When you apply for a loan there are certain things lenders look for to determine your business fundability. These are the minimum items to check on your own to make sure a lender will see what they need to approve your financial needs. Solid Business Credit Score Experian, Equifax and Dun & Bradstreet are the three business credit reporting agencies that you should watch to make sure your scores are strong. Diversity Your lender will determine your business fundability based on the types of credit you have as well as the strength of the scores themselves. They don’t want to see only one type of credit, they want to make sure you are solid in all types of business credit and have a reliable record of timely payments.  You should have a minimum of 5 vendor credit accounts and 3 different credit cards in your business’ name. Once you have set these up within the system, they will appear on your dashboard. If you have been in business for any length of time, another bank loan that is current and in good standing or has been paid off recently shows new lenders that you are a good risk. Business Credibility Your business fundability will hinge on the reputation you have developed in business circles. Having good standing with vendors is one way to prove your credibility, but other B2B relationships strengthen your standing in the business world and make your business look more reputable. Spend the time, even when you are just beginning to create business relationships. Minimum Bank Rating You need to have a good bank rating for your business. This is one of the easier things to develop. Open a bank account in your business’ name. Maintain a healthy balance that is at least at the minimum level for that account for several months. A normal bank cycle is 3 months so that is the minimum amount of time it will take to start with for a bank rating. During that time you should show good cash flow, paying your bills and having the income to cover all expenses without digging into your minimum funds. The longer you can keep your bank rating going, the stronger your rating will be. Proper Registration Your business should be listed with 411 at the least. It is even better if you are a member of any organizations affiliated with your type of business and have a good, strong relationship with local business associations and the Better Business Bureau.

Lender Compliance lender compliance

Compliance basically means that you are doing everything in your power to make your business as credit worthy and prove your business fundability by complying with all aspects important to a lender. Everything in a lender’s list of requirements is geared to make sure your business has the ability, now or in theory, to repay a loan and the disposition to do so.  A part of being compliant is geared toward proving your business actually exists and enjoys a good reputation as well. Like in your personal life, your businesses reputation speaks a lot about its morality and desire to make payments. In other words you need to prove adequate income or a reason to believe there will be enough income in the future to make your loan payments, and that your business has a good track record of reliability.  How to Prepare for a Business Loan In order to show your business fundability you need to be prepared to present certain documents. Provide your prospective lender with your business plan, your financial statements for at least two years, or as long as you have been in business and proof of incorporation as well as licenses and permits needed for your locale. You will be asked for all pertinent contact information such as address and phone number. To present a solid appearance, your address should be an actual street address not just a P.O. Box, and you should have a listed phone number. It is better to have a landline telephone even if you use a cell phone for most of your communication, however if you use cell service exclusively make sure it is a contract phone that will have your business name associated. Without exception you need to acquire an EIN number. This is an employer identification number given as a tax reference to businesses by the IRS. It is a simple process to register your business with the IRS, and it can be completed online on the IRS website. In Step 1 of the Business Fundability System, you will be walked through these necessary steps in order to be lender compliant. Business Banking Even if you have never had a previous loan in your business name, establishing a bank rating is essential and surprisingly easy to do. All you really need to do is open a bank account in your business’ name and keep that account in good standing for at least 3 months. The longer you keep your account open and show normal operations in the form of making payments on accounts and making regular deposits the better your rating will be.

Lender Compliance lender compliance

Actually, this can be more of a vital part of the compliance process than you might realize. The key here is to think about things from the lenders perspective. Lenders want to grant credit to companies that are a “safe-risk.” If you were a lender, would you consider someone who works from home a safe-risk? Traditionally, home based businesses are either hobbies or start up companies that have a dramatically higher risk ratio compared to more established businesses. If you are doing business from your home, then you need to set up a virtual office right away. Many lenders will automatically decline you if you are doing business from home. I am not sure I can overstate that statement. They will AUTOMATICALLY decline you. Meaning, it does not matter what type of revenue or how good your personal credit is, if you are doing business from your home, they won't even bother to continue with the application. Be sure to either have a real physically address that is a commercial address or set up a virtual office.  If you have any questions about this, the Business Fundability advisor team can help.

Lender Compliance

Central Contractor Registration (CCR) is the official, on-line registrant database for the United States Federal Government. Its sole purpose is to collect, validate, store and distribute information to federal agencies’ finance offices, federal government procurement and electronic business systems. If your company plans to do business with the federal government then you will need to be registered in CCR before being awarded a contract. There are four key items that you will need before beginning your CCR registration.   Employer Identification Number (EIN) or Tax Identification Number (TIN) – If you have a number then it will take 3-5 business days to clear the CCR taxpayer match process. You can apply for an EIN over the phone or on the internet and receive it immediately but it may take 2-5 weeks for the number to be active. DUNS Number – All U.S. Government contractors can receive a DUNS number at no charge. If you don’t have a DUNS number you can obtain one within 1-2 business days by completing the DNB web form. Business Statistical Information – CCR requires that your company provide the receipts and number of employees on a world-wide basis, which includes any affiliates. If your business sells or generates electricity it will be required furnish additional information. Electronic Funds Transfer (EFT) Information – This is required to receive payment of invoices.   Some other information required in order to register include:   Point of Contact (CCR POC) – Designate someone in your company who will be directly responsible for maintaining and updating the company CCR profile. Electronic Business Point of Contact (EB POC) - This will be the person in charge of deciding which employees of your company may represent your company to federal business systems. Marketing Partner ID (MPIN) – This will be a special password that you will have to designate during the registration process.   It’s extremely important that all the detailed information about your company matches exactly in each of the D&B, IRS and CCR databases. Any mismatched data can result in a delay of your CCR registration.   A foreign company that performs work outside the U.S. is required to first obtain a North Atlantic Treaty Organization (NATO) CAGE (NCAGE) code before registering with CCR. Use the NCAGE online form at http://www.dlis.dla.mil/Forms/Form_AC135.asp.   To get started with the CCR registration process go to => https://www.bpn.gov/ccr/   For additional information about CCR registration you can download its free CCR User’s Guide as well as view step-by-step screen shots of the entire CCR Registration process located on the CCR website.    

Lender Compliance

Creating an effective business plan can be an intimidating task for anyone who’s never owned a business before. While there are countless opinions regarding the importance of a business plan when it comes to financing it is in your best interest to have one. Many banks and lenders will expect a business plan from a company that is applying for a loan or line of credit. If you plan on applying for an SBA loan then you will certainly need to have one.           For an established business it demonstrates that careful consideration has been given to the business's development, and for a startup it shows that the entrepreneur has done his or her homework.  A formal business plan is just as important for an established business, irrespective of its size, as it is for a startup. It serves four critical functions:             1.      Helps management or an entrepreneur to clarify, focus and research their company or project development and prospects. 2.       Provides a considered and logical framework which a business can develop and pursue business strategies over the next three to five years. 3.      Serves as a basis for discussion with third parties such as shareholders, agencies, banks, investors, etc. 4.     Offers a benchmark against which actual performance can be measured and reviewed.    Just as no two businesses are alike, so it is with business plans. As some issues in a plan will be more relevant to some businesses than to others, it is important to tailor your plan's contents to suit individual circumstances.   Nonetheless, most plans follow a well-tried and tested structure and general advice on preparing a plan is universally applicable.          A business plan should be a realistic view of the expectations and long-term objectives for an established business or new venture. It provides the framework within which it must operate and, ultimately, succeed or fail. For management or entrepreneurs seeking external support, the plan is the most important sales document that you are ever likely to produce as it could be the key to raising financing. Preparation of a comprehensive plan will not guarantee success in raising funds or mobilizing support, but lack of a sound plan will, almost certainly, ensure failure. If you are writing a business plan for your bank, your bank manager will want to see that your ideas are well thought out, but the most important aspect to him or her will be your financials. Are your projections realistic? And will the cash flow of the business be enough to ensure that you can make the monthly payments for the loan that you have requested? If your business is making $1,000 a month and your payments are $1,200 a month, the bank is likely to reject your application. When considering an investment opportunity, most venture capitalists will look at the obvious trends and market niches. The most important factor in a decision to invest in a company is the quality of the people. In real estate, the three biggest factors are “location, location and location.” The venture capital factors are “people, people and people.” VCs will ask, how experienced are the people that are going to run this business? Do they have knowledge of the industry? Have they started successful businesses in the past? Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen.      

Lender Compliance

Dun and Bradstreet also know as DNB,  is the leading business credit bureau of business information and insight for risk management, sales and marketing, and supply management decisions worldwide. With more than 130 million companies listed in its database spanning across 190 countries it’s no surprise that over 100,000 companies worldwide use this bureau’s commercial information. The importance of registering your company and obtaining a DUNS number with DNB is because it has become universally accepted as a standard business identifier for the United Nations, the European Commission and the United States Government.   Many suppliers, creditors, banks, businesses, and finance companies require credit applicants to provide a DUNS Number in order to review a company’s credit report prior to extending credit. This numbering system was created to help standardize business information. When you obtain a DUNS Number it will consist of a nine-digit number that is unique to your company and will be the number you use on credit applications. Suppliers and creditors will pull your company’s credit report using your DUNS number so they can determine the creditworthiness of your company. Failure to register with this business credit bureau and establish a favorable credit rating could cost you thousands of dollars in potential credit from suppliers and creditors. If there is no report on file with DNB, most likely a creditor will require a personal credit check and/or personal guarantee. Before you go through the process of applying for a DUNS Number, you should first check to see if your company is already listed. Go to the DNB website at iupdate.dnb.com and enter your company name, city, and state in the search box. If it is listed in the results then you simply need to verify that you are the owner of the company and DNB will provide you access to its iUpdate system. Through iUpdate you have the ability to review your existing company information, credit profile, make necessary corrections, and dispute any inaccuracies you identify. If you do not see your company listed then the next step is to apply for a DUNS Number. There are several options you have which we will cover in greater detail on the next several posts. It is important to note that if your company plans to bid for any type of government contracts or grants then you can obtain a DUNS number in a matter of days at no cost whatsoever. This is known as Central Contractor Registration (CCR) and it will be the topic of our next post.

Lender Compliance

At this stage of the business credit building process you may be anxious to move forward and start applying for credit. However, there are still a few minor details that need to be completed in order to begin. As a recap, here are the following items to be completed prior to moving forward:   Business Name Business Entity Federal Tax Identification Number Business License Business Address Business Phone Number 411 Directory Listing Business Fax Number Business Email Address Company Website Business Bank Account   If you have not completed any of these items go back to the previous posts and review each of the steps that you may have missed.  It is critical to not rush the process or you may end up risking the chance of getting declined for credit. Before getting registered with the major business credit bureaus all the lender compliance items must be completed including your company’s business classification code. There are two types of codes used known as the Standard Industrial Classification Code (SIC) and the North American Industry Classification Code (NAICS). Both of these codes are designed to classify what type of industry your company is involved in. This allows lenders, suppliers, and creditors to quickly identify the nature of your business and to determine whether or not you are involved in a high risk industry. This is why it is so important to select a code that does not put your company in a high risk category. Unfortunately, some industry codes trigger red flags with creditors such as real estate, travel, automobile sales, restaurants, and dry cleaners. For example, if you plan on investing in real estate then you will want to make sure that the company you build credit on is not “real estate investing”. Most banks will automatically turn you down because this is a high risk category. Your company can still invest in real estate but you may have to set up a business that does business development, business management, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investments from a separate division or company. Once you have selected the right code for your business you will be ready to apply for your Dun and Bradstreet Number. Be sure to record your codes because this will be required on many credit applications as part of the underwriting process.   To select an SIC and NAICS code go to siccode.com/naicsearch.php web site for details.

Lender Compliance