A true expert in her field, Gerri Detweiler has helped thousands of businesses with financing. In this episode she shares the most important steps in building your business credit in order to open your own studio or expand your current business in the fitness industry. Don’t forget to check out the references for more free resources and links to help you navigate your finances!
What You'll Learn from this Episode:
• Where to start to finance your own business / how to prepare for expanding an existing business
• How to build a business credit score that enables you to apply for loans
• How to navigate between personal, business and vendor credit scores as well as interest rates
To get copies of your free 6 Steps to Building Business Credit & 14 Steps to Make Your Business Legit worksheets, email us at firstname.lastname@example.org!
Here's the Complete List of Tips:
1. Taking the First Step (06:00)
New entrepreneurs: Start your business sooner rather than later to position it for growth: Get your business registered as soon as possible; as you expand and go along you’ll have “time in business” behind you which opens up more opportunities in the future with lenders (who look at how long you’ve been in business). Forming a legal entity also helps to protect yourself.
2. Building a Business Credit Score (10:00)
Next step: Get a business credit card as soon as you can in order to separate your personal and professional finances. They are available to young businesses based on your personal credit score and any income that might be available. Obtain it in the name of the business; business credit cards report to business credit agencies and help you start your business credit score. In the early stages, it’s common to sign a personal guarantee – which means your personal possessions may be at risk if you can’t pay back debt: So the goal is to build a business credit score and business entity where you personally aren’t at risk (but your company).
Action Tip: Some business credit cards also report to your personal credit, some do not: You can find a comprehensive list in the show references!
Caution Advised: Business credit cards are not protected by the same consumer protection laws as personal ones, so you want to make sure you pay on time, ideally automatically.
3. Vendor or Supplier Credit (16:00)
Any vendor/supplier you work with may allow you to pay later – this is valuable for increasing cash flow into your business as you don’t have to pay upfront, so do your research. Vendor credit is the No 1 type of credit in the business world so it never hurts to ask if this is an option with the supplier of your choice, especially if you want to build an ongoing relationship.
Action Tip: There’s a couple of easy vendors to start with that don’t care about your credit score:You can find a list in the show references!
4. Other Types of Financing (19:34)
Micro-Loans are a good option for young businesses. Also look out for loans that are available for businesses that aim to give back to the community etc. A loan that is available for every American to apply for is KIVA: If you find a few backers you can get small loans without interest!
Action Tip: If you want to find microloans in your community or free financial counseling for new business owners, see the links in the show references!
Getting a Loan (Business Owners) (23:43)
If you already have a business up and running and need capital to expand, one of the best forms of funding you can get is an SBA backed loan which is very attractive to lenders (as the
SBA is backing you financially in case you fail to pay everything back) and has favorable interest rates – they are an effort to get but worthwhile.
However, be cautious and inform yourself:
- SBA has minimum standards; however the lender chooses beyond that what kind of business they back.
- They use a unique credit score by taking both your personal and your business credit into account.
Business cash advance: If you’re accepting credit cards from your clients then you will be approached with offers to advance your money based on the sales you put on that credit card.Be very careful when considering those options as they use different terminology that might trick you into thinking you have to pay a low interest rate.
Action Tip: You can find a link that helps you calculate actual interest rates in the show references!
Nav.com shows business owners their business and personal credit in one dashboard and gives tools to find financing for your business – for FREE. It also assists you in finding business financing opportunities. Look to the show references to create a free account and get a month of premium Nav for free.
Main action tip (32:48)
Start this process before you need it! Don’t wait for an opportunity or crisis to come along but prepare yourself way ahead of time so you can make informed and feasible financial decisions.
- Build a proper foundation and register your business
- Separate your personal and business finances by getting a business credit card
- Pay your business credit on time
- Get vendor credit to build your business credit history
Other References in This Episode:
FCM 007: What You Need to Know Before Opening Your Studio with Ninette Wassef
FCM 064: Steps to Opening Your Own Studio with Tash Bean and Debbie Davis (Pt. 1 & 2)
FCM 039: Breaking Free of the Conventional Career Paths with Dr. Laura Miranda
FCM 041: EVERYTHING You Need to Know to Get Started Training Online with Dave Smith
Resources mentioned in the episode:
1. Nav's Build Business Credit Checklist! This contains references to the steps mentioned including:
- Getting a business credit card: Nav.com/business-report
- Which business credit cards report to personal credit: Nav.com/report
- Vendors that help build business credit: Nav.com/vendors
2. Information about microloans is available at OFN.org or check with your local SCORE or SBDC advisor (SBA.gov/tools to find one locally)
3. You can get a free Nav account at Nav.com/freeaccount and listeners will get a month of premium Nav for free by using the coupon code free account!