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4 Ways to Improve Your Business Credit Score

 Business owners need to focus on their business credit score. Having good credit ratings gives you several benefits such as better terms from vendors and suppliers and access to capital from financial institutions. The following are ways of improving your company’s business credit score.

Use Credit Cautiously

Getting a business credit score encompasses generating credit by opening a credit account and sending out loans application. Ensure that your company’s credit card is separate from your personal credit card. This is in a bid to help your business build up credit.  Also, ensure you keep your credit utilization ratio and your debt levels as low as possible, this improves your credit rating. Avoid all financial activities that might hamper your business credit score.

Keep an Open Account

Ensure you do not close your credit card account, this is done in order to avoid negatively impacting your business credit rating. Also, keep those accounts active even if you do not utilize them in maximizing the amount of credit that is available to you.

Pay Bills Promptly

Delayed or late payment of bills can have a negative impact on business credit. Ensure you pay your bills as at when due, this act not only improves your credit rating, but also enhances good relationships with vendors, suppliers, and creditors. Being financially responsible is key to creditworthiness.

Monitor Your Credit Report

Every business owner should check his or her credit report at all times. This gives you room to check out for errors, inaccuracies, and outdated information that may cause a negative impact on your business credit score. In any case, you find any errors, reach out to the relevant credit reporting agencies and inform them of your discoveries so that your records can be amended.

For more advice on improving business credit scores and other sectors of business finance, contact us at Efunding Experts.

The Advantages of Using a Business Line of Credit

There are a lot of reasons for a business to need a line of credit, here’s what the advantages of using one are. Business lines of credit are similar to a credit card. Business owners face a lot of challenges in which financial hardship is inclusive. At times, businesses are in dire need of funds to help settle sudden expenses, emergencies or to help sustain the cash flow during an off-season. There are several advantages of using a business line of credit which includes:

Fast Cash

A business line credit provides businesses with funds that they need. Often times, borrowers are not required to pay interest on the money borrowed if it isn’t necessary. Once a business has an established credit line, it is usually accessible by the business at any point in time.

Even Cash Flow

It is important that businesses have available and accessible cash at all times. Sometimes, unforeseen circumstances can show up and the crisis might last for a long time. A business can’t always predict all expenses. An even cash flow can be provided through business lines of credit as it offers immediate funding whenever your business needs it. Lines of credit help businesses manage their financial risk, all businesses have risk.

Establish a good relationship with your Lender

 A relationship with your lender starts as soon as you get approved for a business line of credit. Ensure that you maintain a good relationship with lender. Businesses have different financial needs handling them well will help to ensure positive growth. If a business already has an existing relationship with a lender, it can make it easier to get future financing

Most businesses take out a line of credit because it’s a flexible option. With this financing option, the company is not required to provide a reason for the loan. This gives the business an opportunity to use the credit for whatever they need.

Build Good Credit

Business credit history gives small businesses concern because a high credit score is needed to guarantee to obtain future loans. If the business has a credit line, on the other hand, it helps build positive credit. As long as the company uses the line and doesn’t forget to make the payments, the credit score increases with the passage of time and fair credit habits.

How to Get the Financing You Need to Purchase a Franchise

They are various ways to secure funds you need to purchase a franchise, they include the following:

Have a Business Plan

A good plan is necessary in order to get finance to purchase a franchise. Your net worth and credit history is an important factor as well. Every lender wants to see a well-documented plan when they are approached by borrowers. A good plan can come in handy when it comes to a loan application. Ensure that your plan is realistic and it includes an accurate projection and a marketing plan. You can consult a professional if you do not know how to draw up a plan.

Look into Franchisor Financing

It is commonplace, that a franchisee seeks funds from a franchisor. A lot of franchisors provide some debt financing. However, a lot of franchisors have limited funds to finance every franchisee. You might be required to pay start-up costs, some franchisors will provide financing for a segment of that cost. They may have plans in place in order to finance equipment, operational costs, and other fees as well.

Choose Other Funding Options

Once you are aware of what a franchisor will offer you, look into other funding options. Draw up a list of other franchise funding options that are available to you. Other funding options can include bank loans, Small Business loans, finance companies, etc.

A home equity line of credit is another option to consider. You must be careful with this type of financing. Your home will be used to secure your loan. This puts your property at risk because if you default on the loan for any reason you lose your property.

A lot of people who want to of their own business ended up going into franchises. This is a great way to have your own business, with the available tools at your disposal for you to make succeed. It is therefore important that you find the franchise funding options suitable to you.

CREDIT CHECK: HARD PULL VS SOFT PULL

What Is a Credit Check?

A credit check refers to an evaluation of your credit history that prospective lenders request when applying for credit. This allows promising lenders to check your credibility as a borrower by viewing how well you respond to pass loans by making payments on time, your recent debt profile. This data is also known as credit history.

A credit score indicates how well you manage your finances in the past. Checking your credit is synonymous with pulling your credit, which is also subdivided into the hard pull and soft pull. The Fair Credit Reporting Act has a number of requirements about when potential lenders can actually pull your credit. This protects the consumer credit score from being unnecessarily lowered. It also helps the lenders to  know how well they can make both hard and soft inquiries 

What Is a Hard Pull?

An understanding of hard pulls is very important when applying for credit because your credit score can be affected. Your consent is needed before any hard pull can be performed. When you apply for credit, a hard inquiry is executed by the prospective lender. This involves car loans, applications for mortgages, credit cards, student loans, business loans, and personal loans.  A hard inquiry automatically becomes part of your credit document, so promising lenders can see it was executed. The negative impact of credit score is caused by a high number of hard pulls. Therefore you should avoid hard pulls when possible.

Furthermore, a hard pull is a crucial step in applying for credit. A vital aspect to remember is that a single pull is that hard inquiries made within a period of 45 days. In order to avoid a negative influence on your credit score, you need to plan hard pulls around the same time. Also, remember that you should consider your credit scores before any hard pull. The points you lose from hard pull can be avoided provided your credit score is strong but on the contrary, think twice before requesting a hard inquiry.

What Is a Soft Pull?

Soft inquiries do not have a negative effect on your credit score in any way. Although, it is being made into your credit all the time.  Anytime you receive a credit card, it is certain that a soft inquiry has taken place on your credit. This enables potential lenders to foresee if you would be considered for a loan before they offer it. Soft pulls are often favorable for both creditors and applicants because they help lenders find borrowers who match their marked profiles.

Employers sometimes perform soft pulls while recruiting new employees, also employers see a good credit score as a signal that a potential employee is responsible. Mortgage lenders, auto lenders, and other prospective creditors often perform soft inquiries in a bid to find potential customers. Soft pulls make it possible for employers to steer clear of individuals who do not qualify.

How To Choose a Business Credit Card

 Business owners must be fully aware of different funding options in a bid to grow their business. You can start by opting for a credit card that is best for you, the credit card comes with lots of benefits. Bear in mind that every decision reached by you today will tell on the financial health of your business tomorrow. Therefore, ensure you do thorough research on which credit cards are available based on your personal and business needs.

Efunding can help ensure you choose a credit card best for your business.

Ask Yourself These Questions While Choosing a Credit Card

●     How much interest rate do you want on your card?

Credit card companies make money through interest rates. The higher the rate, the more interest you’ll pay on your credit card, especially if you do not make prompt payment. This can lead to more debt over time.

●     Do you travel often for business purposes?

Most business owners people travel occasionally for business purposes. Choosing a business travel card can give you access to the following lounge access, TSA pre-check, and reward points which you can apply to future business travel.

Another benefit of travel credit cards is no foreign transaction fees. Whenever your card is used abroad, your charges are the same. You will spend and earn points, without fear of incurring debts.

●     Do you want to add an authorized user? 

Getting a credit card that enables you to add an authorized user would be good for your business. This is important because whenever you are unavailable supplies can be bought without you being present. This can also help to ensure the smooth running of your business.

●     Do you want cash advances?

Some credit cards require a cash advance, without any added fees. Getting access to a good amount of cash to be able to purchase or fulfill an order, can make an impact on how your business is run. Having said that, if you need a large sum of money, then the loan will be a better option.

Attributes of an Installment Loan

Installment loans vary depending on the nature of the loan and the lender. Before deciding on a product and lender, you should understand the following:

  • What use are you going to give the loan?
  • What amount are you in need of?
  • Does the lender terms favor you?
  • How long will the repayment period last?
  • What is included in your repayment plan? 
  • Does the loan require collateral to secure it?
  • What are the other prerequisites to secure a loan?

Pros of an Installment Loans

An installment loan is quite easy to manage since the same amount is paid monthly. Making payments as at when due will be helpful when the time comes to get a new loan in the future. Finally, an installment loan, as well as prompt payment, proves to lenders that you are responsible and also you can be trusted.

Cons of an Installment Loans

There are several disadvantages to installment loans which you must be aware of them. Most times you do not get the desired funds you need for your business. Lenders look for reasons to make you not eligible for the amount you requested for. Therefore, you might not get enough funds to foot your bills.

WHAT IS AN INSTALLMENT LOAN

An installment loan is one which offers funds to small businesses or individuals. Once you obtain the loan, the borrower then pays instalmentally the same amount for the duration of the terms which both parties agreed on.

Installment loan is a great funding option for business owners who want to make purchases but can’t pay the total amount upfront.                                                                                                        

What Types of Loans Are Not Installment Loans?

  • Payday loans: These loans are quite easy to get, but the interest rates are usually high. For businesses that need access to quick funds, this can be an option.
  • Title loans: Title loans are a good fit for car owners. These loans require applicants to put up a collateral in exchange for the loan. This collateral will be taken if there is a default in the repayment of loan.
  • Credit Cards: This is a means of generating business funds. Also, when you use a credit card, there is a certain amount of credit that you cannot exceed (credit limit). 
  • Lines of Credit: Lines of credit provides business owners with capital they need. They are usually renewable, but the interest rates are high. A collateral is required when you don’t qualify for an unsecured line of credit. With secured lines of credit, you get better rates.

Types of Investors For Small Businesses

There are various types of investors for small businesses they include the following:

Angel investors

  • They provide private financing to projects this might be risky but there would be profit in the long run.
  • It is quite difficult to access angel investors due to their reputations,arranging a meeting can be challenging .
  • They are willing to risk more than venture capital investors but will also demand a greater return on the investment.        

Venture Capital Investors

  • These investors can be contacted in person or online.  Venture capital investors invest money from third parties, therefore, making a profit is the focus.
  • There are successful entrepreneurs who invest in projects in many colleges. You can look for venture capital investors with entrepreneurship programs in colleges. 
  •  You can ask for referrals from companies who has existing relationships with venture investors already.

Family and friends

  • This can seem as an easy option but it can hinge on your relationship If things don’t work out. All parties involved must know the risk they are taking before getting involved .
  • I would advise you make this your last option, unless your family and friends wouldn’t mind putting their resources at risk.                                                                        

Crowdfunding

  • Allows access to funds made by the contributions of lots of small investors.
  • Crowdfunding platforms are easily accessible and very easy to use.
  • You must be doing well in your sector or actively involved in social media to get access to funds.

Incubators and Accelerators

  • An incubator is an organization in search of startups with great potential and capacity for growth..
  • Accelerators can quicken up the pace of projects, seeking short-term profit. 
  •  This can be a good alternative, if you are in the technology sector..

How to Get Investors for Your Small Business

Know your potential investors 

Your potential investors must meet these prerequisites

  • They must be an accredited investor with experience.
  • Willingness to take a risk. 
  • Fore knowledge of your type of company, industry, and market.
  • A good investor must exercise patience as you journey on your path.

Be transparent

When you introduce your company and your financing needs to a potential investor, you should be able to summarize everything in a simple presentation that lasts just a few minutes.

Prepare all the documents that your investor may need

Prepare all the documents a potential investor would want to see such as your business plan, your budget, the use you’ll make of the investment, and the repayment term.

Tell your story

Ensure you share your stories, all entrepreneurs have stories to tell. Mention the challenges you have faced, future projects and how you plan to return the investment you’re requesting as well as your entrepreneurial strengths

Be courageous

Request for help whenever you need it, this is key when thinking on how to get investors for your small business. Keep in mind that every entrepreneur needs a great team as well as investors to really succeed. 

State the role of your investor

The role of your potential investor should be clearly defined from the start. If you want to get investors for your business, ask yourself the following questions: Are you willing to share ownership of your business with your investors? What will your investor provide you with is it business advice, or  capital?

3 Ways to Improve Your Cash Flow Immediately

Cash flow is an important aspect of your business, having a positive cash flow is vital to the success of your business. Being cash flow positive means that at any given time, your income exceeds your expenses. Having a positive cash flow means your income is more than your expenses in all cases. Improve your cash flow through the following ways:

Speed Up Income Collection

A prominent problem facing cash flow is unpaid account receivables. Atimes you have to fast track process for late-paying clients to do justice to their invoice by offering discounts so as to enhance early payment. Send invoices to your customers digitally and do your follow up on those delaying their payment with notice on a regular basis. This is all in a bid to meet up with your business needs.

Reduce Expenses

 Avoid a negative cash flow completely, in other to achieve this ensure you do not spend more than the amount that comes into your business. Draw up a business plan and a budget for all your expenses and stick to it at all times. Do away with expenses you cannot handle. You may have to lay-off some workers or buy less inventory during off-seasons.

Plan for Unforeseen Contingencies

To maintain an accurate cash flow you need to put into consideration some unforeseen needs that may show up in the future and also make financial provisions for them. In order to achieve this you can have a cash reserve, where you put some amount of money from time to time.

For more information on how to improve your business cash flow, contact Efunding Experts.

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