Building up your credit status will depend on the financial stability of your business as based on the financial documents during its operation. Also, prompt payments are a major issue when it comes to raising your credit status. Fail to pay on the date agreed; you get a negative score on your credit score if that happens.

You might also need to keep monitor credit card reports when they are delivered to you. Try to check for transactions that you did, or did not, make. If you spot an error, report it immediately to the corresponding agency. This will result to a higher credit rating.

Get a loan

Before you can actually improve your credit scores, you need to have a credit to work with. Many small businesses are now opting for business credit cards to improve their ratings. One reason for this is that these plastics have reduced interest rates and APR, which is quite useful for making prompt and affordable payments.

Also, since business credit cards have no principal amounts attached to them, you can easily control the interest expense you make every month. You can do some budget planning to minimize expenses and maximizing profit, without worrying about interests piling up.

Another way to improve your credit status is through credit lines. Many financial institutions, like banks, are now offering short-term lines of credits (LOC) for small businesses, with easy payment terms.

Since interest expense on LOC is dependent on the principal amount, you can easily reduce it by paying the original debt until you reach zero. With this term in mind, you can easily make prompt payments according to the agreement between you and the lender.

The gist to build up your business credit is to make prompt payments on your debts. Whether you have multiple loans or tons of credit cards at your disposal, you need to make sure that you pay each one on its designated date. If done right, you are well on your way to improve your credit scores, which in turn, will improve the financial future of your business.

Handling Your Credit Report

Not a lot of people may realize this, but one of the most vital documents that you should take note of, is your credit report. It is a document that contains detailed information about your credit history, including identifying data, credit accounts and loans, records of late payments, bankruptcies and pretty much almost everything that has to do with how you handle your finances.

This report, depending on its content, can either help you a lot or cause serious hindrances to you, especially if you are operating your own small business or about to make certain loans. After all, your credit report will basically become one of the major defying factors of your creditworthiness.

How Vital Is Your Credit Report?

If you have not been in a situation that has commenced how important your credit report is, let us allow an example scenario to walk you through. Let us say that one of these days you may need a certain amount of money in order to push through the expansion of your business. In doing so, you may need to apply for a loan or a credit account in order to gain funding for your project.

But before any lenders would actually give you a credit account or give you a loan, they would first check on your creditworthiness and whether they can trust you to make the right payments. With this, they would of course check your credit report to see if you have any histories of bankruptcies, unpaid debts, late payments and so on. If you do not have a very good credit record, then no lender would most likely help you out. And this could be very much of a hassle to you.

Such a situation can be applicable not only to your business needs, but to your personal needs as well, such as asking for a car loan or a housing loan. Even in trying to get a credit card account can become a difficult process if your report is unfavorable. And also, some firms that you may want to do business with or partner with in the future would most likely want to look up on your credit report and might be discouraged if it does not project a good image.

What Should You Do To Keep Your Credit Report Favorable?

With your credit report being very essential to establishing your financial reputation, you must do what you can to keep it as clean and favorable as possible. Paying your bills on time, preventing debts from mounting up, and basically handling your finances well are just few of the things that you can do to keep your record untarnished.

If you realize that upon checking your credit report, there might be some errors in it, make sure that you exhaust all means to correct it as this can reflect badly on you. Sometimes these errors may come because of innocent technical mistakes through your banks, and sometimes they may come with much serious threats as having people steal your credit identity. In such cases, contact the credit bureau and report your concerns as well as correct errors by approaching the source of your report.

Credit reports may be just as important as your passport, birth certificate or any other legal records. It helps establish your financial identity and reputation, and may prove to be very useful not only for you to handle your personal finances well, but even in your business finances.

In trying to do transactions that may involve money and credit with other people, this will be one of the very crucial things examined. And so, make sure that you manage your record well and keep it as spotless as possible.

Accepting Credit Cards: Merchant Status For Your Business

A lot of people nowadays, prefer the convenience of purchasing through credit cards. In the United States, nearly 1 in every 3 consumer purchases are paid through credit. It is crucial therefore for companies to readily accept credit payments to avoid losing sales.

No matter what type of dealing you run, whether it is a small shop, online store or mail order business, having a credit card service for customers will surely come in handy towards your business’ growth. However, one cannot just accept credit card payments in an instant. In fact, one has to apply to a number of banks for a merchant status to be able to do this. But once your merchant status is established, then your business will be good to go.

How Does Merchant Status Work?

Your company must first partner with one or a few banks to be able to accept credit payments. Before doing so, you must apply to these banks to achieve the merchant status. These banks will work with you to transfer money paid through credit by customers within a day or two of the sale. They will also be responsible for collecting the money from the customer, and in return, your company will pay them a usual commission, ranging from 1.5 percent to 5 percent for each transaction. Other fees may include monthly support and equipment rentals.

What Do Banks Look For In Companies Applying For Merchant Status?

Applying for merchant status may be a process much similar to applying for a loan, as lenders would certainly investigate on your overall financial status. The feasibility of having credit payments used through your business will certainly be looked up. Here are some factors that lenders will need to consider before granting you merchant status:

• Your Business’ Type & Length of Time.

Lenders would certainly need to know whether granting your company the status might have higher risks for accepting credit payment. For example, home-based companies may have more difficulty to obtain a merchant status as compared to companies with stores. Aside from this, companies that are already established for some time in contrast to those that are only starting out may be granted status quicker.

• Your Sales Track Record.

Lenders would also be interested to know if your company could really bring in money to the table. If your company has a dependable sales track record, then the easier for you to achieve status.

• Your Credit History.

General credit-worthiness would certainly be given much consideration. Be prepared for your personal or business credit histories to be investigated. In line with this, lenders may also try to check with your previous merchant accounts, about your business’ performance as this give feedback on how credit worthy you are.

What Should You Do To Achieve Merchant Status?

To prepare your company for application, you must be ready to have all information about your business as well as your personal credit history at hand. This includes how you obtain the necessary finances for your company and how you run things in the company. Requesting for a credit report for your business before hand will also be a good move.

Most importantly, be sure that you have maintained a favorable business and personal credit score for lenders to consider you faster. Pay your dues on time and avoid mounting up huge debts.

In your small business, establishing a merchant account may seem unnecessary or too much of a hassle at first, however, once you start accepting credit payments in your business, you will surely realize how much it can contribute to improving your company.

It does not only by boosting sales, but it can also provide much more convenience to your customers and even establish your company. More importantly, accepting credit card payments will surely improve cash flow.

In the end, once you will see how your small business can grow by having a certified merchant status, you will realize how all of your efforts were actually worth it.