Hey guys Sean Mory here with another session of LenCred Credit Geeks Q&A. Joined once again by our Founder and CEO Tom Gazaway, as well as Dustin Weitzell one of our advisors. Today we have a great question that comes from Gregory out of New Hampshire. Tom, Greg asks, I have been reading a lot of online information and it seems that credit card financing is a good start up option when I do not want to pledge collateral for my business. He asks, can I get small business financing myself or should I hire an expert?
First time I have ever heard that right? (laughter) My point exactly. (More laughter)
No that is a great question that Greg asked. I mean you know nobody needs to hire anyone to get a credit card. We can all go online, we can all do a google search, we can all find plenty of credit cards. The short answer is no, you do not have to work with any type of expert, to do something you can do yourself.
HOWEVER, there are some things you are going to miss. We always joke about this right, Dustin, where you know over here at LenCred we have spent the last eight years focused on this startup financing space. Helping a lot of our clients with credit card financing so all day every day for eight years we have picked up a few things a long the way. So a couple of those things they might miss for example, would be are they going to find business credit cards or personal credit cards? Of course if they use personal credit cards then they are probably going to do some damage and probably do damage for an extended period of time to their personal credit. Therefore, let us do some business credit. Well how do you get the right business credit cards and how do you know which ones are going to report to business only and not report to your personal credit? Do you not think that is a little bit of a challenge or task if you have not been doing it.
I feel like we learn new stuff every week and we are always getting better. So to think that you can go in on day one and when you are starting a business and you have all these other distractions going on. That is one less thing that if you get in the right place with people that care and understand what they are doing, that can really help you get to the next level, and take that burden off of you.
There are a few different kind of answers to that question. Even though no one has to or cant do this on their own. You know there is a lot of credit cards that you are not going to find through a google search for example. So where are you going to find them at? We have them in our network and our database. Most people that have the experience will help you access the additional credit lines that you might not find through a traditional google search.
My number one issue with a lot of our clients, well it is really not an issue, they get Capital One Sparks which is a great business card BUT a lot of them do not know that their Capital One Sparks Business Card is sitting on their personal credit as well as their business. So they are building business credit but it is also going on their personal. What happens is that utilization then bring down their score which could potentially keep them from being able to borrow more money in the future. Again we say a lot in this business to clients, you do not know what you do not know.
You know a great credit card with a huge advertising budget, number one business credit card in america today.But again it does not report only to your business credit.
Which is fine as long as you know that. Use it for the things that you are going to pay off like gas, hotels, and things you but every month. You are building business and it is great for your personal as well and it could be your win-win as long as you UNDERSTAND that. You do not want it to be your stand alone business credit card normally.
Most people dont know when you say so that card for your business is your Capital One Sparks, and they are like how did you know that? Well it is on your personal credit report. Then they are like oh OK. (Disappointed that their “business credit card” is reporting on their personal credit)
There used to be a little more popular and has been in the last couple years, but there was the popular online strategy called apparama. Where small business owners just applied for as many credit cards as they could, with no order, or no strategic thinking behind it. Then they would just throw it against the wall and see what sticks and then they would land somewhere. Again is that you know the worst thing in the world? Well it might be better then nothing but you know when there is no strategy involved, where do you think your business would be in five year if there was no strategy? If you piled your family in a car and said lets figure out how to get to California, if you did not have a road map and you did not have a plan, Maybe you get there but it would be an interesting adventure. A bit more challenging then it need to be right? Possibly.
I think there are a lot great ways to go about getting financing on your own. If you are looking for large amounts of financing, then you might have a challenge doing that. We know a lot lenders who give much lower credit approvals when you apply online versus through a business banker or through one of their kind of internal channels.
A lot of those online applications are going for the instant approvals. So if they would approve you online for five thousand. They are probably saying ok safe is ten thousand we are going to go to five thousand for the instant approval. When you get to the right place with the right connections and relationships they may try to maximize that money and give you the full ten thousand. That is what we try to do as much as possible.
Who ever the expert is or who ever the company is you know I think our message Sean has always been, whatever you decide is best and credit card financing may not be best for everyone, hopefully we can bring some level of education that helps small business owners kind of go in eyes wide open. We encourage people, build those business and do what you have to do. We just caution in these last eight years of being in the trenches all day every day, we have seen some of the pitfalls that can be created. So if you do it on your own, just try and be as cautious as you can that you would not be kind of cavalier or half hazard. Try not to make some of the common mistakes that are normally made by business owners when they go get their own financing. It is not rocket science right? But it is an ever changing landscape that is different today then it was five years ago. It is even different today then it was a couple months ago and it is probably going to continue to change.
I had a husband and wife and we ran the wife through a business plan. We got her almost eighty thousand dollars($80,000). They were super excited. Then they got wise and opened another business and he went after the same types of lines we went after for the first business. He got fifteen thousand ($15,000) even though they had similar credit. Small business owners do not realize that because we do it quick, we work closely with the lenders, and we know what we are doing. That if you do not go in the right order, watch your inquires, and other factors really do matter. We learn stuff everyday and have been it for eight years. Those are the things that people take for granted, that we can work quickly and get the larger dollar amounts. Most of the time most small business owners have tried the SBA or been to their local bank and they are not getting that money. So if I say I can get you that money but it is going to be on a few different credit cards, we can probably get you the amount you need.
The last thing Sean you know this, is if someone is thinking about hiring somebody or working with an expert. Whoever that is, just make sure that you do not allow them to misrepresent you to a lender. So in the name of trying to get you a larger credit limit, you do not in any way want to allow someone to inflate your income levels or things like that which would be misrepresentation, even though it was not you doing the submission it is your name and your business that is ultimately going to be on the hook in the event that you know that ever is found out.
I think that more then answers that question guys. Thank you for your feedback. I hope that answers your question out there Greg. If you guys have more please send them to us, we love to answer everything that we can. As always go visit us at www.lencred.com and we would be happy to help out wherever we can. Thanks