The XBanker
Business Financing eXpert
Archive for April, 2008
Business Credit Success for former ESPN reporter
April 25th, 2008
If you are an ESPN SportsCenter fan, the name Scott Walker should ring a bell. Scott was a reporter for the popular show for four years when he decided the travel was taking its toll. He wanted a career that would allow him to spend more time at home with his wife, Nicole Neal Walker, an attorney. Initially they started a television production business, but by the end of 2004 they had developed a bigger vision.
With their knowledge of television production, they decided to build the premier interactive golf website. With DigitalGolf.TV, golfers get access to exclusive content on top-ranked golf courses featuring 18-hole interactive views from every tee box, fairway and green, as well as an expansive library of popular video instructional tips to help golfers of all skill level improve their game.
Their latest offering? The Digital Golf Test Drive(tm), which allows members to test drive a golf club — brand new or like new — for as long as they like.
“Golf equipment is so expensive,” explains Walker.” We want people to be able to have access very quickly to the best equipment. And if they don’t like it, they can send it back to us. We don’t want people to get stuck in a product that is not right for them.” Walker says it’s “like Netflix for golfers.”
With a membership of only $44.99 a month, golfers can check out a club and have it sent to their door with free shipping. Two clubs at a time are available for $79.99 per month and a full set is available with a monthly membership of $99.99. Members keep clubs as long as they like, and either purchase them or return them and try something else.
But in order to bring this popular program to its members, DigitalGolf.TV had to invest in a lot of golf equipment, and the Walkers want to do it the right way – using business credit whenever possible.
To do that, the Walkers been following the BusinessCreditSuccess.com program and have been meticulous about following the steps in the program. “For us, the most important thing were the basics,” Walker explains. “From the business perspective, business credit is befuddling. But the time you’ve put into it really does save you a lot of heartaches.”
Success Steps
Like many entrepreneurs, the Walkers have used both personal and business credit cards to grow their business. Though very pleased with their success so far, they wish they had used more business credit. “I wasn’t aware of some of the things that were available to me with business credit. I would have taken a little more time in building the business, and taking the steps that would provide a better foundation for success. What we have learned now (through the program) has helped us improve our foundation.”
Advice For Entrepreneurs
Scott Walker’s advice to other business owners?
“Work the steps (in the business credit building program) and don’t try to skip any. Before we applied for a D-U-N-S number we made sure we had walked through the steps first, such as getting the phone line in the name of the business and getting it listed with directory assistance.” It takes a little time, he points out, but is worth it. “All that work is coming to fruition and the bank is pleased.”
And no doubt many golfers, who now can virtually tour the best courses in the country, lower their handicaps and hit the links with their dream equipment, will be too.
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Business Financing For Those With Bad Personal Credit
April 24th, 2008
The harsh reality for most business owners is that they can’t escape their personal credit. With the rise of the McBanks, business lending (particularly for loan amounts under $100,000) have become auto-scored and personal credit driven. This is what we lovingly refer to as the Bank Lending Matrix. In this system, you either fit the mold or not. It is even tighter these days due to the mortgage melt-down and irresponsibility of lenders and consumers.So if you have poor personal credit (by bank standards that means a score under 670) you need to forget about bank small business loans until you get your score up. If you need the cash now, you may need to consider bringing on a partner with good personal credit or trying to raise money from investors.I’d prefer to see you get the money you need without giving up equity. So, depending on your borrowing needs and the status of your business, here are some potential solutions for you:
You may just find that you can get all the money you need from one or more of these solutions. Feel free to speak with one of our associates if you have any questions or need help with one of these solutions.
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Tips for Boosting Your Credit
April 21st, 2008
Many consumers are looking for the fairy godmother of credit, who will wave her wand and make their bad credit disappear. But building better credit isn’t magic.
I’ve been watching the consumer finance industry for 18 years now, and I’ve never seen it so tough for consumers. It’s almost as if consumers have to walk through a “minefield” of traps to keep up, much less stay ahead. One wrong move, and your credit score drops like a rock, your interest rates jump to the stratosphere, or you’re dragged into arbitration where you’re virtually bound to lose. I see it all the time.
The better your credit rating, the more money you’ll save and the stronger your negotiating power. So let me give you some essential tips for maximizing your credit rating and saving money. (I am assuming you’ve already received your free annual credit reports If not, order them right away.)
Tip #1: Don’t close old accounts! I’ve said it before, and I’ll say it again. You’re bound to see some old accounts listed as open though you don’t use them anymore. FICO says that closing old accounts won’t help your credit rating and can only hurt it. Think having too many open accounts hurts your credit? Think again. My colleague Scott Bilker of DebtSmart.com has 83 open credit cards and a credit score of over 800 – which is excellent!
Tip #2: Watch your debt levels. If you’re using more than 30 – 50% of your credit cards or home equity lines of credit, your credit score may take a hit. In fact, Experian says that consumers who use more than 50% of their available credit have Experian Plus Scores of 633 versus a national average of 677.
Tip #3: Check the Credit Limits. Some issuers don’t report credit limits for competitive reasons. But this can hurt your credit score. Without a credit limit, the FICO score will substitute the highest balance ever reported, which is likely much lower. This can make you look maxxed out, even on cards you pay in full! Complain to the card issuer, and if they won’t report the limits, look elsewhere.
Tip #4: Don’t Cosign. I’ve heard so many stories from consumers who have been burned by cosigning. Even if you cosign a loan and it’s paid on time, it likely will still be reported on your credit report and count against you as if it were your own debt.
Tip #5: Stay On Top of It. Identity theft, credit fraud and credit report problems are rampant. I receive complaints every week from consumers who have discovered mistakes or problems with their credit reports. And every week I read new stories about security breaches that have put consumer’s personal information at risk. It’s no longer enough to check your once a year – you must stay on top of your credit and financial accounts.
Think about it. What will you do if someone cleans out your bank account…or runs up hundreds of thousands of dollars of debt in your name…or even hijacks your health insurance policy? You’ll quickly be living a nightmare.
You may think that avoiding online transactions is the best way to protect yourself from ID Theft. But the Better Business Bureau says the opposite. In fact the BBB recommends consumers monitor their financial accounts online and use electronic alerts to notify them of important activity like transfers, or low balances. They also suggest consumers use online statements and pay bills online as well.
A report by the Better Business Bureau and Javelin Strategy & Research says that id theft victims who monitored their accounts online experienced losses one-eighth of those who relied on paper statements to detect the crime.
Tip #6: Clean Up Common Mistakes. One in four credit reports contains mistakes serious enough to get you turned down for credit, a loan, an apartment, home loan or even a job, according to a report by the Public Interest Research Group. Over the last decade, the state PIRGs and other consumer organizations have issued numerous reports showing that credit files frequently contain mistakes.
The PIRG study found that 79% of the credit reports studied contained mistakes of some kind, 25% of them serious errors. In just over half of the reports, personal identifying information was misspelled, long-outdated, belonged to a stranger, or was just incorrect. Add to that the growing problem of credit fraud and identity theft, and you can’t be sure your credit report doesn’t contain costly mistakes. The only way to make sure it’s correct is to review it. Mistakes can happen at any time, to anyone.
Now here’s the important part. What do you do when you find mistakes? Federal law gives you the right to dispute mistakes on your credit report. The credit bureau or creditor must get back to you within thirty days with the results of your investigation. But be careful.
You need to be smart about how you handle disputes. For example, you should always send your disputes by certified mail and keep a record of all correspondence. Dispute items with both the creditor and the credit reporting agency for maximum results. Also, get good advice before you pay off disputed accounts or old collection accounts, or you may make costly mistakes.
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Social Lending or Peer-to-Peer Lending
April 21st, 2008
Here’s the truth: lenders care about risk – and so should they. Underwriting guidelines are 100% based on the principle of risk avoidance. It’s simple: the less risky you are perceived to be, the better your chances are of getting approved. The unfortunate truth is that with most banks, your “story” doesn’t play a part in the risk equation. You could be extremely gifted, passionate about your business, intelligent, and a proven winner in past ventures, but, unfortunately, non-tangible factors rarely help your case.
The Bank Lending Matrix doesn’t accept intangibles as data inputs, so these intangibles are neutralized at the banks.The only way to overcome this is to get your “numbers” in order. This means to take care of your personal and business credit score, build your business, create legitimate revenues, and wait until you have 1-2 years of history before you ask the bank for money.Waiting isn’t ideal for most entrepreneurs, since they need the money to get started.
A new and viable financing option is something referred to as social lending, community lending or peer-to-peer lending. Some of the most well know are Lending Club, Prosper, Zopa and Virgin Money (formally known as Circle Lending). With the exception of Virgin Money, these social sites are online platforms that allow a prospective borrower to tell his or her “story” when seeking a loan. If someone in the community likes what you say, they may choose to lend you money.Here’s an example, let’s assume you want to borrow $5,000. You don’t actually have to convince one person in the community to lend you the full amount – you just need to persuade 100 people to lend you $50 each (for instance).
Using Prosper as an example, Prosper takes the $50 from each of the 100 lenders (average Joes, not big banks) and issue you (the borrower) one loan. You only have to make one payment each month to Prosper. They manage the payment process and distribute the money to the 100 people. It really doesn’t get much easier than this!
I like this lending option, because the underwriting is not automatic and intangibles definitely play a factor in the decision to lend money. Just because your not dealing with the matrix, doesn’t mean that you get to take advantage of a bunch of pushovers – you might find that your peers are even more risk adverse than the banks! Nevertheless, social lending is a great alternative to the banking industry and might be a viable avenue for getting capital for your business.
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Truly Free Credit Reports
April 18th, 2008
Here’s how to really get free copies of your credit and consumer reports (including a few agencies you may not know about).
There are three major national credit reporting agencies that collect and sell reports about consumer’s financial habits. There are also national specialized consumer reporting agencies that are required to provide an annual free disclosure to consumers. Since these may collect and report different information, it’s a good idea to review all of them at least once a year.
To order your free annual credit report for Equifax, Experian or Trans Union, go to www.AnnualCreditReport.com or call 1-877-322-8228. The reports are free, credit scores are not.
Chexsystems and Telecheck both report on bounced checks and overdrawn bank accounts.
Choicepoint provides several types of consumer reports:
C.L.U.E. reports relate to insurance claims. Get a copy at www.ChoiceTrust.com or call 1-866-312-8076.
To request a copy of your employment history report from Choicepoint, call 1-866-312-8075.
To request a copy of your tenant history report from Choicepoint, call 1-877-448-5732.
MIB reports information related to applications for life, health, disability, or long-term insurance. Visit www.MIB.com or 866-692-6901. Note, if you have not applied for for individually underwritten life, health, or disability insurance during the preceding seven year period, MIB will not have a record on you.
One question I am often asked is whether it’s a good idea to stagger your requests for your free credit reports. In other words, order one from one bureau in January, the second in a few months, etc.
My answer is, “Absolutely not.” These agencies do not share information with each other and a mistake may show up on one report but not the others. If you don’t know about it, you can’t fixe it. It is essential you check them all right away. If there is a problem, or you want more frequent access, order a credit monitoring service.
Have fun!
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