Five Warning Signs Your Business Needs A Tune-Up

No business owner intends to fail. But after the initial glow of self-employment fades away, many owners unknowingly limit their future opportunities and burden their own credit by doing business and thinking small. Incredibly, many business owners overlook the opportunity to build financial credibility and open doors for expansion by failing to look at specific signs that their business needs a tune-up.

#1: BUILDING YOUR BUSINESS WITH PERSONAL DOLLARS

Starting a new business often means putting in your own money to Jump Start the business. Initial out-of-pocket capital expenses might include a business license, signs and advertising, business cards, initial inventory, and business equipment. While this might be the quickest way to get underway in the ‘Start-Up’ phase of your enterprise, it quickly becomes a financial burden when your business needs to expand beyond being just a ‘Mom & Pop’ operation.

#2: PERSONALLY GUARANTEES FOR BUSINESS EXPENSES

It’s often the case that when you need to lease a copy machine, storage facility, automotive vehicle, office or business equipment, the source looks to you to personally ‘guarantee’ the transaction. That means you personally must sign and stand behind the cost. If the business cannot meet the obligation, you’re expected by the source to carry the burden yourself. That means the full extent of your savings, home equity, investments and everything else you have an ownership interest in is at risk.

When a personal guaranty is involved, lenders or business vendors normally collect personal financial information before making a decision about the transaction. They want information such as your personal balance sheet, personal income statement and a personal credit profile in order to make a decision about the loan. The higher your debt to personal income ratio, the more of a strain is being put on your personal credit. Many investors step up and sign personal guarantees because they feel they have no other choice. Yet if you use personal credit too often, it can actually hurt your personal credit score.

#3: DOING BUSINESS IN YOUR OWN NAME

If you are doing business in your own name as an unincorporated Sole Proprietor with no corporation or limited liability company, then you are at very high risk of personal liability. That is because legally, you and the business are one-and-the-same.

Establishing your ‘business entity’ is the first step to reducing your risk. Today, the national trend in company formation is that more LLCs are being formed throughout the USA each year than corporations. That wasn’t always the case, but today with IRS adoption of its check-the-box regulations, as well as with the asset protection and privacy now available in states like Nevada, limited liability companies have become very popular for their flexibility, privacy, protection and simplicity of operation.

Operating your business through a Company gives you better credibility in the marketplace and it’s much easier to obtain business credit. Additionally, by operating as a Company, you’ll have more business deductions available to you than if you’re operating as a Sole Proprietor.

#4: HALF-FINISHED BUSINESS PLAN

One of the reasons so many business enterprises fail is that they don’t have a realistic and specifically written Business Plan with sufficient detail in each category. While a business plan is no guarantee of success, it certainly helps you to move what’s ‘possible’ in your business future to the ‘probable’ category. I won’t say that business owners are lazy when it comes to drafting a business plan – just intimidated by the effort it takes to ‘do it right.’ It means defining your business, laying out the market for your service or product as it exists today, understanding the competitive environment, assessing your strengths and areas needing improvements, and developing a marketing plan and loan proposal that you can take to the bank or other lender with confidence.

Most business owners sum up their unwritten business plan this way: work hard, make as much money as you can, then do it again next year and hope for the best. By contrast, the businesses enterprises that enjoy long-term financial success see a business plan as a dynamic inter-active living document that gets reviewed and updated on a regular basis.

#5: FAILING TO BUILD A BUSINESS CREDIT PROFILE

When a business is started, regardless of what your personal credit score is today, it’s entirely possible to build an entirely business credit. With a systematic approach, you can work to build a positive business credit score that is not tied to your personal credit and spending habits. That way, as your business needs cashflow to expand, pursue a major marketing initiative or respond to any other business need, the money is available.

The line of credit your business can have is enhanced by certain factors that help to build business financial credibility in the marketplace. For example, operating your business through a company helps to separate the individual ‘you’ from the business enterprises as a separate ‘person’ in the eyes of both the law and the financial world. Also by developing trade references and opening business lines of credit with vendors such as office depot, etc. you can begin the process.

Your personal credit profile is tied to your personal social security number. The consumer credit reporting agencies keep files that are separate from those kept by a business credit reporting agency. A business can and should develop its own credit profile, but remember that to be successful it must be done differently than the way you developed a personal or ‘consumer’ credit profile.

First of all, you have to be organized. Second, you must be persistent and patient. Third, you must monitor progress by staying in touch with your credit-granting vendors. For example, if you buy office equipment and supplies at Office Depot for your business, rather than use your personal credit card, open an account in the name of your business and ask for a line of credit. Even if you can afford to pay the full amount when it becomes due, make your payments on time and over a 90 to 120 day period. Then be sure to ask the vendor (in this example, Office Depot) to report not under your personal name but under the name of the business. Explain you are trying to build company credit for your business.

It’s important to understand the business credit bureaus. First of all, Dun and Bradstreet is by far the biggest player with the most experience and influence. Today it has registered with it about 70 million businesses enterprises. Its closest competitor is Experian Business, which has about 14 million businesses registered. Business Credit USA, Client Checker, Equifax Business, and FD Insight round out the field and these should be considered as well.

Each of these agencies has employees who stay on the phone and internet all day long to ‘verify’ your submitted business information whether submitted by you or by a third party. If questionable entries arise in the course of their verification process, this will ‘red flag’ your business and result in a less-favorable business credit rating.

You should also know that personal consume credit scores and your business or company credit scores are based on two separate and distinct scales. On the one hand, your personal score (which is rated from a low of 300 to a high of 850) is linked to your own individual social security number as a filing and designation identifier. On the other hand, corporate or company business credit is identified with your company’s IRS-issued taxpayer identification number (also called an EIN or ‘employer identification number). This type of score runs from a lower corporate credit score of zero to a high of 100. For financial credibility, a business credit score of 75 or higher is considered to be an excellent score.

It’s often the case that business owners will put the ‘cart before the horse’ and will unwittingly register with the business credit bureaus in advance of really being ready. Doing so before you have all your ‘ducks lined up’ is a sure fire way to be ‘red-flagged’ and denied a strong credit rating.

You might be frustrated in the beginning at pace of obtaining business credit. However it’s usually the case that you might begin the wrong way and mistakes in the beginning result in ‘red flags’ being raised in the verification process of the credit reporting agency.

In preparing for a registration with the major business credit reporting agencies, you’ll want to first be able to prove up a history of on-time payment with vendors (i.e. office depot, equipment suppliers, commercial landlords, etc.) that will report your business credit history not in your personal name but rather in the name of your business. My longstanding advice to new and experienced business owners alike is that it would be wise to wait on registering with any of the business credit bureaus until you first seriously consider the use of a professional business credit coach.

Some coaching in advance with third-party pre-registration verification may just be the ticket to achieving a higher business credit score. Plus you can learn from the mistakes made by others ahead of you. This can save you time and money.

As I speak at workshops and business conferences around the county, I often get stopped in the hallway afterward and asked for information and referrals to quality business credit coaches. I’m happy to oblige even though I don’t personally practice in that particular area. It’s related to the business enterprises and investment holdings of my business, tax and asset protection clients and I have done my own due diligence on quality providers.

Settlement Loans, Attorneys, Brokers And Champagne

You may be asking yourself what in the world do settlement loans, attorneys, brokers, and champagne have to do with one another. That’s a good question.

While attempting to determine what kind of article to write for you this week, I read and researched several articles that were published on Ezine Articles, videos distributed through YouTube, etc. Frankly, most of these articles and videos, to include many of my own, are “dry-as-toast.”

Then I realized that most of the individuals writing the articles and posting videos have absolutely no experience in the litigation funding Industry. However, as both an attorney and a licensed health care provider, providing related-services for more than 20 years, I have a great deal of real-world experience that I can share with you.

The title of this article is selected from an actual case that was brought to my attention for review. In fact, I was asked to represent the healthcare provider in pursuing its claim against the plaintiff involved. Many times individuals wonder, “Why in the world am I unable to obtain either a lawsuit loan or a settlement loan?” Unfortunately, these individuals frequently don’t even bother to fairly evaluate the nature of their claim.

The title of this article was chosen from a case in which a plaintiff filed suit for injuries sustained when he supposedly fell out of a tree due to a defective safety-harness. He subsequently sought to obtain a lawsuit loan. The individual successfully sued Home Depot for an allegedly “faulty product.” The plaintiff was also pursuing a Product Liability claim against the manufacturer of the safety-harness.

However, it was discovered that this individual was arrested within a few weeks of sustaining injuries to his head, neck, and upper back, for which this individual sought and obtained chiropractic care. However, it appears as though the injuries were not sustained from a fall out of a tree due to a faulty safety-harness. How do I know this?

You see, the individual was arrested shortly after this purported fall from a tree. What was the reason for which individual was arrested? The individual was arrested for having attempted to rob a liquor store.

The proprietor of the liquor store, once he realized the perpetrator was attempting to rob him, pulled a champagne bottle off the rack and struck the would-be robber repeatedly in the head and shoulders with a champagne bottle.

The would-be robber fled from the scene, leaving behind a gun, bloodied ski-mask, gloves, etc. It would appear that the would-be robber did not realize that the DNA-evidence left behind would link this individual directly to the attempted robbery.

Needless to say, this individual, although he pursued a third-party claim against, among others, Home Depot, the manufacturer of the safety-harness, et al., was unsuccessful in obtaining litigation funding to assist him throughout the process of his litigation.

Remember, individuals pursuing lawsuit loans, legal settlement loans, settlement loans, and other forms of litigation funding must first have a bona fide claim. This simply means that the individual must have a legitimate claim against the party being sued!

Individuals involved in funding such claims often have a great deal of experience in reviewing such matters, even though many of those individuals who offer funding in this Industry lack that experience. Therefore, expect your claim to be scrutinized carefully. Remember, these claims are non-recourse (i.e., if you lose the underlying case you pay absolutely nothing).

While it is true that lawsuit loans, settlement loans, legal settlement loans, and other forms of litigation funding may prove to be extremely helpful to those individuals who present legitimate claims, they are certainly not likely to be of any benefit to those individuals who attempt to perpetrate fraud on the court.

Therefore, unless you have a legitimate claim to pursue, you’re discouraged from pursuing litigation funding to assist you throughout the course of that litigation.

Getting a Home Improvement Loan: What Your Bank Needs

The popularity of stores like Home Depot and Lowe’s show how many homeowners are jumping on the home improvement bandwagon. Maybe you’re thinking of redoing part of your house as well. Perhaps you want the kitchen of your dreams or an extra bathroom. You know you’ll have to take out a loan to finance the project, but if you’re just in the beginning stages of the planning, you may not know exactly how to go about it. Whether you’re refinancing or taking out a home-equity loan, here’s some information on what your bank needs:

As with any loan, your bank will want to review your financial history before approving you for a home-equity loan. While different banks will have different loan criteria, there are a few things you can expect each institution to require:

-Your address and how long you’ve lived there

-Your employment history and current employer

-Your annual income and assets

-Your total debt and monthly obligations

For home-equity loans, the bank will also need information on your house such as its age and current property value. Save time by bringing the current tax assessment for your property with you. For smaller loans (usually $2000 or less), this may be enough information to indicate the home’s market value to the bank’s satisfaction. However, for larger loans, banks will require professional appraisals. Home appraisals typically cost $200-$300.

Above, I mentioned that banks want to know your total debt and monthly obligations. Specifically, they want to know your debt-to-income ratio. If your debt is greater than 30%-40% of your monthly income, the bank may be unwilling to offer a loan out of fear that you will not be able to make payments.

To further protect their assets, the bank will require a copy of your credit history to make sure you’re not a bad risk. A few months before you decide to take out a home-equity loan, it’s a good idea to get a copy of your credit report and check it for errors. Contact the credit bureau and correct any errors ahead of time. This will save time later and help you get the right loan for your home improvement needs.

The Middle Class Is Broke and on the Verge of Bankruptcy Filing

As the mainstream media continues to talk up the economy, one fact can’t be disputed, that disposable income for the middle class American family is becoming a thing of the past. The news continues to tell a story of how the real estate market is recovering and less Americans are filing bankruptcy, hence, a recovery. This is nothing more than a bunch of hogwash. All you have to do is to ask your friends, family members and neighbors how they are doing financially and everyone will complain about the tax increases and the costs of food at the grocery store. That’s not even bringing up gas prices. The government would like you to believe that gas prices go up and down based on what’s going on in the Middle East.

That is only part of the equation and the truth of the matter is gas prices are going up, the dollar is going down in value. Every week it’s something new, sequester, fiscal cliff or some financial disaster that if they didn’t step in and fix it by bailing out a bunch of their donors, the economy would collapse. Most economists stated that it would’ve been better to let the big banks fail back in 2008 and we would be seeing some kind of recovery for the middle class by now. Today the billionaires list was released and as I reviewed it there is something interesting I found. The rich are getting richer through this economic crisis. Many of them increased their net wealth by as much as 50%. Just look at your bank statement and see how much interest they are giving you. It is probably close to nothing, but they are making billions on shorting and manipulating the markets.

A recent study said the average American is three weeks away from filing for bankruptcy. Some people find that hard to believe but in reality it is close to the truth. The truth of the matter is most Americans are living paycheck to paycheck and thanks to the increase in payroll taxes, gas prices and food prices, those paychecks are worth less and less. Most American families have gotten to the point where they have no disposable income for eating out or entertainment as it is unnecessary.

I’ve put together some signs that show the middle class is running out of money and on the verge of a bankruptcy filing.

This week Subway restaurant reported that the recent tax increases has had a noticeable impact on their business. They are estimating a 2% decline of sales since the tax increase at the beginning of the year. Subway is not the only restaurant struggling, many other large chains are complaining and the decline in business.

An article came out last week showing many of America’s largest retail chain stores will be closing down hundreds of stores in 2013. The list included Sears, Best Buy, JC Penney, Office Depot, Barnes & Noble, GameStop and OfficeMax. The economy must be worse than expected for these giant retailers to start trimming the fat.

According to the New York Federal Reserve student loan debt has tripled over the last 10 years. This has translated into most young adults having no disposable income to go out because they are drowning in student loan debt. Student loan debt has now surpassed $1 trillion.

A study released today stated 24% of all Americans have more credit card debt than they do money in the bank. This is nothing more than a cocktail for these individuals to end up filing for bankruptcy as their only alternative. Today, credit card debt is one of the major causes that push people into a bankruptcy filing.

Over the last four years the median income in the United States has declined $4000. Added to the U.S. Census Bureau stated the middle class is taking a smaller share of the overall US income than ever before in history.

As the Dow continues to set new records, the media is singing happy days are here again, Americans need to take an honest look at their own personal situation. They need to keep it real and they need to file bankruptcy they should contact a bankruptcy attorney and discuss your situation. The media as a responsible to pay these people’s bills and people need to wake up and take accountability for their personal situation before it’s too late.

Bad Credit A Bigger Risk than Terrorism

Yes its true! According to an article written by Dan Seymour of the Associated Press on Monday, the biggest short term risk to our economy is bad credit. According to a survey of 258 members conducted by the National Association of Business Economics (NABE) credit has replaced terrorism as the gravest immediate threat to our economy.

It almost sounds surreal but I actually agree with the findings of the survey. As we continue to deal with the “credit crisis”, the issues have trickled down into our everyday lives at a record pace. The stock market being our first indicator, followed by the fact that 2 million people are expected to lose their homes this year to foreclosure. Even the big boys like Home Depot are taking the hit. Folks, real estate drives our economy far more than we would care to admit. Ask the car dealers, airlines, and other companies that depend on high discretionary income if real estate drives our economy. With less people able to tap cash/equity out of their mortgages through refinancing, Realtors not spending at a very high clip either, and the 100,000+ loan officers who have left the industry our entire economy is feeling the crunch. Builders are building less new homes being which means less work for the blue collar individuals ultimately leading to higher than normal unemployment rates. It is a serious trickle down effect.

Whoever thought that a few missed payments here and there would supplant Osama Bin Laden and his terrorist goons as one of the greatest risk to the U.S.A. I believe it goes back to my blog from last week about “Was the Mortgage a Mistake”. The consumerism mentality of our culture has left us in a very tough position for now. In a perfect world maybe we should have purchased smaller homes with stable fixed rates and chose not to drive our gas guzzling oversized SUV’s. But who know the bottom was going to fall out so quickly.

Listed below are 5 tips I encourage you to use, so we do not continue to add to the threats bad credit is placing on our society:

1) Stop using the credit cards unless you can afford to pay the balance in full for that month. This tip alone will give you a raise in income by having your money work harder for you because it won’t be spent paying high interest credit debt.

2) Pick up the book Smart Couples Finish Rich by David Bach. Married or single this book has some great tips on budgeting and other financial tools that will help you weather the storm and plan for the future

3) If you know you are going to be late contact your creditors in advance. Most creditors will be more forgiving of customers who are proactive about there obligations.