Understanding Why Too Many Credit Inquiries Can Hurt Your Credit Score

Many of our applicants are surprised when they realize that applying for credit from multiple lenders (such as department stores or auto dealerships) has negatively impacted their credit, and temporarily prevented them from qualifying for the business loans or lines of credit they need to fund their business.

They become frustrated that even though their overall credit may be good, multiple credit inquiries can have such a negative impact on their credit scores as well as their ability to access business funding. I hope the information below address some of these concerns.

What is a Credit Inquiry? Whenever you apply for credit from any lender, retailer, auto dealership, mortgage lender, etc., you are authorizing the lender to ask (or inquire) for a copy of your credit report from one or all of the credit bureaus. Later, you may notice these credit inquiries listed on your credit report. There may also be businesses or lenders listed on your credit report that you do not know or did not directly give permission to receive a copy of your credit report. However, the only credit inquiries that count toward your Fair Isaac Corporation (FICO) scores are the ones that result from your applications for new credit.

Are There Different Types of Credit Inquiries? Yes, there are two types of credit inquiries: hard and soft inquiries. A hard credit inquiry is when you are applying for new credit. A soft inquiry is when a lender pulls your FICO Score for marketing or other purposes, such as when a landlord or potential employer might pull your credit. Fortunately, soft credit inquiries have no impact on your FICO Score. Hard inquiries, on the other hand, only hurt your score if there are several in a short amount of time.

Why Does It Matter How Many Credit Inquiries I Have? To lenders, if you have applied for or opened several credit accounts in a short period of time, you may represent a greater credit risk and the lender may be less likely to extend you a loan or line of credit. They may assume that you will be unable to repay these credit accounts and will eventually default, or that you have some type of financial hardship, such as health problems or a job loss that will make it more difficult to repay the loan.

Will Only One Credit Inquiry Affect My Credit Score? The effect of applying for credit varies based on an applicant’s individual credit history. Typically, for most applicants, one credit inquiry will take less than five points off the applicant’s FICO score. Credit inquiries can have a greater impact if the applicant is a young person with a shorter credit history, or if the applicant simply does not have a lot of credit experience. Large numbers of credit inquiries, however, means greater risk for the lender. Some studies have shown that people with six or more credit inquiries on their credit reports are more likely to declare personal bankruptcy than people with no inquiries.

What is Rate-Shopping? InvestorWords defines rate-shopping as “The act of reviewing interest rates from various lenders and on various loan or credit products. Rate shopping allows a consumer to understand the costs of available products and the differences between lenders.” If rate-shopping is done within a short period of time, such as two weeks, it should have little impact on a person’s credit score.

What Can I Do to Limit the Impact of Credit Inquiries on My Credit Report? If you need a loan or line of credit, make sure you do your rate-shopping within a short period of time. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. Also, do not give permission for a lender to obtain a copy of your credit report if you are not yet ready to make a purchase.

Credit inquiries are only a small measure of your overall creditworthiness, but still very important.  People with high FICO Scores regularly pay their bills on time, keep their credit utilization (debt-to-credit ratio) low on credit cards and other revolving credit lines and apply for (and open) new credit accounts only when needed.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Decatur, Georgia. You can reach La Mancha at 770-249-2357.

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4 Misconceptions about Small Business Financing

How much do you really know about small business financing? Businesses that have been around for years as well as start-ups have several misconceptions when it comes to obtaining business capital.

The reasons for these misconceptions vary, but many business owners think traditional banks are not doing a good enough job of explaining their financing options, the requirements necessary to qualify for different types of business financing, how business credit is calculated and how lenders use business credit to deny or approve loan applications.

Four of the biggest misconceptions that we frequently hear from prospective clients are:

1. The Small Business Administration (SBA) is a Direct Lender.

The SBA does not make loans directly to small business owners. They do, however, make guaranteed loans through a variety of sources including banks and credit unions. The SBA guarantees a portion of the loan to reduce the risk to lenders, making lenders more likely to lend to smaller companies.

2. If my application is declined by traditional banks, I have no other options.

Banks are only one financing source available to small business owners. Other lending sources include alternative financing methods such as invoice factoring, credit unions or crowdfunding. The best option for you will depend on a range of factors, including how much financing you need, the length of time you have been in business, your business credit history and how quickly the financing is needed.

3. If I have no business credit or my business credit is not good, I can’t get business financing.

While traditional banks have increasingly made it more challenging for small business owners to obtain financing, a variety of alternative lenders (like Triton) are making it possible for small businesses to find the capital they need. Your business credit score is still important and you may have to pay a higher interest rate if your credit is not the best, but alternative lenders provide many options for you and your business.

4. Alternative lenders are too expensive.

In some cases alternative lenders can be more expensive than traditional bank lenders, but as demand for alternative financing has increased, prices have become much more competitive with traditional banks. Another advantage to working with alternative lenders is that the approval process is much faster than traditional banks. After speaking with an alternative lender, you will most likely be surprised at the affordable options that are available.

Whether you need financing today or you are planning for the future, now is the time to learn more about small business financing. I would love to hear from you, so please leave your comments below. Or you can contact me directly at lsims@tritonfinance.com or call 770-249-2357 with any financing questions you may have.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Decatur, Georgia. You can reach La Mancha at 770-249-2357.

Posted in Alternative Lenders, Alternative Lending, Business, Business Credit, Business Financing, Business Ideas, Business Lines of Credit, Business Loans, Business Management, Business News, Business Owners, Business Startups, Business Tips, Credit, Crowdfunding, Crowdsourcing, Economics, Entrepreneurs, Entrepreneurship, Finance, Small Business, Small Business News, Small Business Owners, Small Business Tips, Start-ups, Startups, Success, Tips for Entrepreneurs, Tips for Startups | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 6 Comments

Finding Some Luck In The Factoring Business

We think you will find the information in this blog post very useful.

Originally published March 23, 2015 by Don D’Ambrosio in Factoring Investor.

How many times have you read about a new startup and kicked yourself because you had the same idea? I remember when I was in college there really weren’t any big name coffee shops on every corner but there sure were a lot of students hanging out at the cafeteria sipping on coffee while studying. Fast forward a few years later and the idea of Starbucks seems like such a no brainer.

When we started our factoring company a few years ago the concept of financing accounts receivable was anything but new. There were many competitors with vast amounts of experience in the asset based lending arena. Prior to jumping into the ring we had diligently written our business plan, thoroughly studied our niche and built a marketing plan with the precision of a skilled surgeon.

Taking all of this into account do you know how many clients we funded in our first four months?

One.

That’s right, we funded one deal and it wasn’t even in our target market. Within six months we funded a few more but they were nothing to write home about.

Then it was gut check time.

The reality is that most startups don’t make it past the first year. You reach a point where you weigh your options and decide if it is better to cut your losses and close the doors or to pivot and reevaluate your strategy. Most people would say the choice is easy by merely changing your strategy and moving on to the next phase. However, when your capital is draining and the phones aren’t ringing the choice isn’t as easy as it sounds.

After some closed door meetings we decided to double down on our company. We totally revamped our marketing plan and infused more working capital into the company. Our bets paid off. It didn’t happen overnight but as we funded more deals momentum kicked in and the rest is history. That’s not to say we sit back and count our blessings. We know our competitors are out there and it’s a challenge bringing in new clients.

So often we get caught up on waiting for our big break to happen or playing the lottery every week with the hope of hitting the big jackpot. Heck, when the last super jackpot was up to 500 million I’m not embarrassed to admit I went and bought a ticket. The point is there will always be the guy or gal that happens to be in the right place at the right time and hits it big. Instead of being jealous of my successful colleagues’ good fortune and writing it off as dumb luck, I think more of the hurdles they had to overcome to reach their goals.

Thomas Jefferson once wrote, “I am a great believer in luck, and I find the harder I work, the more I have of it”. Truer words could not be spoken but I’m still heading to Vegas next month.

Don D’Ambrosio is the president of Oxygen Funding, Inc., an invoice factoring company located in Lake Forest, California.

For more information, he can be reached at don.dambrosio@oxygenfunding.com or you can visit his company’s website at www.oxygenfunding.com.

Posted in Alternative Lenders, Alternative Lending, Business, Business Financing, Business Lines of Credit, Business Loans, Business News, Business Owners, Business Tips, Economics, Entrepreneurs, Entrepreneurship, Factoring, Finance, Invoice Factoring, Small Business, Small Business News, Small Business Owners, Small Business Tips, Success, Tips for Entrepreneurs | Tagged , , , , , , , , , , , , , , , , , , , | Leave a comment

4 Tax Deductions for Small Business Owners

It is nearing that time of year when small business owners are gathering the paperwork necessary to prepare this year’s taxes. However, don’t overlook these tax deductions for 2015:

  1.  Entertainment

One of the most common business expenses is entertainment. Having a breakfast or lunch meeting with a client or prospect at a restaurant , or just getting together for coffee is tax deductible as long as it is a genuine business meeting. You should keep a record of the meeting, including the client’s name and what was discussed as well as the receipt from the restaurant.  Only 50% of the bill is tax deductible, however.

  1.  Email Marketing

How many social media posts do you read each day versus your emails? If you are like most people, you read a few social media posts every day, but you read all of your non-spam email. Therefore focusing on email marketing makes sense. There are several companies that can provide you with paid email campaigns to send communications to your prospective client list. And although you will have to pay a fee for this service, you can deduct all of it.

  1.  Networking

One of the most effective marketing activities for small businesses is networking, in person and online. Networking allows you to build relationships that eventually will lead to referrals of new clients. Networking activities are tax deductible, including membership fees to such organizations as your local chamber of commerce or service organization.

  1.  Sponsorship Marketing

Your business may not yet have enough income to advertise in print or television media, which can be very expensive. But there are other ways to keep your business before the public. Sponsoring the local football team or participating in a local charity event are examples of strategies that can promote your business to attract new clients. Your efforts are deductible as advertising costs. To be seen supporting the community and contributing to its economic development is extremely powerful and creates enormous goodwill.

Conclusion

Taking advantage of these tax deductions can go a long way to helping small business owners lower their overall tax bill.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Decatur, Georgia. You can reach La Mancha at 770-249-2357.

 

Posted in Business, Business News, Business Owners, Business Startups, Business Taxes, Business Tips, Entrepreneurs, Entrepreneurship, Small Business, Small Business News, Small Business Owners, Small Business Taxes, Small Business Tips, Start-ups, Startups, Tax Tips, Taxes, Tips for Entrepreneurs, Tips for Startups | Tagged , , , , , , , , , , , , , , , , , | 10 Comments

Funding Options for Veteran-Owned Businesses

Veteran Owned BusinessAs Veteran’s Day draws near, I thought it would be a great time to direct attention to the number of veteran-owned businesses operating in the United States.  Some estimates show over 2.45 million small businesses in the United States are owned by veterans, representing over 9% of all U.S. businesses. Most of these businesses specialize in technology, consulting or construction and require less start-up capital than a typical small business. Fortunately, the process of obtaining veteran funding is becoming much easier.

Where Do I Start?

If you are a veteran or you know a veteran who is seeking a business loan, a great place to start is with the Office of Veterans Business Development (OVBD), an offshoot of the US Small Business Administration (SBA). The OVBD offers a wide variety of programs designed to assist veterans – counseling, training, and business support are all within the OVBD scope of services. The organization actually maintains dozens of localized resource centers around the country so veterans can receive one-on-one, in-person business assistance when they are ready to start a business.

What Funding Options Are Available for Veterans?

Funding for veteran-owned businesses is becoming easier to procure. If you are a veteran or service-disabled veteran, the SBA has resources to help you start and grow your small business. From creating a business plan to finding your first customer, the SBA has solutions to help you succeed.

One popular resource the SBA offers for veterans is the Patriot Express Loan Program. Under this program, eligible veterans who apply to receive a small business loan can receive approval in as little as ten days. This type of funding is ideal to cover start-up costs, growth and expansion as well as inventory expenses.

There are several options available to veterans who are trying to obtain financial assistance when starting a veteran owned business. Traditional banks offer small business loans to veterans, but it is often more difficult to get approval. However, alternative lenders such as Triton Financial Solutions offer veteran loans from a few thousand to hundreds of thousands of dollars at surprisingly low rates and are a great choice in cases where a veteran may have been turned down by a traditional bank.

Who Should I Talk To?

If you are looking for more information on how to start your veteran-owned business, contact your local chapter of the Office of Veterans Business Development. Once you receive business counseling and work with an advisor to create a business plan, you can call Triton at 770-249-2357 to find out more about small business funding for veterans.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Atlanta, Georgia. You can reach La Mancha at 770-249-2357.

Posted in Alternative Lenders, Alternative Lending, Business, Business Financing, Business Ideas, Business Lines of Credit, Business Loans, Business News, Business Owners, Business Startups, Business Tips, Entrepreneurs, Entrepreneurship, Finance, Small Business, Small Business Owners, Small Business Tips, Start-ups, Startups, Success, Veterans | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments

When Is The Best Time to Start a Business?

It may be surprising, but it can be easier to start a business in a slow economy. You might have less competition because other would-be entrepreneurs are often more reluctant to risk launching a new business, and existing business owners commonly cut back on costs (especially marketing), limiting the number of new customers they can attract. Of special note is that consumers do not completely stop spending during economic downturns; most simply look for better deals and the companies that can provide those better deals are stronger once the economy improves.  Consumer loyalty to those companies frequently remains strong even after the economy recovers and spending increases again.

Below are some notable examples of successful businesses that were started during economic downturns in U.S. history:

  • FedEx Corporation began operations on April 17, 1973 as Federal Express, and today manages daily shipments worldwide.
  • GE (General Electric Company) was established in the mid-1870s by Thomas Edison.  In the middle of the Panic of 1873, Edison created one of the best-known inventions of all time, the incandescent light bulb.
  • HP (Hewlett-Packard) was inauspiciously born in a Palo Alto, CA, garage at the end of the Great Depression, and now operates in nearly every country in the world.
  • Hyatt Corporation opened its first hotel’s doors at the Los Angeles International Airport on September 27, 1957 during the recession of 1958.  The chain rose to worldwide fame in the following decades and now operates more than 365 hotels in 25 countries.
  • Microsoft Corporation wasn’t always the company it is today.  In 1975, when it was started by Bill Gates and Paul Allen, Microsoft was just a little company in Albuquerque, NM.  Currently, the company is estimated to earn more than $60 billion in revenue per year.
  • CNN might be a news giant now, but in recession-plagued 1980, it was a little-known station called The Cable News Network founded by Ted Turner.  It revolutionized how people received information when it premiered as the first 24-hour all-news channel.  Today, 1.5 billion people around the globe watch CNN.
  • MTV Networks brought something new and different to the music scene when it debuted in the economic slump of 1981 and is now a global brand with dozens of television shows.
  • Burger King Corporation is another recession startup.  The company began in 1954in Miami, FL.  During another recession in 1957, the company introduced its successful signature burger:  the Whopper.  The company currently operates more than 11,000 locations in over 60 countries.
  • The IHOP Corporation chain opened its doors July 1958 in Toluca, CA. The fast growing company, which began franchising just three years later, today has more than 1,300 locations across the U.S.

Recessions, however, are not only advantageous to startups.  Existing companies can make incredible gains in years when the economy is down.  Some of the most recent success stories include Google and PayPal.  From 2000 to 2001 each of these companies thrived, leading PayPal to go public in 2002 and Google in 2004.

If your dream is to start your own business, give us a call.  Not only do we provide financial solutions for our clients (including startups) we also offer business consulting services, ensuring that our clients have long-term success.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Atlanta, Georgia. You can reach La Mancha at 770-249-2357.

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3 Essentials for Operating Your Business

TritonOver the years, I have had several discussions with clients and other business owners about the challenges of operating and sustaining a successful business. These discussions are a reminder that small business owners should return to the fundamentals of running a business and not allow poor decision making to affect their long-term success. For instance, many business owners decide to save money by cutting back on marketing, customer service and accounting. This decision can have long-term consequences and affect the future success of the business. Below are three essentials for operating almost any type of business:

1. Marketing: When money is tight, many business owners decrease their marketing budgets. However, this is when you should be increasing your marketing efforts so that you can attract more customers as well as promote your products and services in different and more creative ways. Your competitors are likely reducing the amount they are spending on marketing in order to save money, so now is the opportunity for you to entice their potential customers to your product or service. Be creative, be constant, be aggressive and be smart. Marketing is more important now than ever.

If you are attracting fewer customers than normal, expand your market to other industries or a larger geographical area. Perhaps you have been heavily marketing to prospects in only one or two industries, but try to find out if there are other industries that could also benefit from your product or service. You can easily expand to a larger market area by using internet marketing.

2. Customer Service: Don’t forget these customer service basics: always be polite, professional and helpful to potential customers, return calls to existing customers as soon as possible and do everything possible to ensure each customer contact ends on a positive note. Most importantly, make sure your product or service delivers on its promise; if for some reason the product or service cannot produce the expected results, let the customer know immediately and offer a satisfactory solution.

Being friendly and helpful to potential customers should be clearly understood by any business owner, but I am often amazed at how rude or disinterested some receptionists and salespeople are when I call a business or when shopping in a store. Believe me, almost nothing makes a potential customer more disinclined to purchase your product or service than poor customer service.

3. Accounting: Many small business owners overlook hiring an accounting professional and try to do everything themselves. Not only can this become overwhelming as your business grows, but you could also get into trouble with the IRS and your state and local taxing agencies. Tax laws, especially for small businesses, can be a quagmire difficult to sift through even for the most educated; don’t skimp on hiring a Certified Public Accountant (CPA), tax attorney or bookkeeper. Typically, CPAs and tax attorneys must remain current on all new tax laws in order to ensure license renewal, and bookkeepers know the basics of accounting and will keep your books in order. The CPA or bookkeeper can track your business transactions daily, weekly, monthly and quarterly to generate comprehensive financial reports. You can then use this information to focus on your most profitable products or services and eliminate anything that does not make a profit.

I know that reducing your marketing and accounting budgets may save money in the short-term, but in the long run you will be much worse off. Keeping the doors of your business open is vital and anything that accomplishes this should never be eliminated.

La Mancha Sims is the Founding Partner and CEO of Triton Financial Solutions, a business funding consulting firm located in Atlanta, Georgia. You can reach La Mancha at 770-249-2357.

Posted in Business, Business Management, Business News, Business Owners, Business Startups, Business Tips, Customer Service, Entrepreneurs, Entrepreneurship, Marketing, Small Business, Small Business News, Small Business Owners, Small Business Tips, Start-ups, Startups, Success | Tagged , , , , , , , , , , , , , , , , , , , , | 4 Comments