Business Credit and Financing

Business Credit Cards

spave1 — Mon, 20 Aug 2007 22:49:59 +0000

Business credit cards offer purchasing options and power as well as rewards and are great for all business owners.

Having a business requires specific purchasing power. This is why business credit cards are such a great option for both large and small companies. Credit cards designed specifically for businesses offer business owners and employees multiple options and, often, rewards and cash back bonuses that are relevant to their needs.

Whether you are a small business owner, the head of a major company or just starting to get your own business set up, business credit cards are something you should look into. Small business owners and individuals just starting out will appreciate the purchasing options and power that having a credit card gives them. And large companies can improve their efficiency with cards whose lines of credit are tailored to their specific business needs.

Having a business credit card has other added perks as well. It can serve as advertising when you use your card. It’s also a great way to appear legitimate when you are just starting out. Additionally, credit cards designed specifically for business use often offer rewards that are relevant and helpful to business owners.

So where do you get a business credit card and how do you know which on is right for your company? These days, all the major credit card companies offer cards designed specifically for business including visa and discover card. Consider shopping online for a card and comparing the offers and rates for business cards side by side before selecting and applying for one.

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A Business Credit Card is More than a Convenience

spave1 — Mon, 20 Aug 2007 22:33:16 +0000

A business credit card is a financial management tool as well.

Most of us take our credit cards as a daily part of life. We whip them out to pay for gas, lunch and even groceries. A business credit card can help you differentiate between personal travel expenses and business travel. Many cards provide year end reports that group different types of expenses together. It can be a bit of a shock to find out you spent $3,500 on stamps, for example. But that kind of knowledge is helpful when you’re examining your profit and loss statement for areas you can trim.

A business credit card can also make sure you track every expense. It’s easy to pay cash and then forget to include that expense. The card tracks the expenses and provides a paper trail as well.

For some expenses like car rentals and hotels it’s mandatory to have a credit card.

A credit card can help with emergency situations and unforeseen expenses. It can also help balance out expenses that you pay once a year, allowing you to break the payments into monthly more easily managed payments. A credit card can smooth out cyclical or seasonal expenses as well. If you know that you have very busy sales months in the summer but won’t get paid until September, a credit card can help your business obtain the necessary products, materials and inventory without using vital cash resources.

Business credit cards have a bit of a down side, it’s all too easy to pay for things with your card and run up a tidy bill. It can also be tempting to use the business card to pay for personal items.

What type of credit card you acquire is dependent on your business’s credit profile and your own. If your company is a start-up it’s doubtful you can obtain a card with a huge credit limit. If you pay off your credit card every month you should probably look for one that offers rewards. However if you know you’re going to carry a balance from month to month, at least part of the year, then a low interest rate is more important than a rewards program.

As your company grows and maintains a good payment history, the limit will increase. Prompt payment on your business credit card account also demonstrates a responsible attitude and that can help you get bank financing in the future.

Do you need a small business loan, credit card, or grant? Want to know about other ways to finance your business? Find out more at 58 Ways to Find Money for Your Business

About The Authors
Brian Hill and Dee Power have written several nonfiction books including Business Plan Basics, ” Inside Secrets to Venture Capital” and “Attracting Capital From Angels,” Reach them through The Capital Connection

U.S. Postal Inspection Service investigates fraudulent business credit card ring

spave1 — Mon, 20 Aug 2007 21:52:23 +0000

CINCINNATI, OH — A three-count indictment charging five individuals involved in a
fraudulent business credit card ring has been unsealed following the arrest of three of the
defendants. The indictment alleges that the scheme caused a loss of approximately
$767,000 since December 2005.

A federal grand jury returned the indictment under seal on July 25. The U.S. Postal
Inspection Service received information in January 2007 from a credit card investigator that
the U.S. Mails were being used by individuals in Dayton, Ohio to obtain credit cards using a
company name in Cincinnati, Ohio. Further investigation disclosed that multiple companies
in Cincinnati, Dayton and Michigan were utilized as part of the scheme.

The indictment alleges that the individuals applied for business credit cards via the internet or
telephonically using their names along with the business names and had the credit cards sent
to various addresses and post office boxes in the Dayton, OH area. The indictment names
the following individuals:

STEPHEN M. MOBLEY, 31, of Dayton, OH charged with three counts to include Conspiracy,
Mail Fraud and Identity Theft. Postal Inspectors arrested Mobley on June 21, 2007 on a
criminal complaint and he is currently in custody;
GEORGE NELSON, 37, of Dayton, OH was charged with one count of Conspiracy. Nelson
was arrested on July 30, 2007;
JASON SMITH, 28, Kettering, OH was charged with one count of Conspiracy. Smith was
arrested on July 31, 2007.
TED BETTKER, 36, of West Carrollton, OH was charged with one count of Conspiracy.
Bettker was arrested on August 2, 2007.
TONY STONEROCK, 31, of Dayton, OH was charged with one count of Conspiracy.
Stonerock is currently serving a federal sentence on a charge not related to this indictment.

An indictment is merely an accusation - all defendants are presumed innocent. The
investigation is continuing and more arrests are expected. The maximum punishments are
30 years imprisonment for Mail Fraud and 20 years for Conspiracy. Aggravated Identity Theft
is punishable by a mandatory two-year sentence.

Getting Business Credit

spave1 — Mon, 20 Aug 2007 21:12:46 +0000

Whether you’re planning to start your own business or expand the one you own, you may be in the market for credit. When you shop for a loan or line of credit, remember that the law protects you against discrimination. The Equal Credit Opportunity Act (ECOA) prohibits creditors from denying you a loan based on reasons that have nothing to do with your credit-worthiness.

The Federal Trade Commission wants you to know that:

You cannot be denied business credit on the basis of your race, color, religion, national origin, sex, marital status, or age - or that of your customers. For example, if you request a loan
to open a store, a creditor can’t deny your application based on your race or your customers’.
If your application for business credit is rejected, you can find out why. You must submit a written request for the reasons within 60 days of the denial. The creditor must give you the specific reasons - in writing - within 30 days of your request. If you don’t agree with the reasons, consider discussing your concerns with the lender; you may be able to resolve the issues.

If your business is small (less than $1 million in gross revenues), the lender must keep records of your credit application for one year after telling you of the credit decision. If your business grosses more than $1 million, the lender has to keep your records on file for only 60 days after denying you credit. If you ask that your records be kept longer, however, or if you ask for a written statement of the reasons for denial, the lender must keep your file for a year. If you don’t ask about the reasons for denial within 60 days, the law permits the creditor to destroy your records. Note that these records could be important for any legal action you may consider against a lender.

You have the right to sue a creditor who doesn’t comply with the law. If you have a complaint about a government lender, public utility company, small loan and finance company, travel and expense credit card company, or other non-bank creditor, you may want to file a complaint with the FTC.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Alternative Sources of Capital

spave1 — Mon, 20 Aug 2007 21:00:49 +0000

Small Business Financing

The U.S. Small Business Administration (SBA), the federal agency created specifically to assist and counsel small businesses, suggests the following sources of capital in addition to banks:

Friends, Relatives, Individuals
Savings and Loan Associations
Insurance Companies
Finance Companies
Mortgage Companies
Small Business Investment Companies
Venture Capital Firms
State Government Financing Sources
Pension Funds
Government Agencies (such as SBA)
Private Foundations

Credit Application Help

spave1 — Mon, 20 Aug 2007 20:57:30 +0000

If You Need Help

If you are not granted credit by the lender and you believe the lender may have acted unlawfully, you can seek further assistance from the regulatory agency that supervises the institution. A list of some of the agencies is contained in this brochure for your reference. If it becomes necessary to seek legal assistance, the Act provides some remedies. If you have been denied credit because of unlawful discrimination and are able to prove it, courts may award actual damages and in some circumstances may impose punitive damages against the lender. If a lawsuit alleging discrimination is successful, the court also may award court costs and attorney fees.

Federal Enforcement Agencies

All creditors are subject to the Equal Credit Opportunity Act (ECOA) and Regulation B (issued by the Federal Reserve Board), which contains specific rules governing credit transactions. The following is a list of the federal agencies that enforce the ECOA and Regulation B for particular classes of financial institutions. Any questions concerning a particular financial institution should be directed to its enforcement agency.
State Member Banks of the Federal Reserve System
Division of Consumer and Community Affairs
Mail Stop 800
Board of Governors of the Federal Reserve System
20th & C Streets, N.W.
Washington, D.C. 20551
(202) 452-3693
www.federalreserve.gov

National Banks
Office of the Comptroller of the Currency
Consumer Assistance Unit
1301 McKinney Street
Suite 3710
Houston, Texas 77010
(800) 613-6743
www.occ.treas.gov

Non-Member Federally Insured Banks
Federal Deposit Insurance Corporation
Office of Compliance and Consumer Affairs
550 17th Street, N.W.
Room PA-1730, 7th Floor
Washington, D.C. 20429
(202) 942-3100 or
(800) 934-FDIC (934-3342)
www.fdic.gov

Savings and Loan Associations
Office of Thrift Supervision
Consumer Programs
1700 G Street, N.W., 6th Floor
Washington, D.C. 20552
(202) 906-6237 or
(800) 842-6929
www.ots.treas.gov

Federal Credit Unions
National Credit Union Administration
Office of Public and Congressional Affairs
1775 Duke Street
Alexandria, Virginia 22314
(703) 518-6330
www.ncua.gov

Small Business Investment Companies
Consumer Affairs
Small Business Administration
409 Third Street, S.W.
Washington, D.C. 20416
(800) U-ASK-SBA (827-5722)
www.sba.gov

Other Lenders
Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3758 or
(877) FTC-HELP ?toll free (877-382-4357)
www.ftc.gov

Equal Credit Opportunity Act

spave1 — Mon, 20 Aug 2007 20:38:42 +0000

Obtaining credit can be a difficult process for any business owner and especially for first-time borrowers. But keep in mind that different lenders have different standards; if you did not meet the standards of a particular institution, you may still qualify elsewhere. If you have a full understanding of why the initial lender didn’t approve your application, with time and more attention to these areas, you can improve your proposal as a result and may succeed the next time you apply.

Women and minority applicants may be concerned that they have received less favorable treatment which is unrelated to their creditworthiness. All business applicants have certain protections against unlawful discrimination under the Equal Credit Opportunity Act. The Act makes it illegal for lenders to deny your loan application, discourage you from applying for a loan, or give you less favorable terms than another applicant because you are a woman or a minority group member.

Under the law, a lender may not take factors such as sex, race, national origin, or marital status into account.

In addition, the lender may not ask for information about your spouse unless your spouse has some connection to the business, or unless you are relying on your spouse’s income to support your credit application or relying on alimony, child support, or separate maintenance payments to establish creditworthiness. But the lender may ask you for information about your spouse if you are living in, or you are relying for security on property located in, a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin).

Whether your business is large or small, if you are not granted the credit, be sure to discuss any questions you may have with the lender.

If Your Application Is Not Approved

spave1 — Mon, 20 Aug 2007 20:34:48 +0000

Most lenders, banks especially, are conservative in granting business loans. Given the obligation to their stockholders and depositors, they need to be sure there’s a good chance the loans they make will be repaid.

If your application for credit is not approved, find out the reasons why. Some of the reasons that lenders often give for denying a business loan include, for example, insufficient owner’s equity in the business; lack of an established earnings record; a history of slow or past-due trade or loan payments; or insufficient collateral. Finding out the reasons may help you qualify the next time you apply. The lender will keep you informed about the status of your application. If you are considered a “small business” (when your business revenues are $1 million or less, or when you are applying to start up a business), a lender has 30 days to let you know, either orally or in writing, whether or not you get the loan. The 30-day period begins after the lender has received all of the information needed to evaluate your credit request. If your application is denied, the lender must give you either:

a written statement of the reasons for denial, or
a written notice telling you of your right to obtain the reasons in writing. This notice may be given to you during the application process or at the time of the denial.

The lender also will keep for one year the records relating to your application.

Different rules apply for larger businesses (those with more than $1 million in revenues). Within a reasonable period of time after getting all the necessary information on which to base a decision, the lender must decide and let you know whether or not you get the credit. Then you’ll have 60 days in which to ask for a written statement of the reasons why you were denied credit; this is important to remember because the lender need not notify you of this right. The creditor will keep records of your application for at least 60 days after telling you of the credit decision. If within the 60 day period you request that records be kept longer, or ask for a written statement of the reasons for denial, records will be kept for one year.

Sources of Credit Technical Assistance

spave1 — Mon, 20 Aug 2007 20:32:06 +0000

Before you approach a lender, you might want to seek the advice of another, more experienced “set of eyes” to review your business proposal, particularly if you are a first-time borrower. By doing so, you’d be getting the loan package in shape to make it easier for the lender to reach a favorable credit decision. There are some business support groups whose members could counsel you on how your package looks. A qualified counselor might even discover that you really don’t need more money, and instead suggest better inventory control, improved marketing techniques, or other changes that could actually solve your growth problems. One source of counseling available to small businesses is the Service Corps of Retired Executives (SCORE), which is sponsored by the U.S. Small Business Administration. Others might include accountants and financial advisers.

Once you are satisfied that your proposal is in good shape to present to a lender, set up an appointment to discuss your application. You will find that the lender can also be an excellent source of business and financial counsel.

The Credit Application Process

spave1 — Mon, 20 Aug 2007 20:12:01 +0000

Applying for commercial credit can be tedious. It calls for more documentation than you might initially have expected and certainly a lot more than when you apply for consumer credit. For lenders, extending credit to an entrepreneur usually means customizing the loan to suit the credit needs of that business. So don’ be disheartened by the amount of paperwork needed to accompany the application. Instead, be prepared!

Among the best assets you can bring to the lender is a well thought-out and documented business proposal. You need to clearly state the purpose of the loan (will the money be used for temporary working capital, buying equipment, or expanding facilities); the amount of funds needed and for how long; and a repayment schedule. Your business proposal should include the following information:

business description that tells the nature of the business, describes the product and its market, identifies its customers and competition.
personal profile that outlines the background and experience of each of the principals in a resume.
proposal that states the type of loan requested and its purpose.
business plan that outlines your corporate strategy for the next three to five years; it will aid you and the lender in determining whether the business will generate the cash flow needed to repay the loan.
repayment plan that tells how you propose to repay the loan or outlines a repayment schedule. The lender will be expecting you to repay the borrowed funds from the profits produced by the business. As a contingency, you might need to develop a plan on how you would repay the loan if the profits alone turned out to be inadequate.
supporting documentation will include copies of pertinent papers that support the information contained in your loan proposal-for example, a lease, certificate of incorporation, partnership agreement, letters of reference, contracts, invoices or vendor quotes.
collateral that you will use to secure the payment of the loan. Collateral can include business and personal assets such as inventory, equipment, and accounts receivable or real estate, stocks, bonds, and automobiles.
financial statements, both personal and for the business. The business financial statement should be provided for the last three to five years of operation including a year-to-date interim report. It should contain a balance sheet showing business assets and liabilities, and a profit-and-loss statement showing revenues and expenses. The lender uses this information to calculate a debt-to-worth ratio for the business. Be prepared to provide copies of tax returns for the business for this same period.
The personal financial statement should list your assets and your liabilities. Identify the names in which title to each asset is held and its fair market value. You should be prepared to provide copies of your personal tax returns. You may be asked for a list of credit references. Lenders will check your personal as well as your business credit rating.

Lenders will carefully examine your financial statements and business projections. As a borrower, you must be fully prepared to answer questions about them.
personal guarantees of the owners or other principals usually are required, even from an established business. The lender also may request another party’s guarantee such as a cosigner or a surety, or may request a government guarantee from the U.S. Small Business Administration or other government agency.

In addition to the personal guarantee that you give, under the Equal Credit Opportunity Act the lender is allowed to require another person’s guarantee should your application fail to meet the lender’s standards of creditworthiness. If all or most of the assets listed on your personal financial statement are owned jointly with your spouse, or with someone else, the lender is likely to require such a guarantee. But the lender may not require that your spouse be the guarantor.

In the case of secured credit, the lender is allowed to obtain a spouse’s or other co-owner’s signature on certain documents when the applicant offers, as security for the loan, property that the two own jointly. In this case, the spouse or other co-owner may be asked to sign documents—such as a mortgage or other security agreement that would be necessary under applicable state law to make the property available to satisfy the debt.