All posts by Gary Stockton

    Why it is so important to separate business and personal credit When we look at small business owners like you in the U.S., we know that you are less delinquent on your accounts. You revolve a little bit more of those balances as you go forward, as you're trying to grow your business. And we know that you are more likely to pay your debt because it's tied to your livelihood. And if something is tied to your livelihood, you're more likely to honor it. Well, we want you to honor all your obligations on your consumer and commercial credit. And so to do that, it's better to separate out those two forms of credit. Your two profiles, your business, and your consumer, meaning just your personal credit. So when we look at this, think about it in this way. I have a small business, and with my small business, sometimes I need to buy equipment. But it as a small business owner. I may not have established my commercial credit. I don't have anything on a commercial credit card. I don't have an installment loan through my business. And I want to do it on my consumer credit card. So I go out and I buy this piece of equipment. I put it on my consumer credit card. What that does is add debt to my consumer credit. A lot of times that utilization will be a little bit higher. The debt will be higher. It's a piece of equipment. Generally, it's pretty big. That means my score will go down a little bit.  You may come into a life event. So we've had a third kid and my wife says, hey, we need a little bit bigger house. So to do that, we go shopping for a house. But what I have is this piece of equipment on my personal credit, bringing my score down a little bit. That's going to make the cost of my house a little bit higher. And I may not be able to afford the houses that I'd really like. So pulling that piece of equipment, going through a commercial credit facility, getting it on a commercial credit card or an installment loan through my business will bring that debt off of my personal credit and put it under my business, where it should be. That establishes my small business, allows that score on my small business to go up. It also takes a debt load off of my consumer credit, allows that to go up. And so it makes me have a better opportunity to buy a house at a cheaper price, also allows me to build my small business credit. And in doing that, I can gain access to cheaper funds for my business going forward and grow. You can check your Experian business credit score by purchasing a one-time copy of your credit report or by signing up for business credit monitoring, including unlimited access to scores. Read our post on checking your business credit score for more information. Related: What is a good business credit score? How do I check my business credit score? Adding tradelines to build credit for your business

Small business expert Chris Brogan on telling compelling stories for your small business and why storytelling is a vital component of your strategy.

Maintaining a good business credit score should be a priority for all businesses. It helps with securing credit cards, loans and leases, and can aid negotiations for favorable terms with vendors. It can also prevent business owners from having to put their personal assets or creditworthiness on the line by separating their business’s credit from their personal credit reports and scores. What constitutes a good business credit score? Each of the three major business credit reporting agencies uses its own scoring model. Moreover, every vendor and lender is likely to have its own criteria, so there’s really no universal standard for what’s good or bad. There are, however, some guidelines you can use for a general reference. What Is a Good Business Credit Score? To help get some context for your business credit score, you can start by looking at how business credit scoring ranges might correspond to levels of risk. The Federal Reserve’s 2022 Small Business Credit Survey provided a handy definition of risk levels using both personal and business credit scores: While fitting into one of these risk levels doesn’t necessarily translate into absolute success or failure in accessing funds, it can certainly help your odds. In the Fed survey, 62% of low-risk applicants for small-business funding received all of the money they requested, compared with 39% of medium-risk applicants and just 23% of high-risk borrowers. Experian’s Intelliscore PlusSM uses the following ranges to describe risk: How Do Business Credit Scores Work? Business credit scores are similar to personal credit scores in several regards. In both cases, financial institutions and other account owners report your account and payment information to credit reporting agencies. Agencies use this data to create credit reports, which in turn are used to calculate credit scores. A business’s credit score is an indicator of the level of risk it represents when it comes to missing payments or defaulting on debt. Where most modern general-use personal credit scores range from 300 to 850, business credit score ranges can vary. Experian business credit scores range from 1 to 100. An Experian business credit report typically contains identifying information; payment history; public records of judgments, liens or bankruptcies; inquiries; company background; and your business credit score. You can view a sample Experian business credit report to get a sense of how this information appears. As with personal credit scores, the precise formulas used to calculate your business credit score are proprietary. But the factors that contribute to the calculation are known: Number of trade experiences Outstanding balances Payment habits Credit utilization Trends over time Public record recency, frequency, and dollar amount Demographics such as years on file, SIC codes, and business size Where Can I Check My Business Credit Score? The best way to understand your business credit reports and scores is to see them for yourself. Here’s where to go to access your score and report: ● Experian: Visit Experian’s website to access your Experian business credit report or sign up for Business Credit Advantage credit monitoring. Credit monitoring can also help you stay on top of your business’s credit. Experian’s Business Credit Advantage provides access to your current business credit file, sends alerts when any changes occur, and even offers tips for improving your company's credit standing. How to Improve Your Business Credit Score Improving your business credit score generally involves two steps: establishing credit and building on your existing success. Here are a few tips to get you started: Establish your business as a corporation or LLC, so you have a dedicated business identity. If you’re a sole proprietor, apply for an employer identification number (EIN). Work with vendors that report to at least one of the three main business credit reporting agencies. Encourage vendors that don’t to do so. Open credit using your business identity only, even if you have other accounts that rely on your personal credit as a guarantee and even if you have to start small. Utilize your business credit and pay it off on time. Don’t overutilize business credit. At the same time, don’t overdo spending on any account. In the same way that maxing out your personal credit lines can negatively impact your credit score, carrying a balance that’s close to the limit on your business credit can be a drag. Keep credit utilization below 30%, and the lower, the better. Pay on time, every time. Pay early if you can. Separate your business and personal credit. Although securing credit for your business without a personal guarantee can be difficult, avoid personal guarantees on your business lines once you’ve established a strong payment history. Download our free Blueprint for Establishing and Building Business Credit. It contains step-by-step instructions and tips. Finding Room for Improvement Focusing on business credit is a worthwhile practice: Good credit is the key that unlocks funding for growth, resources in an emergency, low-interest rates and great supplier terms to promote efficiency and a host of other building blocks for financial resilience. Check up on your business credit and, if warranted, look for ways to improve your business credit score. To paraphrase an old cliché, you can never be too rich or too creditworthy in business. About the author Gayle Sato Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps. Gayle began her career as a staff writer for Entrepreneur magazine. As an independent publisher, she edited and produced a series of personal finance magazines for credit union members and THINK, an executive magazine for the credit union industry.

Here are twenty-one small business marketing secrets for absolutely any budget that will elevate your business above the competition.

A third of new businesses will close by their second year, according to the U.S. Small Business Administration. Running a business that beats the odds starts with ingenuity, grit, and guts.  So, what does it take to build a business that can withstand decades of economic upheaval in between the boons and successes to remain resilient? We thought this was an interesting question, so we did some research, examining businesses that have been on file with Experian for decades to see what traits they share. For G&G Electric Supply in New York City, four generations of perseverance and the ability to pivot are in their company’s DNA, beginning with founders Gabriel and George.  The Zildjian Company has roots dating back to 1623 Turkey, and then as immigrants landing on Ellis Island in 1929 on the eve of the Great Depression. As we’ve all experienced through this historic period of national economic uncertainty, changes can occur in business that force us to adapt and adjust quickly.  Market conditions shift, and even the best plans and roadmaps are forced to contend with entirely different circumstances. For small business owners, these conditions can be scary, and the volatile situation is a reminder that past profits and recent confidence are no guarantee for future success. There are companies today that are still standing, despite the shaky conditions that were brought upon by roller-coaster economics and dramatic world events. Inspired by reviewing the profiles for this article, we present some of the most interesting, resilient businesses and the attributes we think set them apart from others. Perseverance G&G Electric Supply Company, Inc. Founded: 1914, New York, NY Industry: Electrical equipment, wiring, installation In the early 20th Century, partners Gabriel and George thrived due to the swift modernization of homes and businesses. Everyone wanted electricity in their house, apartment, shop, or office. Weathering the storm of the Great Depression, they landed contracts for the now-iconic Empire State Building and Radio City Music Hall. The war years, personal losses, and shortages that followed offered their own challenges, but the company adjusted and added more clients by diversifying into software development. When one arm of the business was soft, they buffed up another to remain profitable, never giving up. Now in its fourth generation of family partners, G&G Electric Supply Company is still the major electrical distributor in Manhattan, with increased technical acumen and a robust offering of products and services. Specialization Dlubak Specialty Glass Corp. Founded: 1900, Blairsville, PA Industry: Weather-proof glass, security glass, decorative glass As manufacturers of glass, Dlubak Specialty Glass products cover a wide variety of needs, including aesthetics, privacy, safety, and more. At the core, they make one thing: glass. But their customers vary from commercial properties and government offices to prisons and military protection. Their expertise is built on specific knowledge to ensure that they provide the correct glass for their clients’ important needs. At a company whose projects have included the safety glass atop the Observation Deck of 30 Rockefeller Center in New York, to gunner protection for the U.S. Army, to bullet-proof glass for foreign embassies worldwide, one of Dlubak’s secrets to success is that they are renowned experts in their knowledge and true specialists at their craft. Reputation The Zildjian Company Established: 1623, Samatya, Turkey. In the USA: 1929, Quincy, MA Industry: Music cymbals, drumsticks, percussion mallets The story of Zildjian begins with its founder practicing alchemy in Constantinople, attempting to turn other metals into gold. Though that effort didn’t work, he discovered a metal compound that he crafted into a perfect cymbal. After centuries of success in their native Turkey, the family moved the business permanently to the USA in the 20th century, and their customers followed the music, so to speak. Music industry professionals from house bands and studio musicians, to world-famous celebrities, continue to seek out the Zildjian brand as the standard in the industry, at least partly because, after almost 400 years, they have earned something no one can put a price on — customer trust. Consistency The Russian Tea Room Established: 1927, New York, NY Industry: Fine dining, in-house catering, private events There’s an expression, “Good taste never goes out of style.” With its upscale interior design, A-list clientele, and adherence to customs like High Tea, The Russian Tea Room restaurant has remained popular due to its standards of excellence and its elegant old-world décor. Founded by members of the Russian Imperial Ballet, it has always been associated with the beauty and grace of high art. Rather than bending to trends and fads, it is steeped in the century-old European tradition. For a business dinner, elegant couples’ night out, or wedding reception, this reservations-only dining establishment has maintained its place in Manhattan society through impeccable quality and classic décor. By continuing to offer an unparalleled experience through its food menu and stocked bar, it remains an institution of luxury and glamour. Adaptability Booz Allen Hamilton Established: 1914, McLean, VA Industry: Commercial business consulting, cybersecurity and technology, defense and intelligence consulting Edwin G. Booz Surveys, as the company was originally known, started as a business that observed other businesses and then offered advice on how to make improvements. Mr. Booz used his background in psychology to focus on the people in business, rather than the products. He effectively invented modern management consulting as an operational business. Focusing on the people is still a major guiding principle of the company a century later. On the USA’s entry into World War II, they helped prepare the US Navy and expanded from commercial consulting into government consulting. Their chameleon-like ability to shift and change enabled Booz Allen Hamilton to continue to grow and increase their specialties including technology, cybersecurity, and more. One might argue that Mr. Booz’s own original psychology studies might have encouraged his company’s ability to always evolve to the needs of the market in order to discover new areas of opportunity. Resilience: in conclusion These brief profiles give a sense of some of the traits exhibited by these successful businesses over time, the ability to adapt and pivot, or provide exceptional customer experiences consistently, or respond to customer demand by offering highly specialized products and services. Above all,  be strong enough to endure times of economic uncertainty to emerge strong and resilient. We hope you find them as inspiring as we did.

Starting a small business can be very hard. Building strong credit for the business takes discipline and a certain amount of intention. In this post, we are going to start by describing two imaginary business owners working hard down on Main Street. Harry runs “Harry’s Hardware & Mercantile”, a busy hardware store.  He has been trading with local do-it-yourselfers and contractors since 1973.  Over the course of the business lifecycle, he established trade credit (Tradelines) with dozens of companies. Mildred just opened “Millie’s Fabric” next door to Harry’s on a shoestring after she got laid off from her job. She founded Millie’s by borrowing money from friends and family, charging most of her startup costs to her personal credit card. And that is where the paths of these two somewhat different businesses diverge.  Harry discovered the benefits of establishing tradelines with his suppliers in the early stages of his business and now runs a resilient profitable business.  Mildred is embarking on the difficult challenge of establishing her business and will need to manage her cash flow wisely. Like Harry, she will discover how beneficial tradelines will be to her success as she starts to form relationships with trading partners. What are tradelines and how can they benefit my business credit report? Tradelines or trade information comprises the financial payment obligations that a business has to its creditors, suppliers, and service providers that involve payment terms like Net 15, Net 30, 60 or 90. It means your business has that much time to pay back the balance of what you borrow. So, for example, if your business buys $300 worth of products at Net 30 terms, you have 30 days to pay it back. A business will start to add tradelines over the course of its lifecycle and establishing tradelines early in the life of the business can be very beneficial. Experian gets a lot of questions about how tradelines impact a business credit score, so in this post, we explain how that all works. Things to consider before applying for tradelines Establish a legal entity. In order for any business to establish trade terms with your company, take the steps to establish the business as a legal entity (ie; forming an LLC, or S Corporation), sole proprietors should make sure the business is registered with your Secretary of State. Establish separate bank accounts. Separate bank accounts will help keep finances separate and help your business track accounts payables. Business email and contact information. Your vendor will look for signs of credibility when assessing whether or not your business is legitimate. Having a business email address in the name of the company helps in that effort. Avoid using free email services like Yahoo or Gmail. Establishing a presence for your business on social media such as Facebook, Twitter, Instagram, LinkedIn or YouTube, depending where your customers spend time online. Bootstrapping a business in start-up is becoming more common, but the mistake that many business owners will make is leveraging their personal credit for company expenses.  Doing this can hurt the owner’s personal credit, and it will not help to build strong credit for the business. It is much more beneficial to establish the business and start applying for credit in the name of the company. Trade supplier types When your business orders raw materials for your business, or purchases office supplies, you would sign for the goods and receive an invoice, and be provided a period of weeks to pay the balance. If your vendor is reporting to Experian, your payment history good or bad will be reported and be a contributing factor in your business credit score. Experian classifies these tradelines as trade supplier types and groups them into the following categories. Financial loan, line, lease, credit card Supply raw materials, building supply, office Services accounting, marketing, financial services Utilities telecommunications, gas, water, electricity Transportation ground, air transport   If you are familiar with consumer credit reports, you should be familiar with financial trades, as they are on our consumer credit reports too.  These tradelines include loans, lines of credit, leases, and credit cards. Commercial credit reports also include trades from other supplier types as well.  Basically, any business that has a commercial accounts receivable portfolio can provide their information to Experian and can establish a tradeline for their business accounts. To contribute data to Experian,  you must be able to export into TXT, CSV or XLS (Excel - saved as comma delimited) and also adhere to encryption guidelines. Data contributors are also required to submit monthly updates.  If you are interested in becoming a business data contributor you can find more information about reporting to Experian here.   How tradelines are classified and updated The first time Experian gets a trade from a specific data supplier for business, that is considered a new trade. On the next update of that trade, it is reclassified as a regular trade. If there are no updates to a regular trade within 3 months, it becomes an aged trade. A trade falls off the business credit report without an update in 36 months. It doesn’t end there; however, if an update comes in for an existing trade, even for a trade that fell off the business credit report, it becomes a regular trade again. Tradeline credit attributes Experian provides information on the total balance outstanding, total credit and utilization, payment delinquencies as of today, and payment trends over time. With this type of grouping, it’s easy to quickly identify newly added trades, regularly updated trades, and trades that are becoming stale. The tradeline disparity between male-owned and woman-owned small businesses Experian studied 3.1 million small business credit profiles between 2016 and 2018 and found variances in the number of tradelines in male-owned businesses compared to woman-owned businesses as the chart below describes. When we look at trade count and the amount of commercial debt or outstanding balances, we saw a different picture between the two cohorts. On average woman business owners have less than 1 tradeline ( avg. .6 trades) vs male business owners, who average roughly 1.4 commercial tradelines. When you compare the average balances, male business owners carry about $40,000 in commercial credit while women business owners carry about $25,000, a $15,000 difference. This difference in the number of tradelines puts women-owned businesses at a competitive disadvantage. To be competitive small businesses should strongly consider establishing tradelines and making on-time payments to these lines. How can tradelines help small businesses gain access to capital? Tradelines can help your business develop the credibility that matters to banks and other capital lenders. A business credit report that includes multiple, positive lines of trade credit in your company’s name shows that your business pays its creditors in a timely manner. Commercial Lenders review this business credit history of tradelines to determine whether to fund a loan or capital, as well as the interest rates and repayment terms if capital is extended. Businesses with good trade credit often qualify for loans with lower interest rates and better payment terms than those with poor or limited trade credit history. For more information about establishing business tradelines check out our post Building Strong Tradelines For Your Small Business.  

Help is coming As America continues efforts to recover from the financial consequences related to the Covid-19 pandemic, some help is on the way for qualifying restaurants. Thanks to the Restaurant Revitalization Program, the U.S. Small Business Administration will be awarding funding to restaurants, bars, and similar food-and-drink-service businesses that meet eligibility requirements. This is a new initiative funded by the American Rescue Plan Act, which became law on March 11, 2021. Funds for business expenses The program will provide funds to cover revenue losses caused by the pandemic. The amounts awarded vary from $1,000 to $5,000,000 per location, to a maximum of $10,000,000 total per business. The funding is meant to provide “support the ongoing operations” of the business, according to the mandate from Congress. Funds may be used to cover many common business expenses, such as payroll (including wages and benefits costs), mortgage or rent, utility bills, construction, maintenance, supplier costs, and other operating expenses. Apply now Starting on Tuesday, May 3rd, eligible business owners can begin submitting applications. Applications will remain open only until allocated monies are expended to qualifying recipients. There is also a time limit on the use of funds granted to those businesses receiving money: March 11, 2023. So, interested businesses should begin their application process right away. Application requirements and information about necessary documentation can be found here: restaurants.sba.gov. More information on eligibility requirements and application documents are posted on the SBA website.

Some people might consider starting a business easy; the hard part is keeping the company open and profitable beyond the first two years. The odds of success are tough; a third of new businesses will close by the end of their second year. And 70% of these companies fade by year 10. According to the U.S. Census, 2020 business starts soared 27 percent to 4.4 million. COVID-19 closures and related layoffs were a likely catalyst. How many of these new businesses will succeed beyond their second year? It takes hard work, guts, and determination to grow a successful business, especially one that remains open for decades.The Small Business Administration studied business failure. In this post, we summarize ten leading reasons. Use them to keep your business on track. #10: Over-investment in fixed assets Up-front expenses are common for any business. However, over-investing early on can spell disaster. Evaluate the necessity of owning these assets. Perhaps you can lease or buy used equipment rather than buy new when you are just getting started. Avoid this problem by limiting start-up expenses, and maximize cash flow. #9: Personal use of business funds Some business owners will use their business to cover personal expenses, a big risk, and a potential accounting hazard. Many small business owners will use personal credit to bootstrap their operations. To bypass this mistake, keep your funding sources separate. To avoid legal liability, set up your business as an LLC, corporation, or partnership. #8: Poor inventory management For a young business, good inventory management is crucial. Tying up working capital in inventory can be risky. So, putting in place good inventory controls early on is just smart. Make conservative, experience-based projections of supply needs. Rather than draining capital and eroding profits, a business can set up a line of credit but must exercise proper control and accountability. #7: Unexpected growth As a business starts to flourish, it's tempting to invest everything back into it in order to grow. For the long-term, it's better to limit spending, especially on more significant expenses. Spending too much, too quickly exposes the business to increased risk, which can endanger working capital. #6: Unable to keep pace with competitors The free-market economy encourages competition. Competition can be good for consumers, but a new business must work hard to distinguish itself against larger, established competitors. Study them and look for areas of opportunity – the path to longevity is taking care of your customers. Find ways to deliver good value and good service. This will build good word of mouth and help set you apart. Business reviews are a great place to start building. #5: Location and visibility Visibility is a key component of success, so try to find a physical location close to where targeted customers work or live. Consider accessibility, parking, and the condition of the building. A business’s online presence is just as important – for both digital and brick and mortar businesses. Customers can’t buy from someone they can’t find, so a professional-looking website with pages designed to get found by search engines is a must. A strong presence on social media is equally important. #4: Lack of experience Good business leadership means having the experience to make the right decisions and anticipate the challenges in the initial stages of growth and beyond. Aside from the expected steps to build a business, leaders must adapt to handle the pressure and avoid costly mistakes. Before opening your business, know your products and services and research customer needs and the general market. #3: Poor credit arrangements A business must make customer payment and credit terms accessible, but it can hurt cash flow if your financing options are too flexible. Mobile payments such as Square, PayPal, Venmo, and Zelle may help provide easy payment solutions. Establishing clear credit terms for large accounts is best. Just as you assess the creditworthiness of your customers, your business is also being assessed by potential vendors. To be seen as good credit risk, keep tabs on your own business credit score. #2: Low sales Maintaining consistent sales levels is a significant success factor for any growing business. Low sales can result from keeping an underperforming sales force, having inferior products and services – or overpricing them, lacking a solid understanding of buying trends, or misreading the competition. Business owners need to be ready to make course corrections to increase sales and revenue. #1: Insufficient capital Having money on hand is an obvious necessity to run a business. Investors, government grants, and business loans are common ways to raise capital. Online lenders have stepped in to fill the gap left by major banks following the Great Recession. Getting a loan may not be difficult, but a new business lacking credit history may face less favorable terms. Even if showing a profit, small businesses must focus on maintaining positive cash flow and paying bills on time to build strong credit. Don’t allow poor credit to limit your potential When it comes to managing your business credit, think of Experian. Whether you need to monitor your own business credit report or evaluate others, Experian® SmartBusinessReportsSM has the ideal small-business reporting service for you. Experian’s business credit reports and subscriptions are the best value for the money, giving you the choice to monitor your business credit reputation or instantly evaluate business backgrounds and credit scores on your suppliers and customers.

For many of us, 2020 has been the hardest year of our lives. As a society we are all going through this together, we know the pandemic will eventually end, and we all look forward to better days. Since the pandemic started the small business community has suffered greatly. We hear many stories about business owners struggling to survive. About business owners having to lay off staff and close permanently. But we draw inspiration from many of the innovation stories making headlines, stories about businesses who made a pivot to join the fight, and support healthcare professionals on the frontlines of the virus by converting factories to make PPE. We hear how small businesses navigated applying for the first round of PPP loans, and hope meaningful relief for small business comes soon.  We draw inspiration from small business progress, and we stand strong with the people who went after their dreams. The pandemic will end, but dreams will not. It’s been said so many times that small businesses are the engine of our economy, and they truly are. Our commitment to helping small businesses with their financial health will continue to be unwavering.   Supporting small businesses, helping them to create a better tomorrow   Find out more about how Experian is supporting small businesses. https://www.experian.com/small-business/mybusinessfuture #smallbusiness #mybusinessfuture #businesscredit