
Principles of Building Business Credit
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
Any business with the goal to expand should focus on building business credit from the get go. Even if you’re not ready to apply for business funding today, the time will likely come in the future. To qualify for business funding and manage your working capital, it’s important to build your business credit. There are several steps you can take to do so, no matter where your business is currently at in regard to its finances.
Here, we will break down the definition of business credit and share some ways to build business credit. This way, you can properly assess your working capital.
Business credit is a measurement tool that is used to qualify businesses for financing methods. In the same way that people have credit scores, businesses too have their own credit history and credit score. Business credit bureaus like Equifax, Dun & Bradstreet and Experian keep track of a business’ debt records.
This credit report is likely to be used by creditors, lenders, suppliers and insurance companies when they need to evaluate your creditworthiness to approve or deny applications and deals.
While there are ways to access business loans for bad credit, it’s less than optimal. Instead, you can follow these recommendations to build your business credit along your journey.
Some of these tips can be performed from the outset of starting your business. Others may happen over time. Either way, if you consistently take care of the following, your business credit will grow.
We’ve touched on some of the benefits of having good business credit already. But, to make sure it’s extra clear, here’s why it’s so important:
Building business credit is a great approach to expand your access to business funding options. The type and amount of debt you take on affects your working capital, so it’s the best case scenario not to carry debt.
With good business credit, you will be able to secure the best loan terms and deals possible as your business will be considered trustworthy since you’ve built a history of paying what you owe.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
PPP loans were issued to help keep small businesses afloat during the coronavirus pandemic. As a form of unsecured finance, PPP loans were granted to qualifying businesses to help them continue to pay their employees, amongst other costs.There were strict eligibility requirements, as well as conditions as to what the loan had to be used to cover.
The Paycheck Protection Program is now on its second round of funding for eligible businesses. However, some business owners may have already been declined a PPP loan. If you applied, but received a denial, you may be wondering why. You may also be looking for alternative forms of business funding. On the upside, there are many other options you have available to your business (keep reading for more on these)!
We’re here to tell you everything you need to know after being denied a PPP loan. We will share some common funding methods so you can easily assess your alternative business funding options.
If your loan was denied, you’ll likely have received notice directly from the lender, rather than the SBA. It’s possible they won’t give a reason for your denial. There are some common reasons for denial, such as: a mistake in the application, your business doesn’t qualify for the loan or you have previously defaulted on a SBA loan. If you received a rejection without reason, you should try to contact the lender directly to find out why.
There are a few other kinds of loans that you can apply for in lieu of receiving a PPP loan.
The SBA has many other types of loans available for small businesses facing financial hardship and economic uncertainty. Here are a few options:
Whether you’ve been denied a PPP loan or are looking for unsecured financing options for your small business, you have a lot of routes to consider.
Let’s take a look at some popular business funding options that can provide you access to capital quickly:
Having the ability to access business funding quickly can greatly impact your success. Although many business owners were denied PPP loans, there are other SBA options to aid business owners facing the negative effects of COVID-19.
Additionally, alternative sources of unsecured finance like merchant cash advances or online term loans exist to meet the needs of small business owners.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
Did you know that there are more than 20 million ecommerce sites?
The world of online retail is extremely competitive. As a business owner of an ecommerce website, there are many things, both big and small, that can help you gain a competitive edge and boost your sales.
Depending on where you are in your business cycle, you may need to rely on financing methods like taking out a short term business loan to fund your efforts. Or, if you have enough cash flow, then you can reinvest into your business to increase profit.
We will break down 10 useful, tried and true optimization tips to boost your online sales. Then, we will get into various financing methods should you need some quick cash fast.
As an online business owner, you may find yourself in need of quick cash to finance your business costs. While traditional bank loans are an option, many new businesses won’t qualify because of the strict requirements. However, there are alternative forms of funding like taking out a short term business loan to get the capital you need to increase your sales.
A short term business loan is a type of loan that supports a temporary business capital need. Many businesses who aren’t approved for lines of credit will look to short term business loans. This attractive funding option tends to have a lower credit limit than a business line of credit, but they also provide businesses with funding fast.
They get their name from the repayment structure, which tends to be short term. Rather than paying back monthly or yearly, short term loans are often repaid on a daily or weekly term. It’s important to look at the annual percentage rate (APR) which affects how much you’ll owe back on what you borrow.
There are a variety of different types of short term business loans, including:
At Uplyft Capital, our focus is on merchant cash advances, a type of short term business loan that can provide you with approval and funding in less than a day. A merchant cash advance’s repayment structure is based on your business’ credit and debit card sales over a period of time. This means, you borrow money and then pay it back with a percentage of credit and debit card sales. It’s a great source of funding for businesses who need cash fast, have steady sales and are looking for alternatives to traditional loans.
Ecommerce businesses have skyrocketed over the years. New ecommerce sites make their way into the digital world on a daily basis. These digital storefronts have a grand opportunity to boost their sales with a variety of approaches and actions. For many, this will require some upfront capital for their short-term needs. That’s where a short-term business loan like a merchant cash advance can come into handy!
Once you devise the strategy by which you will grow your online sales, you can estimate your need for capital (if cash flow can’t cover the costs). Then, you have the option to apply for any type of short term business loan you wish to finance your expansion!
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
There are many ways to boost your bottom line.
From focusing on maximizing sales to minimizing costs, there are various methods you can try to find what works to fuel your growth the fastest. Depending on your strategy and goals, you’ll require different funding requirements and methods by which you can attain the capital.
Some business owners may opt for a short term business loan. Short-term business loans are a capital funding method used for a business needs like working capital, buying equipment or expanding. If you’ve been denied business loans because of your credit history and financial status, you need to know that there are ways to find funding through business loans for bad credit.
Before we jump into the logistics, let’s take a look at some of the most common ways by which small businesses can transform into profitable powerhouses.
Options for business funding are plenty. If you have bad credit, then you may need to consider business loans for bad credit or short term business loans.
Growing a profitable small business won’t happen overnight. It’s useful to conduct research in your respective industry to figure out customer demand. Based on needs and funding options, you can outline a plan to run your business efficiently. This way, you can satisfy customers while maximizing profits and minimizing your costs.
The aforementioned strategies are just a few ways that small businesses can boost their bottom line. It could require a short-term business loan, an alternative funding method, or finding business loans for bad credit to make your dreams a reality.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
It’s estimated that 12-24 million ecommerce sites exist. With each day, new sites are added into the world. As with any type of business, having finances in order is key for growth and survival. Whether your financial leverage comes in a line of credit, loan, merchant cash advance or another form of funding, your ecommerce business will need it to make it.
Here, we will look at what financial leverage means in business, how it works, and your funding options for running an ecommerce business.
When it comes to business, leverage can be defined as “using borrowed capital as a funding source” to expand assets. Since you’re borrowing money, or using debt, to finance assets with potential returns, it’s an investment strategy. The hope is that the benefits will eventually outweigh the costs. So, you’ll be able to pay back the debt, plus any interest, and gain profits.
As with any type of financing, there are both upsides and downsides. The benefits of using financial leverage like a line of credit, for example, include:
If your company is considered to be “highly leveraged,” then it means that most of the capital is in the form of debt. That comes with its own sets of risks, and we will get to that shortly.
Financial leverage can be translated into a nominal amount by looking at a business’ financial statements. This will help you find out how much of the business is based in debt, or leveraged.
For starters, the main financial leverage formula to consider is:
Total Debt + Shareholder’s Equity = Financial Leverage Ratio
Shareholder’s equity can be calculated by taking the current number of outstanding shares multiplied by the current stock price. This will show you how much of your business is owed to others and not your own.
By looking at financial statements like a balance sheet, income statement or cash flow statement, you can also learn more about financial leverage with these formulas:
In these formulas, if you are running a retail ecommerce business and take out a line of credit, then that amount of credit becomes considered debt. It’s money you’re borrowing to buy assets, or equity. In this example, you may use this line of credit to purchase inventory, and inventory will translate to sales. Inventory is considered a current asset because it can be converted into cash within one year or less, if all goes well!
It’s easy to see from the above example that financial leverage is inherently taking on a risk. If you buy all that inventory on debt and cannot make sales, then you owe money and are not bringing in cash flow. That’s just one type of risk associated with financial leverage.
Financial leverage will also affect current and future cash flow. You’ll have to consider how much money you owe back on the borrowed principal amount as well as interest owed. Furthermore, your financial projections need to take into account financial leverage.
Depending on what you’re using the debt to purchase in forms of assets, there’s other risks like market risk, economic risk or the risk of natural disasters. If you use debt to purchase real estate and the values drop or a hurricane wipes out the building, then you’ve lost on your investment.
Whether you have brick-and-mortar location(s) or are solely running an online store, the explosion of ecommerce has ushered in the need for ecommerce funding. The good news is that since it’s such a popular business venture, there are many options to provide you with financial leverage.
Ecommerce businesses often rely on financial leverage because of the nature of the business. Whether you need a line of credit or quick cash to buy inventory, equipment, pay for warehousing or operational costs, etc., you will take on debt to grow.
Ecommerce is a quick-paced platform that requires you to provide value consistently to your customer. Since the internet moves so fast, you can set yourself apart by being prepared for whatever is to come. This will mean being able to get cash fast to meet spikes in demand and changing customer spending habits, so financial leverage is a concept you’ll want to know well.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
As small businesses enter respective markets, their first goal is to survive. The truth is that many won’t make it. However, from the massive amounts of businesses that don’t keep their doors open for very long, there have been a lot of lessons to learn from to become one of the ones that do.
According to the Small Business Administration, two thirds of businesses that have employees will survive at least two years. Only about half make it to lasting longer than five years. Within the first year alone, 20% of businesses have to call it quits.
No matter the industry you’re entering, as a small business, you will have an uphill battle to protect against your fragility. We aren’t here to scare you out of trying. In fact, we want you to finish reading this article, equipped with the knowledge and power to be one of the businesses that defy the odds.
Every business has their own fair share of hurdles. What works for one may not be the same formula for another. That’s why it’s so important that you understand your market and customer’s needs. The first step for a small business’ success resides in its value proposition. Be clear and communicative about why you start your business and the value you will bring to your customers.
When you care about your quality and service, you can take care of one of the biggest business challenges – retaining a loyal customer base. Besides this crucial piece of business, you’ll have to maintain strong leadership, obtain the right capital funding, open up shop in the smartest location, grow steadily and oversee your marketing plan closely.
The SBA’s data has shown that a business’ survival rate is somewhat independent of the economic situation. So, don’t be afraid to start something new if the economic environment is less than optimal. Your small business’ survival is more in your own control than you may think.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
When seeking business funding, there is a list of criteria you’ll have to meet for approval. Depending on the type of funding you want, the requirements will differ. But, what do you do if you have bad credit? The good news is that you can find funding, even with bad credit. We’re going to share some alternative business funding methods with you. Additionally, we’ll get to the bottom of what credit means, why it matters and what makes it good or bad.
Small business funding is the process and act of borrowing capital. Capital is provided through business loans or lines of credit from lenders so that small businesses have money to cover their needs.
Depending on the type of business funding you select, there will be a unique process for approval. The amount of capital you can receive also varies by funding method.
Every small business owner has their own set of needs at any given time. When cash flow is running low, access to quick capital can be the answer to many problems a business is likely to face. Some reasons why a small business may seek outside funding include:
To receive small business funding, the process usually includes these steps:
The lender will assess if a borrower qualifies to receive funding. Even if a lender does not approve a borrower, they may still make suggestions for other sources of funding. Approval rates vary by the type of product a borrower applies to receive. The likelihood of being approved along with the amount of time the funding process takes can depend on:
When small business owners don’t qualify for business loans for any list of reasons, then they can look to alternative business funding options. These provide borrowers with quality and accessible financing methods.
Alternate funding began in the 2000s because traditional lenders were facing a challenge to finance all small businesses. The economy and small businesses continue to rely on alternative business funding methods because they offer variety, convenience and better terms in specific cases.
Here’s a list of some types of alternative business funding options available to small business owners:
Alternative business funding is a good solution for any business owner who may have:
One of the most common reasons why small business owners get declined for loans is due to bad credit. Credit is the ability to borrow money and pay it back later. Creditors are banks, lenders, merchants and service providers who give money upfront (grant credit) because they trust you’ll be able to pay it back.
Creditworthiness or your credit refers to a rating that allows creditors to judge your likelihood of paying back the money. In the United States, creditworthiness is based on credit history, or your record of borrowing and paying back money. Independent credit bureaus store these records and share the reports with lenders.
Your credit report includes information like:
Credit matters in small business funding because it is one of the main criteria by which you are judged for approval. It also matters for when you sign a lease for an apartment or home (can affect the amount of your security deposit), take out insurance (helps determine your rate), open an account for a utility company or even to judge your character when you apply for a job.
If you’re worried that your credit won’t be good enough for a loan, or you’ve already been denied, it’s okay. There are still ways to get business funding with bad credit.
To be the best prepared for alternate funding, you should:
When it’s time to apply for business funding options, outline the criteria by which you’ll be judged. If you clearly don’t qualify according to lenders’ criteria, don’t waste your time trying.
Instead, re-evaluate where you stand financially and look to alternate sources of business funding. There is definitely a way to get the cash you need at any phase in your business cycle.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
The stages of business growth can vary, but most experts will define either 4 or 5 stages of business growth. As someone looking to start a business or someone looking to grow a business, it’s useful to understand the general life cycle of a business so you can take the right steps at the right time to boost your chances of survival.
The world of business is ever changing and shifts along with supply, demand and consumer preferences. To establish a startup as a powerhouse and well-known brand, you will have to take calculated risks. Let’s take a look at the four main stages of business growth and things to consider during each step along the journey.
Some people will consider a business a startup at the inception of the idea. Others will only see a business as a startup when funding has been established and there’s some semblance of a customer base. No matter when you define the beginning of your startup phase, you have a minimum viable product (MVP) to work with and should turn your focus to:
a. Talent: The people you hire in the beginning of your business will set the stage for the company culture. While there is a cost to bring on a new hire, it proves to be worth it when you can find the type of people who are willing to do whatever it takes to make the business successful. Some traits to look for in your first employees include: flexibility, adaptability, desire to problem-solve, a willingness to learn and take on new jobs as needed.
b. Process establishment: The next business stage is scaling. But, before you scale, you want to have well-defined processes so that as you expand, control and quality do not fall behind. You need to make sure that processes are clear and iterative so that as the business grows, the processes will continue to work for you and not against you.
c. Customer service: As the holy grail of most businesses, customer service should always be at the top of your mind. Invest time, money and energy into supporting your customer base, especially those who are with you from the beginning.
d. Early adopters: Early adopters are those who are first to use a new product or service. To attract this customer base, you have to clearly define your target audience. Rather than spreading a lot of money across a wide net to attract people, focus on your core audience and let them help you build brand awareness through word of mouth. This will help to lower your customer acquisition cost and promote brand loyalty from the get go.
Every company has a different timeline for when they become profitable. But, once you move past the break-even point, then you’ll look to scale the business. At this point, you may look for additional business funding or reinvest your profits into the business.
a. Executives: At this point, it’s worthwhile to invest in at least one or two executives with experience in your industry. They can help to sharpen your go-to-market plan and optimize efforts.
b. Define roles: Since you recruited your team in the startup phase, you may not have clearly defined their roles since everything was getting up and running. Now, you’ve probably been able to better clarify what each person is responsible for doing, and if need be, you can bring on more team members who are experts in their respective roles.
c. Marketing: To boost your brand awareness, it’s the right time to invest in marketing and branding. From establishing a strong brand identity to communicating your value proposition to an audience, this is the time where you will begin to see your business take off.
Once your brand is established, your team is in place and your profits are growing, expansion is the next to do. The goal is to grow your market share. This can be done by:
a. New opportunities: Explore new opportunities for revenue. This may be by offering new products or services, expanding markets, creating up-selling features or growing brand equity in existing markets.
b. Stay focused: Hopefully, things are looking up. But, it’s important to also remain vigilant and aware that your product and services must retain their original (or better) quality or your success will be threatened.
c. Key aspect is cash: You’ll likely need cash on hand to expand. This is especially true if your expansion plan entails adding new products or services. There are several ways to receive business funding, but two common methods are by taking out a business loan or applying for a merchant cash advance.
How do you know you’ve made it? If your brand has become a household name or your market share is maximized, you’ve likely hit the maturity stage. You’re no longer focused on establishing your brand identity or expanding your markets, but rather, you are in the business of retaining customers and in it for the long haul.
a. Build customer loyalty: More than half of business’ sales generally come from existing customers. That’s why it’s so important to retain your customers and continue to provide them with the value you’ve always promised.
b. Organizational structure: While your organizational structure is solid, it’s useful to consider how you can innovate and try new ideas. In most instances, this type of culture can be generated and supported by the organization’s leaders so that everyone feels like they can contribute ideas and be heard.
Business moves fast. It takes agile business owners who are up for a challenge to make their business last in an overly competitive landscape. While every business and industry has their fair share of nuances in terms of business structure, communication and goals, these four stages of a business cycle have become somewhat universal.
Some important takeaways for business owners include: remember why you started, continue to prove your value to your customers, invest wisely by taking calculated risks and understand your business financing options at every step of your business’ life.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
When it comes to running a small business, the big and small decisions more often than not end up relating back to money. From sourcing funding to managing finances and paying taxes, there’s a lot of information to know. Of course, many businesses rely on financial advisors and accountants to manage their books, but it can literally pay you to understand the basics about small business taxes.
That’s why we’ve made this guide to outline the main aspects of small business taxes, from the kinds of taxes you may have to pay to the considerations to take when structuring your business.
The types of small business taxes that you will end up paying will depend on the way you structure your business (we’ll get to that later). But, the three main types of business taxes are:
Besides the aforementioned taxes, you may be required to pay these too:
The way by which you structure your organization legally will undoubtedly affect your tax rates. Here’s a look at the types of businesses you can run and their respective tax implications.
When you run a business, you’ll have to keep track of income and expenses. Expenses get deducted from your revenue as pre-tax so that your tax liability is then lower based on profits (instead of revenue). To write off expenses, here’s a list of common ones that can be deducted:
The best way to find out what you can write off is to consult with your accountant or CPA. In most instances, small business software for taxes like QuickBooks will help to itemize expenses for you.
Also note, you can write off startup costs before you are fully operational. You can deduct up to $5,000 in startup expenses and up to $5,000 in organizational costs. This holds up as long as your total costs to get going is less than $50,000.
Taxes can surely get complicated. That’s why it’s so useful to know the basics when you’re setting up your own small business. If you have the opportunity to consult with an expert, it’s definitely advisable. As you can see, the way you set up your business as a legal entity will greatly affect your taxes. So, be sure to perform research before jumping right in.
Once you’re getting going, you may realize you need some help funding your small business. Don’t forget that’s what we are here for at Uplyft Capital. Whether we can provide you with a cash advance or not, we invite you to leverage our Marketplace to get connected to the best small business loan for you.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.
When you start building your small business, a big question pops up early on. You’ll find yourself asking, “Is it time to hire a new employee?” Whether the answer is yes or no at any given time, it pays to know how much it’ll cost you to bring on a new employee.
Of course, everyone’s job titles and salaries vary. But, there are associated (and often hidden) costs to hiring a new employee. In fact, Deloitte has shown that the average cost of a new hire is $4,000, but the price may likely vary.
Here, we will break down everything you need to know about the hiring process, how to hire the right person, and the total cost of hiring a new employee for a small business.
It would be great if the right candidate naturally showed up at your door when you are ready to hire. The truth is that there are many surefire ways to find the right person, but they take time and as such, have costs.
The first step is to write out the job description, which will include a summary of the position, line items or bullets of their job responsibilities, and the required experience and/or education to fulfill the position. You can post the job description on job boards (there are likely to be fees for this) or across social media (can be free unless you pay to sponsor the post). Another option may be to hire a recruiter. However, this may be a more costly option than you are ready to take on. The average cost of a headhunter is $20,283.
It’s no Denzel Washington movie when it comes to training day. Once you’ve recruited the perfect new addition for your team, you’ll have to invest resources like time, money and effort into preparing the new hire for their role. Training actually turns out to be one of the most expensive pieces of the new hire process.
You could and should think of training as an investment. You are putting money upfront to hopefully reap dividends in the future, if all goes according to plan. On average, the cost of training a new hire is just north of $1,200 per employee. This number is calculated by quantifying the hard materials cost, as well as the time it takes a manager and fellow employees to get the new hire ready to go (to the point of 100% capacity).
Along with on-boarding comes the process of submitting paperwork and documentation, including but not limited to: health insurance, annual salary, benefits and the like. You’ll have to set up an approval process for the new hire to receive necessary paperwork and it to be properly reviewed. Many big businesses have this managed by a Human Resources department or have outsourced an HR team. As a small business, you may want to take this on by yourself to minimize the costs. If you do so, there are plenty of options for automated human resources management software on the market.
In business of any size, customer satisfaction tends to be a top priority. Equally as important is employee satisfaction and retention. Just like it costs more to acquire a new customer than retain an existing one (5x more in fact), the cost of turnover is like throwing money out the window. You invest time and resources into getting a new hire up and running so that they can hit the ground running. Remember when we said this is an investment that will only pay out if the employee reaches maximum potential? If an employee quits shortly after being hired, all the costs associated with on-boarding can be considered sunken. Corning Glass Works has found that an employee who attends a structured orientation program is 69% more likely to remain with the company for at least three years.
As a small business hiring a new employee, you probably have spent most of your time calculating a new hire’s costs based on their salary and benefits. Beyond their salary, you should also factor in the price of benefits like: medical and dental plans, retirement contributions, disability coverage, life insurance, tuition reimbursement and so on.
The break-even point for bringing on a new hire tends to take place by month six, at least for mid-level managers (according to Harvard Business School). This is based on the employee reaching their full potential by that time, as training, salary and cost of lost productivity even out.
The cost of hiring is not a one-size fits all calculation. Naturally, the salient costs like one’s salary varies greatly by location, hours of work, experience level, etc. But, as a small business, taking on any new costs is an important consideration. However, new hires may not be a cost you can fully avoid because at some point, the benefits of hiring someone to help boost productivity will outweigh the costs of not having a valuable team member. Here are some tips to help reduce the cost of new hires:
Small business owners have a lot to manage. That’s why the consideration of hiring a new employee is one to take seriously. Devoting the right time and resources to find the perfect candidate can save you money in the long run.
While the hiring process isn’t always the most quick piece of business, it often ends up being one of the most important. Give time to figure out the exact job description, necessary base salary and benefits, on-boarding process, training environment and overall employee experience. The goal is to find the right person who also feels you offer the right opportunity for growth and maximum potential.
Having access to the best business funding options may rely on your business credit. Here’s how you can build good business credit.