Updated: Jan 26
There are a multitude of companies out on the market that will promise anything to convince small business owners the credit approvals they dream about. But in your rush to believe you have finally found a company that can answer all your business credit prayers – before you GIVE them your hard earned dollars — TAKE something for yourself. Take your hand off that mouse button, take a short step back, take a deep breath, and take a moment to listen to what they are really saying.
Do you know how to spot the words that can do more harm than good to your company?
Every small business owner has seen the eye-catching ads, visited the perfectly designed websites, and listened to the high-pressure commissioned salespeople who seek to sell their most recent game-plan for your financial future. There are very few companies that will tell you the bold and honest truth right up front, even if their honesty means they will never get your money. As a small business owner, you need to spot some of the key words that you find in these advertisements and understand their hidden meanings. Their eye catching words will make you sit up and pay attention, as is their whole intention — to lure you in and hope you get so caught up in the glitter so that you don’t read the fine print.
If you do a Google search for “small business loans” and you will find page after page of companies that are willing to “pre-approve” your business for credit or “help you find the funding you are looking for”. They will go as far as “guaranteeing” you an unrealistic amount of money in a very short time. They are preying on your desperation. After all, you wouldn’t be looking for credit if you weren’t needing it… and you wouldn’t be searching the web for it if you could get it from your hometown bank down the street… And who doesn’t like the idea that someone else will do all the hard work for you or that you can get it for practically nothing… We all have the naturally impatient beast inside that wants it and wants it right now.
There are three main reasons for enhancing your business’s credit report:
to separate business credit from personal credit
to show your company can handle its own debt and payment responsibilities, and
to achieve more credit!
While the majority of banks may require a personal guarantee on a loan or line of credit, there are many financial institutions who will extend business credit based upon the creditworthiness of the business name, but only if you have a sound and established D&B report. When you look for a company to assist with building that report, you have to look past the catch-phrases and get to the strength of the promises.
OUTLANDISH PROMISES — If the ad is saying they can get you any large sum of approval in a specific time frame, BEWARE of unrealistic expectations. Only the creditors and their underwriters can promise this, and most of them won’t. Only a fool would promise you any credit at all without performing their due diligence. Contributing factors include where your business is starting from, how old your company is, what experiences are showing on your report, what kind of business you operate, and believe it or not, something as simple as where your business is located can impact your approvals. It is your responsibility to sort through the promises and get to the facts.
POINTS – You might as well say “percentage” because that is what this really means. If they are wanting points on approvals, it means that for every dollar of credit they obtain for you, you have to pay a portion to the company who got you there. That doesn’t sound so bad, really, if you think of it as an incentive for them to achieve as much as possible. Until you consider that they may get you a $1000 line of credit with some outrageous company you will never use and you now have to pay them 10 points ($100) for something that will never really benefit you at all. Some companies charge upwards to 15 points and give you no choice in who they are applying you to.
GUARANTEE — As we all know, there are only two guarantees in life… death and taxes. Even something as simple as a 35 billion year history cannot guarantee you will see a sunrise tomorrow morning. There are no other guaranties. So if their ad says they can guarantee approvals, run for the hills. So many companies who assist in building business credit say this nasty word, and after they have strung you along for months and months and you are no further ahead, they will fall back on some hidden clause in the contract to cover themselves and you are out a lot of time and energy, and a whole lot of money.
NO UPFRONT COSTS – Face it, no one works for free. There are lots of companies that say they will, but then, once you get roped into their service, the added fees start piling up. You can’t even get a gym membership these days without some type of promise to pay. Some companies promise to get a lot of work done before you have to make your first payment, but then sit back on their haunches waiting for that first payment to clear before they really get to work.
CREDIT PARTNER PROGRAMS – Then there are the so-called “credit partner” programs, getting you to add someone who has high personal credit scores to your company report so they look like a part of your business and can vouch for your creditworthiness. The credit “partner” applies for credit in your company name using their credit score to vouch for the loans. Problem is, you don’t get the money. The partner does! In return, you are hoping the loan will show up in your positive payment habits and that the “partner” will always pay the bill on time. You may get a small stipend for taking the bait, but you could very likely lose everything in the process. Banks and federal authorities consider this to be bank fraud, and D&B sees it as a misrepresentation of business principles, which leads to your report being placed into a higher risk status and your credit being permanently cut-off. And since the “partner” has already gotten as much credit as possible into their pocket, your company will be considered “over-extended” by banks, lenders, creditors and additional funding sources.
INCREMENTAL REPAYMENT – These types of credit require you to provide your bank account information and access to your receivables. The lender will auto deduct a “small amount” on a daily basis to repay your debt. After researching such a contract, and reading the fine print, it turns out that you are going to repay upwards of .50 on every dollar! While it sounds good when you are facing a moment of desperation, this type of repayment plan can be devastating to your small business, especially one already having a hard time managing their day to day working capital. Imagine cutting that capital in half!
MINIMUM REQUIREMENTS – Read the small print. Most of these companies require a minimum amount of monthly revenue ranging generally between $10,000-15,000. Most small businesses are already struggling to make ends meet and simply do not have that kind of monthly income to tie up. If you do, then you don’t need to read this article because you can most likely walk into any bank and get a line of credit. This is just another way to lure you in, and then hit you with crazy fees and charges when there is no escape.
But you also need to do one more thing – RESEARCH, RESEARCH, RESEARCH — Common sense approaches do not only apply to lenders, but also to choosing which company to assist you in building your D&B® report. If you have visited their website and think you like what you see, follow that up by searching a company by their name on the web. See if there are any scam alerts, Ripoff Reports, PissedConsumer files, or BBB complaints.
Up to 90% of dissatisfied customers threaten to file a claim, but less than 10% actually do. If you are seeing numerous complaints or blog-postings about a company, you can bet your last dollar you would just be adding your name to the list. One company that sent us an advertisement via email had more than 50 BBB complaints and file upon file of dissatisfied customers.
LESSON: Recognize empty promises and snappy catch-phrases for what they are. You should feel confident that you will get all of your questions answered honestly the first time you ask, and it will be the same answer every day after that. "Success” should be the first word in your contract, and the last.