How important is the name you choose for your business when it comes to getting approved for
loans credit lines and business credit. Well it's way more important you think it is and in this
training we're going to talk about how to avoid a business name that will get you automatically
denied for credit financing, we're going to talk about how to avoid names that make you face
greater underwriter scrutiny we're going to talk about just the perception, that your name has to
prospective customers, customers and lenders, and credit issuers as well. We're going to
talk about setting up your business the right way with the right name or fixing a wrong name
so you can still have the best chance of getting the most money at the best terms
for your business, we're even going to dive in and talk a little bit more about entity type and
NAICS codes and why you need to choose the right NAICS code or industry code
for your business, and by not doing this the right way can cost you a tremendous amount
of credit and financing. We've got a lot to cover today, so let's dive in.
The name you choose for your business is very important when it comes to your fundability and
your ability to get credit and financing here's why. Lenders and credit issuers typically look
at high risk industries and put them in one of two buckets. Now the first bucket is a restricted
bucket and restricted means no go if they know that you're in that industry they absolutely are
not going to help you, so if you choose the wrong business name that reflects you're in one of these
restricted industries well you're automatically going to be denied in almost all cases when you
go to apply for credit cards, credit lines or loans this is programmed into the algorithms
that these computers are using to either generate an automated approval a push for a manual review,
or an absolute flat-out denial. So you've got to avoid these industries all together or names that
indicate you're in these industries, so let me give you some examples, ammunition, weapons,
porn. These are all in these restricted industries where a lot of lenders and credit insurers
absolutely will not lend money if they see that you're in these industries and the
one way to tip them off is having a name that actually indicates that, so say for example bail
bonds is in this restricted industry, we wouldn't want to name your company Chico's bail bonds
you'd be better off to go with chicos, and choose an NAICS code that still reflects what you
do, but doesn't necessarily indicate that you are an actual pawn shop. Now we'll talk a little
bit more about NAICS codes in a few minutes, but let now let me talk to you about the other bucket
that's not the restricted bucket. This is the one where you face greater underwriter scrutiny, so
like I said there's really two high-risk buckets that lenders or credit issuers can put you into
you want to avoid being in either one of them. The restricted will get you automatically denied, but
this other bucket just makes it where you face greater underwriter scrutiny. So if you're in an
industry that's seen as high risk by lenders and credit issuers, but not so high risk that they will
lend to you the problem is is that you typically will get pushed for a manual underwriting review
and oftentimes get denied pay higher interest rates or get less money than you could,
if you went through that same computer and got an automated approval. Now there's a lot of examples
here one of the most common of which is financial services, so accountants, attorneys, people dealing
with credit, financing credit repair are all seen in financial services. Financial services is
seen as a high-risk industry it's not restricted, lenders and credit issues are still going to lend
they'll still issue credit a lot of them to those in those industries, but if your name reflects in
one of these industries you're definitely going to face greater underwriter scrutiny. So for example
at Credit Suite, we knew this when we named our company but having the word Credit in our name
makes it harder for us to get merchant accounts, bank accounts, loans, credit lines, and credit cards.
So you have to really choose wisely between having a business name that reflects what you do so your
customers know more about you just based on the name but also you've got to make sure that
you're choosing a name that doesn't put you into one of these high-risk category buckets and make it
where you either face greater underwriter scrutiny or get an automatic denial when you go to apply
for credit and financing. So how do you choose the right business name or even industry that
keeps you out of these two buckets, well the first thing to know is that you are the one that chooses
the industry that you're actually in, meaning that there's an NAICS code or an industry code that's
used to kind of as a designator to determine what industry you're in, you're the one that needs to
know what that NAICS code is you're the one that needs to use that code in that exact designator
whenever you apply for credit or financing. Look what happens a lot of times is you go to set up
a bank account and ask what industry you're in and you say something general like consulting
you go to apply for credit or financing and you do exactly the same thing, well you don't want to
do that and here's why. If we look at real estate for example there's over 30 subcategories of real
estate that you could actually be in, so if you go in and you apply for credit financing lets say you're
in real estate then you really are depending on the lenders the credit issuers to then determine
which of those 30 plus categories, you could be in and if they choose unwisely and put you in
high risk they report that to other lenders they report that on your business credit reports, and
all of a sudden all types of other lenders and credit issuers are seeing you as high risk at the
exact same time. So first of all an NAICS code is an industry code it's a way of designating what
industry you're in, and really this was created for example by by the IRS where they're using
it to compare your business expenses to other businesses in the same industry to see if there's
anything that's fishy or questionable right. The SCC uses industry codes as well as lenders, credit
issuers, the business credit reporting agencies and many many many other trade organizations
and other groups as well. So first thing you want to do is go to naics.com and try to find the actual
indicator that best fits and describes what you do, now keep in mind you oftentimes can choose
between one two or three, so let's use Credit Suite as an example. We're big on educating about credit
and financing right. That's what we're doing right now we also have software that helps business
owners through the process of improving their fundability building their business credit
and getting financing, and we can also easily be seen as being in financial services but
some of those 3 increase the multiple of our business, so if we ever want to exit the business
and we choose for example financial services or software well those are worth more than being in
the education space we'll get a greater value for the business if we're in one of those industries
versus being in education. But when it comes to getting credit or financing financial services
is seen as high risk, so if we choose that way well then it's harder for us to get credit in financing.
So knowing that we might choose to do what we've done which is go with being a software company
because that'll give us the best multiple when we exit the business, but it also puts us out of
the high risk restricted category sections that a lot of lenders and credit issuers choose. Yhat's
exactly what you want to do you want to look through the naics.com list figure out what
ones you could actually choose from what ones do or could reflect what you do, and then choose ones
that keep you out of the high risk categories but also will still give you the best valuation when
you go to actually exit and sell your company. So how do you know which ones to actually avoid?
Well there's a couple different ways to do it you can go through and just do a general Google search of
how to avoid high risk NAICS codes, and if you do that or even search on our blog you'll find Credit
Suites blog, talking about a lot of different industries how industries are perceived which
ones to avoid. Now naics.com also publishes a list as well of industries that you want to avoid in
their list even has the actual codes that you want to avoid as well. So those are some starting
places now again depending on your industry you might not really have a choice to choose between
one two or three it just might be what it is, but you never want to choose something that doesn't
really reflect what you do, again you just want to understand what industries are perceived as
high risk and make sure that if you have a choice between a few of them that really could describe
what you do, that you go with one of the lower-risk options than one of the higher risk. And since
you're already focusing on your business name go ahead and make sure that you have the right entity
type set up as well. You want to avoid being a sole proprietorship and even a partnership if you can
corporations are the most highly regarded entity type per lender and credit issuers perception. So
you want to try to stay with an S-Corp or a C-Corp that gives you the most credibility when it comes
to lenders and credit issuers, and you also could choose an LLC even though it's not an official
entity type for the IRS. Being an LLC or being a corporation is what gives you the most credibility
with lenders and credit issues now if you've done this the right way you know what your
NAICS code is you've chosen one that keeps you away from being high risk from facing greater
underwriter scrutiny or getting an automatic denial. Now you know what your code is you know
the exact designator whenever anybody a bank that you're setting up a bank account a merchant
provider where you're setting up a merchant account a lender or credit store when anybody's
asking what industry you're in you put the exact code, the exact designator, and now that
you're doing this you want to go back and make sure your taxes reflect that information, and
you also want to check with Dun & Bradstreet, Equifax, and Experian commercial to make sure
the credit reporting agencies all have the right information or dispute with them to correct it.
Now you've fixed everything you might have done wrong in the past and moving forward always use
that industry code in the exact designator and that will keep you out of those high-risk buckets
and help make it easier for you to be able to get more money at better terms to grow your business.
Now that you know more about industries to avoid how to choose the right NAICS code how to choose
the right industry as well as set up your entity the right way you're well on your way
of being able to get credit financing to learn more about more fundability aspects that you
want to get down the right way to be able to get max funding grab our free business credit
building guide at creditsuite.com/ein that's creditsuite.com/ein and
feel free to jump on a call with us we'll do a fundability assessment to give you
tips and tactics to make sure you can improve your findability, we'll get your business credit
reports with Dun and Bradstreet, Equifax, Experian we can even look at your NAICS codes on those,
and help give you guidance and we'll do a funding assessment to talk to you about all the funding
you can qualify for right now. So all you have to do to get your free consultation is give us
a call at 877-600-2487 that's 877-600-2487 you can email us info@creditsuite.com you
can also schedule your consultation online at creditsuite.com/consult.
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on our next training where we talk about more cool ways to get money to start and grow your business.