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Our Services. Unsecured Business Line of Credit Loans Separating Personal Credit From Unsecured Business Credit Card Debt Unsecured Loans for the Small Business Owners With Bad Credit Working with a CFO For Your Corporation Zero Interest Corporate Credit Cards Corporate Credit Cards Become a Business Way of Life Unsecured Business Line of Credit Loans. An unsecured line of credit loan is extended by banks or other types of lenders. The amount of the credit line offered is based solely on the credit worthiness of the company and does not require a personal guarantee. Unlike a secured loan such as a mortgage or car loan where the real estate or automobile are used to secure the loan, no collateral is required for these lines of credit.Even though unsecured business lines of credit have been in existence for many years, it still comes as a surprise to many small business owners that the program exists or that their company can even qualify. A common question we are asked is “why should banks make unsecured line of credit loans?” The answer is simple, Banks and other lenders are already making unsecured lines of credit to you as an individual. Why shouldn’t they offer a commercial program? Almost every American carries at least one Visa, MasterCard or American Express credit card in their wallet or purse. If you carry more than one, which is not uncommon, the total of all the credit limits on all the cards is your total line of credit. The credit cards and the limits on each are issued to you based on your credit worthiness as an individual and are totally unsecured. Therefore, it makes good business sense to offer an unsecured credit line program to corporations. In fact, corporations could be viewed as more stable than an individual and are more likely to use the lines more frequently. Our business line of credit program operates just like your personal Visa, MasterCard or American Express. The credit cards come in the corporate name and can be used for any business finance purpose. The first line of credit you will receive through our program will be a Platinum Visa credit card from Bank of America. This generally has a credit limit of $10,000 but may vary based on the credit score of the business owner. Other lines will follow from Chase, Discover, American Express, Wells Fargo and Business Credit Express from Bank of America. Unlike a regular bank loan, but just like your personal credit cards, you only pay on what you use. This gives your business access to capital when you need it. Separating Personal Credit From Unsecured Business Credit Card Debt Many start ups are financed with the personal funds of the small business owner. As a financial advisory for business services, we see business owners refinance their mortgages to get cash back or take cash advances on their Visa, MasterCard, American Express or Discover credit cards.By taking these actions, the business owner immediately affects his or her personal FICO credit score. Borrowing more money against the available personal credit limit reduces the ability to obtain more credit in the future. To obtain financing in this manner may appear to be an easy and obvious solution, but it may cost you more money in the long run. Banks and other lenders look at the percentage of money that you owe compared to available credit limit. This is called the debt service ratio. The higher the ratio, the higher the “risk” you are perceived to be. As a higher “risk” if you are granted a credit card, loan, or extended credit it could be at higher interest rates.Financing this way will eventually affect your ability to get corporate credit lines also. Therefore, it is important to totally separate your personal credit from your unsecured business credit card debt. We recommend to our clients not to refinance their mortgages, borrow against any of their credit cards, and not to liquidate their 401K’s. Instead we suggest leveraging the bank’s money by obtaining unsecured business lines of credit. We can arrange for unsecured lines of credit through Visa, MasterCard, American Express, Chase or Discover credit cards, all of which will be in the corporate name. As part of the process, the personal credit profile of the business owner will be used to obtain the corporate credit cards from lenders. As they are corporate cards, the business credit card debt will not appear on the personal credit report of the small business owner. If unsecured corporate lines of credit are offered by banks and lenders based on the personal credit report of the business owner, it is apparent that borrowing against real estate or cash advances on credit cards will hinder the entire process. Obtaining unsecured lines of credit in the corporate name separates personal credit from the business credit card debt. It also protects the personal assets of the business owner company meanwhile keeping the same financing options available, and in many cases improving them. Unsecured Loans For The Small Business Owner With Bad Credit Bad credit can be caused in many ways such as identity theft, too much credit card debt, unpaid student loans, late mortgage payments, or bankruptcy. Business credit cards are granted by banks and lenders based on risk. One of the ways they determine risk is with the FICO score. To a lender a lower FICO credit scores mean higher risk. You probably receive numerous credit card offers for Visa, MasterCard, American Express and Discover in the mail every week. For a small business owner that needs financing, these credit card offers can look very appealing. If you know you have bad credit and are tempted by these credit card offers, you are adding to the problem. Every time you submit a business credit card application the bank or lender runs a credit report. Every credit report inquiry lowers your FICO score. When the lenders see too many inquiries on your credit report they start denying credit.It appears to be a dead end situation with an existing small business or a start up that needs financing when the owner has bad or poor credit. Our unsecured lines of credit program offers a solution for this situation. Based on the bad credit situation of the business owner, banks and lenders will not extend credit. In this scenario, the owner should find a friend, relative, or business associate who has the credit profile required. Working With A Chief Financial Officer For Your Corporation. Small businesses would not normally have a Chief Financial Officer (CFO) for the company. On paper the CFO would probably be the business owner or the Chief Executive Officer or CEO. A CFO would be employed when the CEO has a poor or bad credit history and is unable obtain unsecured business lines of credit. The CFO’s strong credit profile is presented to the banks and lending institutions as application for business card cards in the name of the company. These credit cards will come from Visa, MasterCard, American Express, Discover and other lenders. As these are corporate lines of credit, they do not appear on the CFO’s personal credit history.The CFO can be a friend, relative, business associate or any trusted individual of the CEO. As it’s the CFO credit report that is used to obtain the unsecured lines of credit, they are issued in his or her name. In our program the first lines issued are a Bank of America Platinum Visa. The Platinum Visa and checks will arrive with the CFO and company name on them. At this point only the CFO is authorized to use them. This would be a good time for the CEO to separate personal credit from business credit card debt. Small business owners tend to use to personal assets to launch the start up. With the availability of the credit lines, the CEO can start transferring the company’s debt from the personal side into the corporation. This places the credit card debt where it belongs, in the corporation, and will probably improve the CEO’s personal credit score. How To Use Unsecured Lines Of Credit Now that your unsecured lines are in place, they are ready to be utilized. These are business lines and must be kept separate from personal credit. In other words, these lines should not be used for mortgage loan payments, personal debt consolidation, student loans, or anything of that nature. If you do use the credit lines for personal finances, it could jeopardize the personal protection that is offered by having corporate status. The object of our unsecured lines of credit program is to increase sales, not increase long-term debt, and to improve the overall corporate credit score. The lines of credit are offered through major banks and lending institutions and consist of Visa, MasterCard, American Express, Chase and Bank of America credit cards. They are revolving credit just like your personal credit cards. You only pay on the amount you use.Use these credit cards as you would use cash. As each line has a different interest rate depending on the lender, there is a little management needed to make sure you are getting the best use of your money. You should avoid using the credit cards to the degree where you can not afford the minimum monthly payment. Making at least the minimum payment every month in a timely manner is critical to improving your corporate credit score. Having corporate credit cards can be useful for the small business in numerous ways. One of the biggest benefits is having access to financing when you need it. With the knowledge that you have access to capital you can look for ways to increase the bottom line. Increasing the bottom line can be achieved by taking advantage of buying in bulk and getting a better price per unit, increasing the advertising budget, or being able to handle larger orders.If you had some business credit card debt before acquiring the lines, maybe some debt refinancing might be beneficial. Most small business owners have made personal loans to the company to get it off the ground. With the unsecured business lines of credit, you are in a position to re-pay the loan to yourself. This places the debt where it belongs, in the corporation, and can improve your personal credit score. The bottom line to managing your corporate credit is use the lines to your advantage, don’t get in over you head, and make at least the minimum payment on time every month. Zero Percent Interest Rate Credit Cards. When informed that some of our credit lines are offered at zero percent interest rate, many of our potential clients become suspicious. The common question is “how can banks make money with interest free loans?” If a major lender offers zero percent should we really question it? After all, we have all at some time, complained about high interest rates! Rest assured that a bank would not make an offer of this nature without making money. But how can they make money with interest free terms? To answer this you have to change your perspective and look at the banking industry’s bigger picture. Banks compete for your business and they each want to get their Visa or MasterCard into your wallet or purse and then have you using them. But that doesn’t answer the question of how banks make money with interest free credit cards. The credit card holder is only one side of the bank’s profit center. The other side is the merchant that accepts your card for a purchase. Banks that issue Visa or Master Cards make a small commission of every purchase that is paid with their credit card.Every time you charge an item or service the merchant receives payment from the issuing bank less a small processing fee. This fee varies depending on the merchant’s volume but is generally between 1% and 7%. By offering a zero percent interest rate on credit cards the banks get millions of extra cards into circulation. These cards are used for travel, entertainment, gas, and purchases of endless types of merchandise and the bank receives a little piece of the action on every transaction. Offering zero percent credit cards to corporations also makes good business sense for the banks. Corporations are more likely to make purchases for larger ticket items such as office equipment. They also probably issue cards to employees such as sales staff who will utilize them for business travel expenses. For banks to offer zero percent interest credit cards is not such a bad idea after all. Rather than be suspicious of the offer take advantage of it. You can even transfer balances from higher interest cards to the zero percent ones. Corporate Credit Cards Become A Business Way Of Life. When Julius Caesar defeated Pharnaces II of Pontus in the Battle of Zela his entire report back to the Roman senate was “Veni. Vidi. Vici,” translated means “I came. I saw. I conquered.” If Caesar were alive today, he could possibly have said: “Veni. Vidi. Visa,” or “I came. I saw. I charged it.” In addition to Visa, he would probably carry a MasterCard and an American Express, although a Discover card might be more appropriate based on his career. If he had any walls or roads to build he could have purchased all his supplies and made payment with his Home Depot or Lowe’s credit card.Personal credit cards are a way of life now. Ironically the word “credit” comes from the Latin word "creditus" that means "to trust." When a bank or lending institution evaluates your credit report and grants you a credit card they trust you to make payments.The credit card issued is unsecured, meaning you are not putting up any collateral for the loan. A secured loan is a home loan mortgage where the real estate is the collateral or an automobile where the vehicle acts as collateral.Business credit cards issued by banks or other financial institutions, are becoming the norm for financing business purchases. An increasing number of small businesses are using the major credit cards such as Visa and MasterCard for daily purchases. They are also utilizing in-house credit cards such as Staples credit cards to purchase office supplies, and the Dell card for computer equipment. These business credit cards are used in much the same manner as personal credit cards. Companies are finding that it is more convenient to use these cards and make one payment when the statement arrives. The business credit cards provide an unsecured line of credit and allows the option to finance high cost items over a longer period of time. Unlike a regular loan from a bank or lending institution where the payment is fixed, the company only has to make at least the minimum payment. As part of our financial services we arrange unsecured lines of credit for small businesses and start ups. One of the biggest features of our program is that the business owner is not liable for the business credit card debt therefore protecting personal assets. |