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Kacie: What's up guys? We're wondering who's gonna say hi first. Are you burping?
John: Oh, joy.
Kacie: We have a special guest for you guys at the end of this show. We're gonna introduce our interview series that's coming up next.
John: Yes. Ms. Piggy's in town to do that. Yeah. Yeah.
Kacie: So today we have a special show for you.
We've got the summary episodes of our business finance. It's so exciting. You get all the major points to, to get your business ready, to get the funding you need to grow and scale and just kill it. Yeah, so
Kacie: we did an entire series, a couple weeks back on financing for your business. We went over the different types of financing.
We went over how to get financing. We went over when you're ready for financing. And so instead of you going back and having to listen to every single one of those episodes separately, we're just cramming it all into one for.
John: We took the best of each episode, put it into one so that you can take what you need to get your business financed and growing.
Kacie: let's get into it. Let's go.
The Business Project podcast
John: business can be
Kacie: complicated. We break it down to regular people like us
John: can understand and find success. I'm John Crespo, accountant and consultant. I'm
Kacie: Casey Bryant, marketer and event planner. If you run a business or want to
John: run a business, welcome to the show.
Oh man. I'm so excited about this topic. If anybody has been on YouTube or has been on social media, you see all of these gurus out there giving. Tips and steps on how to become a business credit, how to get so much business credit overnight after starting a business. And that has worried me for so long because, you know, there's a lot of people out there that don't really understand what business credit really is and how it, it can affect your business and really, When it is that you should really need it and get access to it and prepare for it.
Kacie: typically if they say it's a quick fix, then it's not a long-term solution.
John: Exactly. Yeah, exactly. And it kind of sets people up for failure. Mm-hmm. Which is something that really bothers me is, you know, we are here to set businesses up for success. Mm-hmm. Long-term. Long-term success and business credit is a long-term process.
Mm-hmm. So there's a lot of planning involved. There's a lot of preparation involved, like there's so much involved, similar to, you know, trying to grow your business through sales. You gotta plan properly on how you're gonna utilize the business credit the right way.
Kacie: You have to put systems in place and you have to know exactly what you need to do in order to make it happen versus just throwing it at the wall and hoping that it works.
John: Yeah, exactly. So I'll give you just some ideas of the kind of videos that are out there on like YouTube and social media. Yeah. You have these videos that are having businesses do like credit cards stack. Where you apply to all these different credit card companies and just get multiple credit cards so that you can accumulate hundreds of thousands of dollars in credit lines via credit card.
There's vendor signing up for vendors and stacking things that way, and just it, it kind of puts people in a bind that, you know, the, the conversation should be around. Tell me about your business. Seems
Kacie: kind of gimmicky. It's very gimmicky. And isn't it bad to apply to a bunch of credit cards? Cuz then that hurts your bus, your credit, right?
Short term at least.
John: Yeah. It hurts your your personal credit because in the beginning you have to personally guarantee, and we'll go into that really. The business project.com will actually dive deep into what those, what that actually is. But you know, your personal credit in the beginning is, is affected when it comes to trying to get business credit.
So that's not spoken about. You know, it's not, it's not spoken about how you have to truly prepare yourself, understand how can it, it can affect you personally and make sure you're setting your business up for success. Yeah. Can you
Kacie: use personal credit for a business?
John: Okay, now, That's a trick question, right?
But it's a question that, you know, everybody has, you know, can, can I use my personal credit for my business? Your personal credit is relied upon to establish business credit in the beginning, right? Mm-hmm. Because that's all they have. Exactly. Right? You haven't generated revenue, you haven't established really, the business.
Right to, for the business to establish credit, and we'll go into the business credit side and how, how to start establishing business credit too. But you, you, you have to heavily rely on your personal credit in the beginning for sure. So making sure you manage that is so important. So if
Kacie: you're an LLC or a corporation where you're supposed to have that break right between your personal and your business.
Using your personal credit affect that liability
John: shield? It does. You're actually, they call it the piercing, the corporate veil, right? Yep. You're piercing the corporate veil because you're co-mingling. Mm-hmm. Co-mingling is when you mixing your personal and business transactions and assets together and you know, then you get confused and you don't know what is what, and then when it comes time to file taxes and you're putting all this stuff.
It's so, it, it gets so confusing. It's such a, the wrong way to really manage your business for the long haul that the IRS actually created specific rules around not. Being able to commingle. Like it's, if the IRS doesn't audit on you and you're filing your taxes and you're mixing your personal and business assets together, you'll get fined because, you know, let's go back and just redefine exactly what business credit is.
Um, let's do it. Yeah, because there's two types. You have business credit and you have commercial credit, so business credit, Utilizes your personal credit in the decision making process. So you, you typically, to get business credit, you have to do something that's called personal guarantee. And we went into that last week, but just touching on it again, you know, personal guarantee is when you, yourself are signing as a, as kind of like collateral.
To the business, um, loan that you're applying for, whether it's a credit card, whether it's a line of credit, whatever it may be. You yourself are saying that if the business can't pay for it, you can come after me, cuz I'll pay for it through my house, my car, whatever it is that I own, or whatever money I have.
I'll make sure that the business, I'll make the business good. So that's business credit.
Kacie: And that's kind of scary too because sometimes in business we know things happen that you don't expect. And so if you have, if you have it connected with your personal. It's, you might lose all of your personal stuff off of something that happened in business.
John: Yep. Which is why proper planning and preparation is important. Mm-hmm. Because when it comes to establishing corporate credit, you're gonna have to, you're gonna go through the business planning process first. Right. And there's, through those courses so that when you get to this, you can, you have a good understanding of everything that's, that's going on that you have to do.
Like you're really going in there with an understanding of your business, how your business is gonna be successful. And utilizing that now to establishing that, that corporate credit, because the first step, believe it or not, is establishing a legitimate business. Imagine
Kacie: that. It's the first step. Yeah, that's a good step.
That's when you don't wanna mix. Exactly. Yeah. Establishing a legitimate
John: business. Yeah. And what does that mean? Like you, you're establishing a legitimate business. It's a business that you have a business plan for, right? You've done your market analysis. You know, you, you're putting all of those steps that we go through in the business project, you're putting those steps into place.
So to create AEG legitimate business. So that is step number one, step two. Step two is actually form an entity. And we spoke about that a little earlier today. It's form a, a business entity that can actually create its own history. Right. So it's the LLC or the S Corporation or the C corporation, whatever, based on the business that you are creating, whatever, uh, structure you feel is the right structure for that business, go ahead and create it.
Get that tax ID number, register with the state. You know, every step in that process that you need to go through to register it. Register it. All right? And now the next one is, uh, get your Business Bank. So you, again, we spoke about that before, right? So everything is falling into place and it's tying into getting your entity established on its own, right?
Having that separate bank account, because you gotta separate your personal and your business transactions. The business truly has to create history with the bank that it has the uh, uh, relationship with. And the only way to do it is to make sure your transactions are flowing through that particular account.
So creating that business bank. Is crucial. If you don't have a business bank account, you're not gonna get commercial credit because most of the companies want to see bank statements, a a business bank statement, not a personal bank statement. They wanna see a bank statement. And now this one is a big one, right?
Step four is a big one, step four is a big one. Um, because this is where you're truly creating that, um, account. And it's, uh, you ever hear of Dunham Bradstreet? Mm-hmm.
Kacie: They're like your credit score company for businesses, right? Yeah,
John: yeah. Yep. So, um, Dunham Brat Streete has this score model called Pay Decks.
Um, they create the pay deck score, and that is what, um, most businesses, most government entities. Um, look at when they're, when they want to use you. If they want to hire you for something, you wanna get a contract, uh, um, you want to get a win a bid or something, you gotta have a Dun in Bradstreet profile set up.
So you apply for it. Yes. And it's free. So there's a free version of Dunham Bras Streete, which is important. They're, you go to their website, they're going to wanna offer you some additional services. Some might make sense for you, some might not. But there's a free, um, profile. You just create your business profile and it'll give you the Dunham brat streete number, typically about 30 days to get that number.
But you want that done in Bradstreet number?
Kacie: Yeah. Okay. So you go on, you apply, and then you get the number. And then how does your business. Do you have to like report things to them when you do things or they automatically pull that for
John: you? Well, that's where, when you're out there seeking loans and relationships with vendors or the types, you wanna make sure that they report that those are vendors that actually report to, um, Dunham Bradstreet.
Kacie: Oh, gotcha. Yeah. So they give you credit and then they report it to Dun and Bradstreet. Yeah. And then they keep
John: up with it. Yep. Okay. Next thing is, you know, establish a business credit card with the. That you have an account with. So
Kacie: this is step five. Yeah. Establish a credit
John: card. Establish a credit card.
Um, now this is gonna be more on business credit side cuz your personal, you're gonna personally guarantee this business credit card. But these cards also report to Dunham. Brad. Streete. Dunham Bradstreet. Okay. Yep. Now there's other business credit reporting agencies out. That will automatically create accounts for you and start pulling your information.
So you have the Equifax and you have the Experian business. Mm-hmm. Credit, um, agencies as well. So the, you create your're, dun in Bradstreet account. All of a sudden these guys are gonna see you out there. They want a piece of it. Yeah. So they're gonna create profiles for you. And some businesses are starting to use that as well.
I wrote a list because there's a lot in it, so I wanna make sure that I hit the points and make sure. I'm giving you the information that you can make the list as well. So let, I guess first off, let's just what? List out what the five seats of credit stands for. Let's do it, right? Yeah. All right. Number one,
I can't even think of five seats. Constitution.
John: Well, I love that your business should have a constitution. Yes, you should. Yeah. Make it for the people all. Number one is character. Character, yep. Okay, that's good. And I'm just gonna say that number two is capacity slash cash flow, right? Capacity, cash flow.
Number three is capital. Number four is conditions, and number five is collateral. So character, capacity, capital, conditions, and collateral. Did you write that down? So character is like your resume. Right when you go, they want to know, the institution wants to know about you. They wanna know your history.
What else do you think falls in character? How do you think they get your history?
Kacie: Mm. If you've paid your bills or not? How do they get that information? Or if you have
John: a lot of credit. Yeah, you just said the word right there. Credit. Credit. Yeah. They pull your credit. So the first step is credit. And we've been speaking about this in the beginning.
You have to make sure your credit. At the level it needs to be to even start the conversation. Your
Kacie: personal credit? Yeah. Or your business credit. Those were
John: both of them. Yep. But number two is capacity slash cash flow. What do you think that means?
Kacie: Capacity slash cash flow. I think that is how much you're able to what you have already.
Wait, how full is your bucket?
John: How full is your bucket? How much cash is coming through your accounts? What is your capacity or your ability to repay this loan? Hmm? Are you generating enough revenue to repay this loan? Banks want it. Obviously they wanna know that cuz. If they're giving you money, they want you to pay 'em back with interest.
Yeah. That's the important part. They wanna make their money, right? It's how they're in business. Mm-hmm. What do you think capital means?
Kacie: How much capital you have? What do you, what is your, what do you have in your bank and what do you, how many assets do you
John: have? Yeah, and it's more for the down payment, right?
Because if you're buying a property, the bank will lend you a certain loan to value. They won't lend you the whole amount. Right. So you gotta come. I, I would say capital is more the skin in the game. That's what I was
Kacie: just gonna say. You gotta have some skin in the game. That's right. Yeah. Yep.
John: They wanna see that you are invested into this project or this package, this loan that they're giving you so that they know that you really want to make sure it's successful and you're gonna be able to pay them back.
That you're gonna do everything in your power to make sure that you're able to pay that back. Conditions. Conditions. That's a good. What do you think that means?
Kacie: I think is that the conditions of the loan, so how much you're putting down, how long you have to pay it back, what the interest rate is. Yep.
Yeah. That's the
John: conditions. Yep. It has a lot to do with that. Okay. So the conditions are, they look at the condition of your business, right? The condition of the environment, the condition of the loan. It's really how the loan is gonna be. And they take into consideration the environmental impact. You know, what's going on in the economy right now?
Interest rates are high, right? Interest rates have gone up because there's a lot of risk in the economy right now because it's slowing down, right? We're going into a recession. I think we, I personally feel we've been in a recession since summertime and, but now it's really starting to feel the effects and on main.
Although I honestly, I think main Street's been feeling it since the summertime. Mm-hmm. Right. I agree. Yeah. But now it's actually moving up the ladder, so everybody else is now starting to feel it. But banks take that into consideration. You know, it the, the condition of the economy, the condition of your business, and that determines the rate, the term and the payback structure of the loan.
Conditions. Conditions. So that's four. Collateral. Collateral. Collateral. Yep. What do you think the collateral. What
Kacie: you have to put up to back it up.
John: Yeah. So you know, it's similar to what, what was it? Capital, right? Capital is how much cash you're putting up. Collateral is what asset are you putting against a loan?
So are you getting to cover it? Yeah. So are you buying a loan? Are you getting the loan to buy property? That property is the collateral. Are you getting a loan to buy equipment? The equipment is the collateral. Hmm. So it's the. That you're putting up against that loan killer type of financing that a business can go for, business can go for is sba.
Everybody's heard of sba Small Business
John: Yep. Yep. I, when, when I'm speaking, when I'm speaking to clients, the first thing they ask for is, how can I get an SBA loan? You know, all I want a SBA loan. And you know, because everybody just knows about it. So the SBA is a government backed loan. You don't go to the sba.
To get the loan right. It's done through a financial institution. A lot of people don't know that, except for like the past couple years because of Covid and things like that. The S B A did administer the P P P loan and the loan, well, P P P forgiveness loan because those were able to be forgiven. And also the, it's called the E I D.
Because those were part of the rescue package that was put together because of Covid. So the SBA administered that directly. Um, so aside from that, if you want to go to the SBA and get a loan from the sba, you gotta do it through a bank or a online lender. Um, so the next one is like a traditional bank loan.
Okay? That's where you go to the bank and you're asking for money. Right now, what's good about traditional bank loans is that. Some banks, you don't need two years in business to be able to get a loan from them. They'll provide startup. It's not gonna be a lot of money, but they'll, they'll make a decision based on your personal credit score.
And if you have income coming in from like other avenues, other sources, they'll give you a credit card and they'll give you a line of credit or a small term loan to help start your business. So the next one is online loans.
Kacie: Online. Yeah. So we had, we talked about sba. Mm-hmm. We talked about traditional, and now we're talking about online loans.
So what is an online loan?
John: Recently, I would say that within the last 10 years, there's been a, um, trend in what's called FinTech. FinTech companies. You ever hear FinTech? Mm-hmm. Financial technology, right? They, they break it down to FinTech. These are online lenders. They're not banks, although there are some online banks, right?
There are some, an example of online bank is like, have you ever heard of a.
Kacie: I have. Yeah. Yeah. We, I was super bummed. We had an online bank called Simple. Oh yeah. Simple. It was the best thing in the world, and they sold it, and then the company that bought it shut it down. And I can go into a whole Yeah, yeah.
Rabbit hole about that. But, um, it was great for users. Yeah. But that was an online bank. Yeah. Yeah.
John: Online banks and online lenders, you know, those are created. In a way to provide like easier access to funding. So a lot of them just look at your bank statements and when making the decision, you don't necessarily need two years of bank returns or, or two years of tax returns, right?
You can just use like three to six months of bank statements. They really base their decision on cash flow and credit. So a lot of them are personally guaranteed loans as well. Okay. But um, your. They're more flexible on credit, so they will lend to lower credit tiers. So if you're like in the 600 s, you have a good chance of getting a loan from an online bank as long as you have good cash flow.
Um, the next group, which is great, is called Micro lenders. I'll give you an example. You never heard of that one either. Micro lenders or, or nonprofits. These are nonprofit lenders. Okay? And they, a lot of them get their funding from the go. From the government or local investors will fund these non-profit lenders, and they deal a lot with, um, they, they have different, um, categories of borrowers, so some of them are maybe geographically based, so depending on where you live, they'll lend to you.
So local. In Tennessee, we have a company called Pathway Lending, and they deal with just the state of Tennessee. So if you're in the state of Tennessee, you own a business, you can reach out to them and. They'll help startups all the way up to established businesses and their criteria, what they, they are more educationally based, so they'll make sure that your business plan is right.
Like they kind of will guide you through the process because of the nonprofit status that they have. They have to be more educational around it, but they give you access to like up to like maybe about 250,000. Some do to, some do less, but I think I've seen some go up to like 250. Oh. Hmm. It was a micro lender.
So look at, look in your state, wherever you live, and do a search for, um, micro lenders near me, right? And you'll, you'll find the ones that are local to you, and then you'll see what they lend against. So it's definitely worth checking out. All right. Next one is, um, merchant Cash advance. This is kind of like, uh, the fund box as well.
Okay. Right? Mm-hmm. Because Merchant Cash advance gives you funding based on. Cash flow. So they'll do an aggregate, like they'll do your average cash flow, monthly cash flow, and they'll give you, they'll lend you up to a percentage of what you bring in on a monthly basis. But these are high interest loans, so these are more, uh, I would, I like to call them alternative financing options.
Mm-hmm. Um, this is great for, if you have that project coming up, you know that you need to get access to funding quickly, that you can pay back quickly. Cuz these are short, this is more short term funding. Um, they don't, I very rarely do they go longer than a year. And, um, Being able to use. Some of them are lines of credits that you can keep on accessing if you want to, but the, I've never seen a term of that's, or a lot of them that go long, longer than a year payback.
So there's short term financing options. Now, some asides that's not traditional financing or bank financing. You can have an investor, right? You can do investor financing, you can do crowdfunding as options. And we, I think we spoke about this probably in the. Se, um, first episode of the series. Right.
Different, different types. But those are some, um, ones that are just non-traditional. You get an investor, they want either equity or they want, um, some, a term term like
Kacie: a l like a lender. Yep.
John: Yeah. Or you can do a, a combination of equity and term. Mm-hmm. Which is another pretty flexible or creative option.
So, um, there's so many ways to go about getting financing for your company is have you planned properly? What approach you want to take.
Kacie: Yeah. And you have to have all these things that we talk about, you have to have in place when you go to an investor or when you go to a bank, they're not gonna lend you money just off of your brilliant idea.
Like you might think that your idea is amazing and it might be amazing. Yep. But you have to have the numbers and the plan to back it up. Otherwise nobody's gonna give you some money.
John: Exactly. Yeah. Exactly. What's going on, everyone, we. Special guest in the building. Miss Piggy, a k a Joy. Say hello,
Kacie: joy. She is introducing our interview series with us.
We're gonna have guests in the
John: studio and our special guest, joy is here to just, um, kick it off. This is exciting.
Kacie: She's gonna break it in for us. Yes. Help us get
John: the practice. This series is gonna be amazing. We have. Um, professionals that are gonna share their insights with us, they're gonna share their journeys and just give us some nice tidbits that we can use to grow our businesses.
Yeah. So what do you say, joy?
Kacie: She says Rent. She says, just keep feeding me the treats and I'll sit here and look pretty. So when we come back for the next series that starts next week, there's gonna be an extra person sitting in a seat. Yep. Just like joy. It's gonna be so fun.
John: It's gonna be exciting. So join.
As, uh, as we interview again, some industry professionals and we're just excited to just share what they have to, to offer. Yeah, let's do it. We'll see you next week. See you next week.