While there are three primary business credit reporting agencies, there are many more that specialize in specific industries or types of credit reporting.  For now we’ll focus on the three primary ones:

Experian Business Credit https://www.experian.com/small-business/small-business-credit

PayNet (Equifax) www.paynet.com

Dun & Bradstreet (D&B) https://www.dnb.com/

These credit reporting agencies are similar to personal credit reporting. They have their own unique system to create a Master Score for a company, but many more variables to consider.  Some agencies provide credit monitoring to the customer, while others only provide services for the subscribers looking to use their tools for assessing credit worthiness.

For any small business owner who is securing business credit, here are some things to consider:

1. Whether you are working with a commercial lending underwriter, syndicator, or broker you need to communicate and verify that the capital being secured is UNDER THE BUSINESS ONLY! You are still required to Personally Guarantee the transaction as an officer of the company, but a business credit transaction should NEVER be reported to your personal credit report.  This will increase your personal leverage and make it difficult to secure future capital when buying larger ticket items like a home.
2. Ask your current/future financial partners & suppliers to whom they report business credit. The reason for asking this question is to make sure THEY ARE REPORTING! If they are reporting, it is usually to one of the credit agencies listed above.If they are not reporting, it might make sense to move your business to someone else that does.  
3. Pay your financial obligations on time. If your company is having financial challenges be proactive and call the lender to arrange timing of a late payment. Communicating quickly can offset a host of unfavorable outcomes and preserve your credit. The better you pay, the more banks will want to play. Ultimately, this gives you buying power and leverage
4. Secure different types of credit (lines of credit, business credit cards, leases/loans, etc.).  Even if the initial amount is small, it is a start. Lenders like to see different types of credit performance so diversity of account types always helps.

Business credit is a tool often overlooked by new and small businesses.  Even if you do not have the time to learn all the details, it is helpful to know the basic concepts.

Disaster restoration services often have low-quality websites. Many companies merely put up a static page with their company logo, their services, and contact information. Successful businesses put more effort into search engine optimization strategies, knowing full well that authority in the market relies on rankings and credible listings.

Social Media

As you build a client list, it is wise to build a following across several social media platforms. Using these platforms to educate consumers and advertise new services is an excellent way to bolster business.

Time-Sensitive Marketing

As an industry professional, you know that certain times of the year bring about specific concerns. It is wise to have a marketing plan stashed away for these predictable times, requiring less work and providing a faster execution during the season.

Brochures

Traditional marketing is still alive and well, and it is often more trusted and authentic than digital campaigns. However, if using brochures, be sure to take your time and structure them well.

Newsletters

Like brochures, a newsletter is a useful piece of marketing. While you may not send them out monthly, a seasonal newsletter is an excellent way to notify consumers about potential threats and problems.

Referrals

Your best marketing tool is satisfied consumers. Clients who are willing to provide recommendations and referrals for your business are often more trusted than any piece of marketing material you create.

To make it in the cleaning and restoration business, you need to up your marketing game. However, to invest in more relevant and professional advertising, you may need access to funding, which is where financial services come in to play.

With expertise in a specific industry or field (finance, marketing, management, etc.), consultants are sought out to help businesses reach peak efficiency and achieve goals that can range from streamlining project management, to restructuring business processes, to acquiring optimal financing for growth. In short, a business consultant works to build high-performing organizations. Here’s a rundown on the value-added benefits of hiring a consultant:

Short-term expertise: Hiring a consultant is a cost-effective way for businesses to gain needed knowledge and know-how from a seasoned practitioner without the long-term expense of hiring an in-house employee.

Diversity of ideas: With specialized experience across many organizations, consultants provide broad-based, practical expertise grounded in knowing “what works” and “what doesn’t work” in resolving problems. Calling on their extensive background, they offer new ideas and devise company-specific solutions to challenging issues.

Credentials: Consultants often have premium educational (MBA), professional and networking credentials that support their business abilities.

Value: Organizations realize cost benefits by not paying taxes and benefits, such as health insurance, 401K, etc. for these temporary hires.

Economy of time: Without adding to their own management workload, executives can quickly consider and implement recommended strategies and solutions.

Scalable work: Organizations can clearly assess cost value by tracking a consultant’s project and associated expenses.

Short-term employment: When the contract expires, a consultant’s employment terminates; otherwise, the contract can be renewed.

The right business consultant offers targeted, flexible services that can help a business in distress regroup and rebound, or guide a successful business toward further expansion and growth. Backed by research data and industry-specific informational resources, consultants bring to the boardroom table the latest strategies, methodologies and trends that can have a positive impact on a company long after their exit.

APR

The annual percentage rate is the cost per year of your loan, including all of your fees. It tells you as the borrower exactly how much it will cost you annually to borrow money from your lender.

If you borrow $10,000, you can pay it off over two years or 10 years. However, your APR rate differs based on the amount of time you take to pay off the loan. While paying off the loan over the course of 10 years can bring your APR down, you end up paying more in fees over time compared to paying off the loan in two years. You’re paying to be able to borrow the money for a longer period of time.

Simple Interest Rate

Also known as the nominal interest rate, simple interest is the amount of money that you pay the lender based on how much money you borrow. It is determined by calculating the amount of the loan (principal) times the interest rate times the duration of the loan. Using the $10,000 loan example, an interest rate of 5% with a loan period of two years costs $1,000 — meaning that you will pay an extra $1,000 on your loan over the life of it.

Understanding the difference between APR rate and simple interest rate will help you decide how much you can borrow.

If you have questions about your payoff rate and the best way to decrease debt and improve your credit, talk to a lending or financial professional at RMJ Funding before making big moves. You might find that there are ways to improve your financial situation more efficiently than paying off your loans early.

1. Past History

One factor lenders consider is your personal history. They will do a background check to see if you have experienced any past financial problems or had any encounters with the law. This gives them an idea of your reliability and character. Things they may look at include your:

Credit score
Criminal record
Past business dealings
Job history/stability

2. Current Capital

To assess whether you are capable of paying back the loan on time, prospective lenders may look at your capital in a risk assessment. This includes checking your net worth, collateral and income. They want to see two things: if you have enough funds now to make a down payment, and if you can generate enough in the future to make regular payments.

3. Future Risk

The point of the assessment is to determine how much of a risk is it to loan money to a startup, so it makes sense that one more thing lenders look at is future risk. Part of this is taking into account your history, capital and money-producing ability. Another large part is trying to predict how successful the business might be by looking at the market, chance of success and future trends. Lenders do not want to pour funds into a venture with no chance of prospering.

This is a simplified overview of some of the factors involved in a risk assessment. In reality, the process is more complicated and involves many more considerations. It is important to understand what potential lenders watch out for when applying for a startup loan.

What Is Section 179 Deduction?

Many people hear Section 179 and cringe. Don’t worry; it isn’t the complicated tax code it is made out to be. Basically, it just allows businesses to deduct their equipment expenses each year. This is just a way to encourage businesses to invest in themselves and grow. Here are the basic steps to follow to get this benefit:

Buy a piece of equipment for your business.
Deduct the entire cost from your annual income.

You may have heard this referred to as the “hummer deduction” because many businesses used it to write off large vehicle purchases. However, the list of qualifying equipment has shrunk in recent years. Fortunately, this article is still very beneficial to small businesses. It is one of the few government incentives available for small business owners and has been boosted by the recent stimulus activity. Now, small businesses are using this incentive and getting benefits, such as a depreciation bonus.

How Does It Work?

Previously, businesses had to write off large purchases over time through depreciation. This means that if you spent $50,000 on equipment for your business, you could write off $10,000 per year for five years. While this is better than nothing, many small business owners would rather write off the entire amount all at once. That is what Section 179 allows them to do.

The depreciation bonus aspect of Section 179 encourages small businesses to buy new equipment and reinvest in themselves. However, this can become a complicated process for some small business owners, so you may want to consult a reputable commercial finance company like RMJ Funding if you are unsure about your deduction.

1. Ownership

It may sound obvious, but ownership is the biggest difference between buying or leasing a vehicle. It also may make your decision for you, if you realize you need to own a car so you can make changes to it or not have to worry about keeping it in good shape for when you return it. On the other hand, you might realize you need to lease it because you don’t know if you’ll actually need or want this particular vehicle for long. If you decide to lease it, you put the responsibility of its future value and resale in someone else’s hands.

2. Cost

When you take out a loan to buy a vehicle, you will probably end up paying more per month than you would if you leased it, but whatever the car is worth when you’re finished paying it off belongs to you. In comparison, if you’re more concerned about a lower monthly payment than you are about having equity in a vehicle, then a lease might be the best choice for you. Since you’re only having to pay for the depreciation of the vehicle and not the cost of the car itself, your monthly payments will be lower than they will be if you purchase it.

3. Use

Lease agreements usually have limits to how many miles you can drive the car each year, limiting how much you can use it. In addition, if you put too much wear and tear on the car, you’ll have to pay fines for this as well. If you know you’ll be using the vehicle quite a bit, purchasing might be the best option for you.

When you’re deciding between leasing a car or buying one, do your research and talk to an acquisition and financing company to make sure you know which option would best fit your needs. Contact our team at RMJ Funding for more information!

What Is It?

Depreciation recapture is when the IRS taxes you on any profits you make from selling an asset you have already used to offset your income. Let’s look at this process from the beginning in step-by-step detail:

Purchase an asset
Deduct the expense of the purchase on your taxes
Sell the asset
Face this tax

This can come in the form of industrial equipment, property, vehicles, or anything else you might deduct from your business. When you sell an asset, the IRS will calculate your amount based on your asset’s depreciated cost and how much you sold it for. This can be a very confusing process, so if you want to check that everything has been correctly counted on your taxes it is best to talk with commercial finance professionals.

How Would It Affect You?

This will only affect you if you sell an asset for a “gain.” Let’s look at what happens if you buy a piece of equipment for $10,000 and use it for four years. After four years, this machine may be running perfectly and bring you $5,000 when you sell it to make room for an upgrade. However, the IRS may only see it as being worth $2,000. While you see this transaction as a $5,000 loss, the IRS sees it as a $3,000 gain. Therefore, you will be taxed accordingly.

Understanding depreciation recapture and how it could affect you can give you the boost you need to succeed when faced with your small business’ taxes. Fortunately, you only have to worry about this if you sell something that you have counted as a tax deduction earlier. If this is still confusing to you, you may want to seek help from a financial expert at RMJ Funding.

Understanding FICO Numbers

The FICO company uses several factors to determine your credit risk or worthiness. The following factors are put through a formula to determine how likely you are to repay a loan:

Age of existing credit
New loans and credit balances
Outstanding balances on previous loans
Payment history
Types of credit

The resulting FICO score typically falls between 300 and 850. The higher scores represent better credit.

Factoring in Credit Bureau Scores

There are three major credit bureaus, and you may already be familiar with one or more of them: Equifax, Experian, and TransUnion. The bureaus use many of the same factors to provide a credit score, but they use a different formula to run those numbers:

Use of credit, existing balance, and available credit
Types of credit
History of making payments
Age of existing credit
New loans and credit balances

The resulting scores are similar to the FICO in that they fall between 300 and 850.

Using Your Score To Get a Loan

A commercial financing lender may use one or both of these scores to determine whether to give you a loan. If your score is near or above 800, you have exceptional or “superprime” credit, and lenders will feel confident in lending you money. On the other hand, if your score is below 600, you’ll probably find it difficult to get new credit.

Preparing To Approach Lenders

It’s generally a good idea to know what both types of scores look like, especially if you’re hoping to get a loan. Remember these scores are similar, but their differences are important. Knowing how to read your FICO score and credit scores and understanding how to use them can also help you improve your credit.