More than half of all small business used some kind of business credit last year as working capital. Find out how you can manage exposure. Get solutions for your cash flow needs from Christine Janklow, president, SettleSource, Inc. and David Gass. president, Earn.com. Learn more at http://bit.ly/aHxjc0 .
- 1. Business Credit Bottom Line Profits and Beyond Wednesday,
Feb. 24, 2010, 2 p.m. ET Brought to you by:The National Restaurant
AssociationChristine Janklow, President - SettleSource.comDavid
Gass President, Earn.com
2. DisclaimerAs part of the Association's continuing effort to
educate and inform webinar participants, NRA members and the
public, the Association has arranged these webinar sessions.
Speakers and webinar Presenters are solely responsible for the
content and accuracy of any materials they present; that the same
contain no libelous or unlawful matter; and that they either own or
have the right to use/distribute any materials presented at the
Association webinar. Speakers and Presenters are also solely
responsible for any statements and remarks they make and present.
The Association does not give any opinion on or assume any
responsibility for the content of any Speaker or Presenter's
remarks, content or materials. 3. Introduction Todays credit crunch
has reduced the options for acquiring business capital and
increased the need to lessen personal risk of borrowing.Now more
than ever becoming attuned to your businesses financial credit and
creditworthiness may dictate whether you will be able to survive
and grow.In this series we are going to educate you about business
credit, how to establish and manage it.The credit crunch may be
here to stay but we believe becoming more savvy about choices may
provide long term well being for your business.Source:
www.settlesource.com 4. Todays Business CreditWe will take you
through some steps necessary to build a business credit profile
separate from your personal credit report.This will
enable:Entrepreneurs to separate their personal and business
life.Business access in the event it will rely on some type of
credit.Lowering the risk of using your personal credit for
guarantees.Source: www.settlesource.com 5. What is Business
Credit?Credit scores are an index or rating system created by
credit reporting bureaus to allow creditors to evaluate risks in
lending to consumers and businesses.A credit score enables one to
borrow on credit to extend payment beyond the delivery date of
goods, services or money. Source: Dun & Bradstreet 6. Small
Business FinancingType PercentageCredit Cards59% According to the
National Small Earnings of Business51% Business Administration
2009Bank Loan 45% Small Business Credit CardVendor Credit
30%Survey; This table describesPrivate Loan (Friends or
Family)19%the most common methods ofUsed no financing 19%financing
used (within the last Leasing 7%12 months) to meet capitalSmall
Business Administration 5% (SBA) loan needs among its
respondents.Factoring (Pledging Accounts1% Receivable) Private
Placement of Debt 1%Private Placement of Stock1%Public Issuance of
stock 0.5% Source: NSBA 2009 Small Business Credit Card Survey 7.
Capital Trends for HospitalityLending is still frozen for manySeek
debt-to-equity dealsDon't forget about angel investors or stealth
capital.Join a purchasing co-operative. Source: Sarah Lockyer,
Finance Editor Nations Restaurant News 8. Changes In Credit These
are the most commonchanges experienced bybusiness card holders
asmade by their credit cardcompanies since 2008These changes can
wreak havoc for business card holders and prompt the need for
changes that will enable continued borrowing and
affordability.Source: NSBA 2009 Small Business Credit Card Survey
9. Debt Management Part of managing credit (debt) and using it
wisely, is knowing the difference between good debt and bad debt.
Good Debt Credit or loans that are installment types utilized for
property that has value/equity and will when paid end in ownership
of assets. Bad Debt Revolving type debt such as credit cards and
loans that are unsecured but come at a high price to the borrower.
No assets after repayment. Source: www.settlesource.com 10.
Personal liabilities and business credit If you run your own
business it is likely that at one time or another, you have
borrowed money in your own name to support cash flow.For:
Established Business Entities; Corporations, LLCs , LLPs and Sole
PsQ: Who is liable for debt if the business fails? A: If a company
borrows money from its bank in the company's name thencompany is
liable for the repayment of the debt.Q: What if I gave a Personal
Guarantee? A: If you have personally guaranteed a credit facility
in a business' name, the lenderwill hold you personally responsible
for payment.Q: What if I took debt in my name but put the money
into the business? A: If you have taken debt in your own name and
the business can no longer affordto pay, then you will be held
responsible for payment. Source: www.settlesource.com 11. Why build
business credit? Small BusinessWith Business Without Business
Example 10 Yr With Good Average or no Owner Mr. Jones CreditCredit
TermBusiness Credit credit Total Accounts1225 Loan amount
$100,000$100,000Available Revolving 75% 5% Term of repayment 10
Years10 Years Credit Balance on Cards$15,000 $135,000 Interest Rate
7.5%10.5% Inquires made last5 15 Payment $1,187.02 $1,349.35 12
months Late Payments 0 3Total Interest Paid $42,441.99$61,921.99
Personal Credit 765 650 Score Having business credit savedMr. Jones
$19,480! Having business credit increasedMr. Jones score by 115
points! Source: D.Gass www.bcscredit.com 12. Some tips to get
business credit with no personal guarantee The key to getting
business credit with no personal guarantee is to first establish
good business credit scores with all three business credit
reporting agencies.1. You must be an established business entity
with separate Tax ID # 2. Get the proper business licenses and keep
them current 3. Make sure you are listed in local telephone
business directories 4. Apply for credit with vendor suppliers and
banks that will give you creditwithout using your personal credit
score as the basis 5. Make sure those lenders report your business
payments to credit bureausOR Enlist the help of reputable business
credit building agencies who canpackage and manage the process on
your behalf. 13. Financing DebtEquityCombinationInvestorPrivate
LenderBankVendor Credit Source: D.Gass www.Earn.com 14. What is
Trade Credit? Trade Credit Is also known as Business Credit or
Corporate CreditTrade Credit is the single largest source of
lending in theentire world, even more then banks loan to
businessesIt is FREE MONEY Source: D.Gass www.Earn.com 15. Mystery
of Business Credit Why is Business Credit so Widely Used, - So
Widely Misunderstood - So Hard to Achieve LONG TERM?#1 - No Laws
Protecting the Business Rights from inaccurateinformation on the
credit report#2 - The Other Factor (Compliance): Can end up in high
risk statuswithout it#3 Too many Credit shops jumping in the game
to offer it because oflack of regulations of the industry. Source:
D.Gass www.Earn.com 16. How Not to Build Business Credit Dont buy
good credit Dont only rely on personal credit alone Dont start
without being in compliance Source: D.Gass www.Earn.com 17.
Personal vs. Business CreditPersonal Credit Profile Business Credit
ProfileFICO/Beacon Paydex/IntelliscoreScores from 350-850 Scores
from 0-100Credit score determines Credit score determines
loan/lease approvals loan/lease approval interest rates interest
rates insurance rates Credibility of yourThree major credit
business bureaus Five major credit bureausTracked by S.S.N. Tracked
by Company Source: D.Gass www.Earn.com 18. Getting Started Source:
D.Gass www.Earn.com 19. Steps to Build Business CreditFROM THISTO
THIS No Business Credit Available Biz Credit Lines The Business
Credit Burdened/Poor Personal Credit Limited Personal Guarantees
Bridge Not Able To Pay Yourself Strengthened Cash Flow Every $ In
Goes OUT Again Qualified For More Credit Personal Assets On The
Line Personal Liability Reduced Loans Declined Sleeping Easier NEED
$ $s Remaining In Pocket Source: D.Gass www.Earn.com 20. Four Tiers
of Business Financing Source: D.Gass www.Earn.com 21. Managing
Credit and Debt1. Assess Your Need for Business Debt2. Line Up The
Credit You Need3. Cut Business Expenses4. Drive Up Topline
Revenues5. Negotiate Your Debt Down or Change the Payment Terms6.
Don't Go It Alone! 22. Small Business and
DebtDebtDistressedorReasonsforSmallBusinessClosures
UnderperformingBusiness DebtStatistics *20% estimated by Federal
Reserve statistics for total credit card debt 2009 **Small Business
Administration 2006 Closure stats Source: BusinessWeek-Data Buccino
& Associates Independent study US Bankruptcy Statistics (+
increases from 2008) 23. Debt: How much is too much for my
business? Any debt can be too much for a business not generating
multiple times the principal and interest payments in added net
profits attributable to the use of borrowed funds.This table
illustrates acceptable levels of debt to capital for selected
industries. Source: Standard & Poors 24. Dealing with Unsecured
Credit Cards Over 59% of small businesses utilize credit cards for
daily purchases. Of those, 16% carry balances over $25,000 in
credit card debt21% with balances between $10,000 and $25,000 More
than 60% carry balances month to monthTo minimize the risk: Know
your liabilities Evaluate your payment structure Communicate with
your creditorsSee what can be done to lower interest rates See if
there are any balance liquidation programs available If you are
late on a loan or line of credit ask if there are any forbearance
options to defer payments Source: NSBA 2009 Small Business Credit
Card Survey 25. Options if debt is overextended If your business is
overextended - what options do you have?1. Continue to pay as
agreed2. Transfer debt or Consolidate if you still can3. Have the
debt negotiated4. File for bankruptcy protectionSource:
www.settlesource.com 26. Commercial Debt Settlement VS. Debt
Servicing*A one year cost/savings comparison based on $120,000
Business Credit Card debt owed.Monthly AnnualCash Flow
AnnualInterest DebtPayments
CostsPrincipalAccruedRemainingreducedRegular Debt
$3,600*$43,200-$33,660 $9,540$22,092
$112,552ServiceCommercial$2,160 $25,920 +$17,280
$40,000$16,640$96,640Debt Settlement Making only minimum required
payments*After 1 year of Debt Servicing business now owes
$112,552After 1 year of Commercial Debt Settlement business now
owes $96,640Source: SettleSource.com Costs and estimates are based
on average client debt loads and minimum monthly deposit
requirements. Case references unsecured and interest bearing bank
debts averaging annual decreases/increases at APR of approximately
20%+-. Savings and costs are based on a 50% savings. Results,
actual savings and timeframes may vary.> NOT A GUARANTEE OR
ENDORSEMENT. Not available in all states. 27. Tips and Tactics to
Remember Know what you owe; List all debts, even those you deem
minor or flexible. Keep cash flowing, borrowing too heavily will
drain cash reserves. Keep expenditures at a minimum until
everything's paid off. Limit your exposure: Avoid signing personal
guarantees on business debt; it can ruin your personal credit
history.Source: www.settlesource.com 28. Contact us If you have
additional questions or wish to learn more about how we can help
you construct a plan to help your business please contact:For help
with Commercial Debt Settlement: Christine Janklow, President
SettleSource P: 888.676.5606 x 101 Email [email protected]
www.settlesource.comFor help with Business Credit Development and
Corporate Compliance: David Gass, President & CEO of Business
Credit Services, Inc. P: 866-254-6076 Email: [email protected]
www.bcscredit.com and www.earn.com 29. Question & AnswerPlease
type your questions in the Q&A area in the lower right corner
30. Thank you for your continued support ofthe National Restaurant
Association.View this and other recorded webinars on the web at
www.restaurant.org/webinars
