Why establishing business fundability matters and how to achieve it easily.
Fundability matters. It's so easy to get lenders to decline loan applications and
creditors to not give you credit. Building a fundable business will help
you get approved. The business will stand on its own. It can't look like a hobby
you do in your spare time. Even if it started off as a side gig.
You need to build for fundability. A business starts with no credit profile.
Therefore, what's on an application is all that's reviewed for approvals. So
your application must be very strong. Most companies fail in their first year.
Half of all companies fail in their first five years and two thirds in the
first 10. As a result, new businesses don't seem fundable to lenders. Get
started just by being consistent and congruent.
Congruency is your best friend. Keep all records consistent. CRA's and creditors
are looking at everything. So it had better match or you'll get a denial due
to fraud because that's how lenders interpret inconsistencies. This is a
cause of denials, which is in the business owners hands. You can change and
correct this. This means your business name, address,
phone and fax number everything must look the same in your
IRS records, business records with Dun and Bradstreet, Experian and Equifax, all
licenses need to run your business and incorporation documents. Copy and paste
this information. Do not chance it with retyping.
Let's look at your business name. One of the most common reasons for a loan and
credit card application denials is the lender can't easily locate a business
online. The business name on your application should be the exact same as
what's listed online and with your secretary of state. A full business name
should include any recorded DBA filing you use. Make sure the business name is
exactly the same on your corporation papers, licenses, utility statements and
bank statements. Also, make sure the business name and all other information
is identical on as many online listings you can find.
Check your name with your secretary of state. They might require that a business
name be unique. Also ensure they have all the necessary information for your
company. Make sure that you are in good standing with them and that your entity
is active. You must file annual reports and pay a fee each year to stay active.
Many lenders automatically decline if a business name indicates a high-risk
industry. Some restricted industries include oil trading, finance, pawnshops,
ammunition or weapons manufacturing, bail bonds, check cashing agencies, energy,
political campaigns and X-rated products or entertainment. If your business name
shows you're in one of these industries, you may be declined.
Chico's bail bonds can be renamed Chico's with no loss of integrity or
clarity. High risk and restricted industries include not just industries
like bail bonds. They include industries which generally
have a lot of cash transactions or the potential for injury to workers as high.
Let's look at your EIN, Corporate Entities and SIC, NAICS Codes. Even if
you have no employees, your business needs a Federal Tax ID number or EIN
like you have a Social Security number. Your business has an Employment
Identification Number or EIN your tax ID number is used to open a bank account
and to build a business credit profile. Take the time to verify all agencies,
banks and trade credit vendors have your business listed with the same tax ID
number. Go to the IRS website an EIN is free.
Make sure your address with the IRS is the same as listed everywhere else. When
getting your EIN choose your business entity, you generally want a corporation
or LLC. A sole proprietor should at least get a DBA. Without a DBA, your personal
name is the same as the company name. You could end up being personally liable for
all business debts. The IRS says with this structure you have a one in seven
chance of an IRS audit. There is only a one in 50 chance for incorporated businesses.
Avoid confusion and significantly lower the chance of an IRS audit at the same
time. To get financing or credit for your
business, you must have a business entity. To truly separate business credit from
personal credit, your business must be a separate legal entity, not a sole
proprietor or partnership. A corporation or LLC business entity gives you more
credibility in many cases. These entities by default, eliminate your personal
liability other entities don't. Make sure your entity is set up in the same state
as your business address. Verify all listing, show the same name, address,
phone numbers, etcetera. As in state and other records.
The IRS website is also where you choose SIC, NAICS codes. These codes spell
out if you're in a high risk or restricted industry. If more than one
code applies and it's not high risk or restricted, then use that one.
There is nothing underhanded or unethical about doing this.
Let's check out your business address. A business address must be a real brick
and mortar building. It must be a deliverable physical address. This can
never be a home address or a P.O. Box. Don't use a UPS mailing address. Some
lenders will not approve and fund unless this criterion is met.
Lenders check USPS in places like Google Maps to see if you're using a
home address. If you are, you often get an immediate decline. Never use a home
address on your application. Even if your company is just you, you can use a
virtual address. We like Regus, Davinci and Alliance.
What if you need a business brick and mortar address if you need one,
entrepreneur magazine says location is your number one concern.
Consider your target market. Consider where your competitors are. Take
advantage of their research. Be sure the area is zoned for your type of business.
Let's look at business phone numbers. You must have a dedicated business phone
number. Lenders see an 800 number or toll-free
phone number as a sign of business credibility even for a single owner with
a home-based business. A toll-free number provides the perception that you are an
even bigger company. It's shockingly easy and an expensive to set up a virtual
virtual local phone number or a toll-free 800 number. You need a fax number or an
eFax as well set it to go straight to email.
A cell or home phone number as your main business line could get you flagged as
unestablished, but VOIP is okay. Do not give a personal cell or residential
phone as a business phone number. Your phone number must have a 411 listing
for most credit issuers, lenders, vendors and even insurance providers to approve
you. Check your record to see if you're listed. Make sure your information is
accurate. No record. Then use a listyourself.net to get a listing.
Let's check out your website and e-mail, credit providers will research your
company online. It's best if they learn everything straight from your company
website. Not having either will undercut your business's fundability. Even the
most non-technical professions are expected to be online these days. This is
true even if your clientele isn't too computer savvy. Use places like templatemonster.com
and Upwork.com and get a site up cheap and fast. You need a
professional website with email on the same domain. Buy a domain from a place
like GoDaddy. Your domain should be your business name if possible.
If you can't get your business as your domain, get creative.
Try using spelled out numbers for numerals, or vise versa. Or a catch phrase
associated with your business or something relating to your area and your
business name. Long domain names are hard to remember and you need to print them
on places like business cards and menus, flyers and bookmarks and other swag.
A .com is best; .net and .us are decent substitutes. It's best to own all
of those. Owning yoursite.com, yoursite.net, etc.
isn't just a nice idea. It's vital if your company is ever the target of
online smear campaigns or if there's a social media crisis for that same reason,
also, get yoursitestinks.com, etc., plus earthier versions. In the midst of
an online crisis, you will be so glad that you did because that makes it hard,
if not impossible, for mischief makers to spoof your site.
You need a company email address for your business. Use a professional email
address such as yourname@yoursite.com. This usually comes with a website
domain providers such as GoDaddy. It is not just professional. It also
greatly helps your chances of getting approval from a credit provider. Do not
use Yahoo, AOL, Gmail, Hotmail or similar kinds of email. Something more
generalized than a name is easier to scale. You can always give an admin
address to an assistant to manage. You might not be able to do that with janesmith@yoursite.
Don't get cute with names, basic generalized names are best.
Cuteypie@yoursite is a bad idea even in a playful industry that caters
to kids. Let's look at your licensing and
business listings. Contact State, County and City Government offices to see if
there are any required licenses and permits to operate your type of business.
Do not apply if you are unlicensed. Take the time to verify that main agencies
State, IRS Bank and 411 National Directory have your business listed the
same way and with your exact legal name. Also, take the time to make sure every
bill you get power bill, phone bill, landlord, etc. has the business name
listed right and comes to the business address. Make sure you have the right
licensing for your business. Be sure to check often the secretary of
state's office can help.
Let's check out business identification numbers. The best known is the DUNS
number. Go to D&B's website and look for your business. dnb.com/duns-number.
Can't find it? Then get a free DUNS number. A DUNS number is how D&B
gets a company into their system. Your DUNS plus payment experiences get you a
Paydex Score with no DUNS number, there is no record and no Paydex Score.
Another ID number is the BIN number from Experian. BIN stands for Business
Identification number. Experian's BizSource assigns a BIN.
You need to get set up with the business credit reporting agencies. A business
must be listed with the reporting agencies. This is necessary to establish
business credit. You can also be denied funding if you don't have a credit score.
You can also get a denial with a low credit score with D&B, Experian or
Equifax. Seriously, consider Business credit
monitoring. You may want to start credit monitoring. We offer it for less. See
creditsuite.com/monitoring. Check all listings with the
business CRAs for accuracy and completeness. You want to be sure any
info they have is accurate see creditsuite.com/reports.
Let's look at business bank accounts. You need a bank account devoted strictly to
the business. This helps at tax time. The IRS does not want you commingling funds.
Make accounting easier and reduce the risk of audit. Keep personal and business
funds separate. The simplest way to do this is with a separate account. The
account opening date is the business's opening date, far as lenders are
concerned, longer history is better. You always need to be looking to the
future. That future is bank and other loans and other kinds of funding. Set
your business up for bank loan approval success. Keep a balance of $10,000 or
more for at least three months to get a low 5 bank rating. This makes it so
most conventional banks that your corporation is fundable if you don't
ave a low 5, you can still get corporate credit and alternative loans,
but you would not be able to get a conventional loan.
Make sure to get a business merchant's account. Now your business can accept
credit and debit cards. Studies show customers will spend more if they can
pay by credit card. This also increases your finance options.
Personal credit quality matters. Personal credit quality is often helpful for
getting funding. So if personal credit is not in order,
now is the time to get it straightened out and improve it. For a business loan
at a conventional bank, you need good personal business and bank credit.
Let's recap. Keep all records consistent to ensure Fundability set up your
business legitimately with a domain, phone numbers and address and more, get
all ID numbers and register with the IRS. Choose a business entity. Corporations
are best. Make sure you've got all the necessary licenses. Set up your business
bank account for fundability and get your personal credit house in order.
Contact us today to learn more about why establishing business fundability
matters and how to achieve it easily.