Webinar – Money Doesn’t Grow on Trees, But Getting a Business Loan is Easier Than You Think!


Welcome everyone to our webinar today “Money Doesn’t Grow on Trees, But Getting a Business Loan is Easier Than You Think!”. We’ve got a great panel here today to bring you information that you need in order to apply for a loan and most importantly secure a loan successfully. Today, you’re going to be hearing from Dawn Fotopulos. She is the founder of Hidden Profit.com and actually that’s Hidden Profit profit.com and she is an Associate Professor of Business at the King’s College of New York. You’ll be hearing from myself. My name is Anita Campbell and I’m the founder and CEO of smallbusinesstrends. I will also be hearing from Rohit Arora. He is the co-founder and CEO of Biz2Credit and these are your panelists. You see our smiling faces here. We’ll be talking about a lot of things today.Covering a lot of advice and information that you can take back and apply to your own business, and most importantly, you can take that information and turn it into a successful loan application and a successful funding of your business. I’d like to first introduce Dawn Fotopulos. She is the founder of Hidden Profit Process and of course she is an Associate Professor of Business at the King’s College. She gives workshops for business owners on how to unlock the hidden profit in your business. She has written a fabulous book.It’s It’s just a wonderful book called ‘Accounting for the Numberphobic: A Survival Guide for Small Business Owners’ and that book won the best business book of 2015 in Economics in the small business book awards. And I understand it is a fabulous book and funny, interesting and most informative. And she is the former Vice President for Citigroup. Welcome Dawn Thank you Anita.
Good to be here Great to have you here. And that is me.Anita Campbell. I’m the founder of small business trends. Small business trends is one of the largest independently- owned websites and media businesses for small business market.We do a lot of publishing on a regular basis of news for small businesses and we do that multiple times per day and it’s focused specifically for small businesses as well as tips and advice. We also have a digital magazine.We also have kindle eBooks on various topics and we just love anything relating to business and find it’s just a fascinating area.We love to share this. That is my mission in life as the founder and publisher. And I’d also like to introduce of course Rohit Arora.Now Rohit is the co-founder of Biz2Credit.com and Rohit is a real visionary because he foresaw many years ago what these online market places could become. They would bring together lenders and a large number of vendors and bring together people in businesses that are looking for credit. And today, Biz2Credit’s network consists of over 1.6 million users and over 1,300 lenders. over 1.6 million users and over 1,300 lenders. 1,300 lenders.Now think of that you can go to one place and you can get access to potentially 1300 lenders. potentially 1300 lenders.Where else can you do that and how long can you do that and how long would it take you to walk around or visit even a half dozen lenders and apply individually? Rohit is also one of the country’s leading experts in small business finance and was 2011 and was 2011 ‘Entrepreneur of the Year’ and ‘2014 Fast Fifty’ by Crain’s New York Business. Welcome Rohit. Yaa, Anita. Thanks for the introduction. Well let’s jump right in. What we are going to be talking about is- What do lenders look for and besides banks, what lenders are out there? Banks are not the only game in town. There are a variety of different credit sources.And it’s not just loan. There are many different kinds of loans . but there are other kinds of credit as well- cash advances and certain other things. So, Rohit’s going to be walking us through that in thorough the landscape as it relates to financing and then we are going to jump over to Dawn Fotopulos who is gonna walk us through the mistakes to avoid when you are applying for a loan. So how do you increase your chances of getting funding. And then we’ll be talking about some other topics related to entrepreneurship including the steps that you need to go through to secure credit.We’ve got ten steps that we’ll close with that you can take down and follow in order to increase your chances of getting financing. With that, I would like to turn over the microphone to Rohit Arora of Biz2Credit. Yes, so Anita. Thanks for the kind introduction and i think this is a very important topic because in last 6-7 years ,it has been a very tough market for small businesses to get access to credit as the interest rates have been pretty low and could have been called a visionary market is very flattering. You know But the key thing is that even I never foresee that this will get so tough for so many small business owners to get money from traditional lenders when we started the company prior to the recession.So I think, it’s a very important topic because as everybody knows cash is the lifeline and bloodline of every single business and how do you get access to credit and how do you get access to loans, so that’s the important thing.And also is now unlike prior to the recession there are lot more options, so it’s not only banks.So, technology is changing a lot of that stuff.So. just to give a walk through this of this presentation, they key thing is that whether you are looking for a bank loan or you’re looking for a non-bank loan, your credit history, both your business and personal is extremely important .Banks still look more at your personal credit score which is FICO scores while non-banks lend with a lower FICO score, but will still at your payment behavior and your ability to pay your debts on time.So I think that’s something very important to look at it. As more and more lending moves online, your cash flow history of your business becomes the most important factor even I’ll say equal or even a little bit more important. Then there’s the credit history. So, if you have a great credit history,but you have a very poor cash flow in the business, it will become very difficult for you to get any kind of loans. So, that’s very important and then how do you maintain your cash flow you know stuff with something that we will talk later during the presentation.But, it really means that you are collecting your bills on time, you are watching your expenses, you are managing your business in a way that every month you bring in sufficient cash to at least run your day to day operations. It’s perfectly fine if you are borrowing money to do and splurge in on marketing, or you are buying a new piece of equipment, or you are buying a new place to move your business in.That most of the lenders will actually give you money for, but nobody will actually give you money to cover your cash flow deficit month after month. If it is seasonal then still it will work. The other aspect is the business plans.That again is very important.So, you need to have some kind of a business plan. It doesn’t need to be a 20 page plan, but it at least a one or a two pager where you can articulate your vision the business and what you need the money for, and what you will do with that. That’s very important from that angle also that you need to have some kind of a plan for your business when you’ve thought of borrowing money, because if you don’t have a plan then you will more often not land into trouble while repaying your loan. Then the third aspect is loan documentation.So, prior to applying for a loan you need certain level of documentation. If you are applying through a bank, you need a lot more like your tax returns and your personal financial statements. If you are applying through an online lender, then you can live with less documentation but you still need your last filed tax returns ,your last 6 months of bank statements, your business licenses, your personal driving license or any form of IDs and all that.It’s like have that handy while you are starting to apply for a loan.Any kind of collateral you might have that will help you to get a secured loan that will also lower the cost, increase the term. Or you are buying a piece of equipment or real estate, so don’t put all of your own money into it that.Always go and borrow some money because then you can use your own money for working capital which is typically an unsecured loan and that is more expensive. Again, you know profitable business model again goes back to the cash flow history, so if you can show a sustained profitability in your business, then you will get better terms, lower rates and more money, so that’s important. Repayment of debt it’s extremely important because that helps you to build your business and personal credit history or it can destroy your credit history if you are negligent in paying your debt on time and then you should be able to articulate and know the potential value of your customers that’s important,so so knowing your customers is important because if you are borrowing money, specially for marketing and expanding your business, the last thing you want to do is not to know that what level of business you will be able to generate and what is the value of your customers. I think that’s a very important aspect that you need to have in mind even if you are not borrowing money. So,If you are borrowing money, then it becomes even more important. So as we are seeing you know ,when we started the business in 2007, there were only banks out there.There were banks, small banks, big banks, some credit unions and that’s it.But over the last 5 years what the technology has done and what the internet has done is that it is destructing the whole financial services market and one of the ways it’s now destructing it by you know letting a large number of family offices, credit funds come in and say that they can now actually reach out to small businesses directly. Because earlier, you could only go and borrow money from a bank because that was the only shop in the town or the only shop that you knew in the town.But now you know you don’t need to go to any bank branch. Even banks have started to go online and digital.So you can go online, you can search for loans and there are now pretty decent number of family offices, credit funds who are actually not only very keen but they have been very effective to start you know , lending you money and we at Biz2Credit actually work with a pretty fair number of these kinds of funds where we can offer you money as a small business owner up to 5 years and rates starting as low as say 9-10% kind of stuff. And, so they are still not cheap as the bank loans, but they are also not as prohibitive as the normal cash advance where the terms are fixed for 12 months.You are paying back money daily and the APRs could be very high starting at 30-40% and going up to 100%.So, I think that the at least one silver lining in the dark clouds that has been there for small business lending that there’s lot more lending options and lot of loan options and as the economy improves, the interest rates on these options are actually going down.So, I think that’s good. As I said there are so many different kinds of loans, specially in the small business fields, so it can be very confusing and this was one reason why we set up Biz2Credit to help business owners so that business owners not only get access to credit, but also get all the guidance free of cost. You don’t have to spend any money in trying to figure out what is the best loan for you or applying for it or getting the money.So here we lift out some of the traditional and non-traditional opportunities.In traditional, you know in U.S. the government has a big small business administration program which actually guarantees small business loans and one can apply and get it through banks or you can apply on Biz2Credit and we have a large number of lenders who will actually give you a SBA loan. Then there are traditional loans that are non-government guaranteed, but still offered by banks and there are in a range of 4-7% while SBA loans are at around 6% a year. Marketplace lending is all about your family offices, insurance companies and endowment funds. Their rates ranges between 9-20%, so higher but you can get money in 48- 72 hours.Then, working lines of credit are typically for companies which are accounts payable Business credit cards during the recession, after the recession they just went out of fashion or out of an option pool, but now they are starting to stage a comeback But there you know business credit cards actually gives you very little amount of money and it’s good if you are looking to have like an overdraft facility for 30- 45 days.Real estate loans, again, if you are buying real estate or you are fixing up your your property or you want to refinance it your existing loans, this is the best time to do that because the interest rates are a historical low and they won’t remain at this level for very long. So I think this is a great time to do that. Factoring is for companies which have invoices spending invoices where you get paid in 30 days, 60 days, 90 days and you need money in your business to run your payroll with other expenses, so it’s a good product. If you are in a hi-tech business, or a business that requires a lot of equity investment, venture and angel investors are a very good source and you can look at angel list which you go and you know get some money, but that is very more catering towards hi-tech companies, internet companies, bio-sector and some of the other more hi-tech. bio-sector and some of the other more hi-tech. So, it is not for the traditional mainstream businesses.Merchant cash advance product which can be used but should be used carefully because it’s pretty high cost. And this really is against your credit card receivables so if you as a business owner accept credit cards, you can borrow some more advance against your credit card receivables. Till there are you know now because of as I said internet is changing the game, so there are peer-to-peer sites where you can get like either loans or what we call still today activity you know Kickstarter, Indiegogo, but there you know that is again for those companies or businesses which are developing an interesting product and not for any day-to-day or to meet their expenses.So I think that are the loans, what we have been doing over last 6 or 5 years now, you know as Anita said, we are trying to solve this or demystify small businesses loan in market and one of the things that we are proud and have been really effective is that we launched a small business lending index and that gives an idea of the approval rates by big banks, small banks, alternative lenders, your credit unions and what we call the institutional lender. So that’s a good way for you to go and see that who is giving loans, what is the approval rates, what are the what is the pricing on those loans, you know where you can get better loans or where is a less chance of you getting a loan so this you know we are trying to demystify and trying to make it easy for people. Because one big issue and challenge still is that small business owners are very busy people and they have very little time and for them when apply for loans in traditional banks is still very paper intensive and takes forever. So I think that’s very very important aspect that we are educating and the people as well as the lenders also.that how they can improve their approval rates also at any given point of time. We go on the next slide So, you know the slide really talks about loan approval that small banks. So, traditionally during the recession, the good news was that small banks were still approving almost 50% of those loans, but now over last few months we are trying to see there’s some good news that big banks are coming back but there are still at least 50% lower in their approval rates compared to the recession and small banks are starting to become a little bit of a laggard in this industry. So, this is very interesting you know and that is because of increase in competition and also because of small banks are not putting in a lot of money in technology and lot of business owners are looking for an online experience which they are not able to provide today. So, I think that’s a message for small banks that they should not lose out their market share the way they lost it in the Consumer Loans in 1990 and this is a message for them to also improve their game out their in the market. Next slide. So this really talks about alternative lenders.and Alternative lenders and institutional lenders is really this happened in last 3-4 years and what’s a big reasons is because of technology.Now you don’t need big bank’s network, you don’t need money to build a brand and as a lender, you can go and reach out to a very large number of businesses out there. So I think as a business owner you can start taking advantage of that now and you could be able to get more access to credit.And the good news there is that you know more coming back and start buying loans from institutional lenders down the line, so if you build a track record with the institutional lenders our in our experience over next 1 and a half to 2 years they will actually have a better shot at getting a bank loan also. So, I think that is something very interesting happening which business owners should take advantage of if they are thinking about you know expanding their business because from an economic title, this is the best time to borrow money, interest rates are still historically low, economy has improved quite a bit over the last 18 months, housing prices have actually stabilized or are going up and the best things that which is happening is that the gas prices are at a historical low, so I think this is the best time for you to borrow money to expand business because we foresee that the next 2-3 years are pretty good for small businesses, so if you borrow today and invest money it gives you enough time to expand your business and pay down your debt so that whenever. the next recession comes, you are stronger Then if you borrow money later, the economic So, I think those are the things that we are looking at it. And then u know the credit unions have been very . interesting So credit unions is one of the big hopes during the recession, but they really haven’t met those expectations.So, they were good during the recession because there was nobody else , but now as more money comes back in, their approval rates have gone up and again the reason is they are very small, , they haven’t invested money in technology, they don’t have a good footprint, they don’t have smart ways of underwriting businesses for businesses who are searching for credit more and more online. So I think that’s where it is getting very interesting.So I think earlier the divide was as a lender you needed all the licenses and you need to have capital and only then you will grow.Now the Now the divide is gonna become even among the lenders, if you are digital or non-digital. So if you are a non-digital lender, you know the chances of you being able to attract good customers and offer them good pricing they’ll start going away. And that will not be a good thing for a lot of these offline vendors. So I think those are important things out there for people to consider and they can follow our index every month. We release it on second Tuesday after the job reports and they can get free subscription to it, they can talk to our loan specialist.So this is very important because this gives a pulse of the market on an on and basis and then you can see if you are gonna apply for a loan or want a loan, what’s your best chance of getting a loan during a certain time period. …. Thank you Rohit. That was very helpful and I do want to say this before we bring on Dawn Fotopulos that if you have a question, please type it in to the little chat box window that appears on your screen and we’ll try to get through all the questions.We have some questions coming in already on social media and elsewhere before the event so we will allow time at the end to ask questions. But please feel free to type in your questions into With that, I would like to turn over the microphone at this point to Dawn Fotopulos who walk us through the mistakes to avoid when applying for a loan.Dawn, take it away.
Thanks Anita. Rohit, you gave us a really great broad-brush understanding of what the acceptance rates are for business loans by lender. Thank you very much. I thought that was enormously helpful and I think the one big take away we all need to have is that there is no one lender that gives 100% loans to everybody that puts a loan application out there, and anywhere from 20% or one out of five loan applications to the large banks who are perhaps 4 or 5 out of 10 with some of the specialty lenders is pretty much what we’ve seen.So what I wanna go is through the 5 kind mistakes or 5 tips really to help you be that 1 out of 5 or that 4 out of 10 where your loan application is received and you get funding. So don’t wing it. It’s about being prepared and Rohit talked a little bit about that documentation and so on. I wanna talk a little bit about how to think like a banker and not a business owner because in this situation when you are applying for a loan, it is the lender who is your target audience and there is a way that they think,and there are priorities that they set when they are reviewing all their loan applications and as a former banker I feel like I have an inside view of that and I think that would really help put your best foot forward when applying for a loan.the Next thing is to be clear on how you plan on using the money and I know Rohit also talked a little about that and I wanna do a little bit of a deeper dive on how to connects the dots between the allocation of resources once you do get the funding and how that lowers the risk factor for the lender. Also, it’s important to know how you repay the loan and that’s where the business planning and the forecasting and all that becomes very important.And then of course, matching the life of the loans to the life of the asset.which is more a tip than anything. But anyway, let’s go through slide 1- don’t wing it.Your numbers need to be strong and they need to stand on their own.The loan application whether it’s online or offline, it needs to stand by itself because you are not going to be there to answer their questions and to clarify anything so, I want you to always remember that a confused banker or a confused lender will always say no. So, it’s super super important that your financial are current , that they are accurate and that they are complete. And it sounds so basic, but I took a survey among 5000 small business owners over the years that I panel moderated for the New York Times Small Business Summit Conference and Anita, I know you know those guys super well and I can tell you that in 7 out of 10 cases, these business owners cannot access their finances, i.e. their income statement, their cashless statement and balance sheet easily. And they don;t update them until they have to do their taxes. So this is a very very important basic business discipline that you need to do and accurate book keeping is critical, but it will also help you with that statement mandate.In order words, make sure that your reconciliations are done on time. Make sure you, as the business owner have access to this information and another ProAdvisor network which is put together by the QuickBooks into .. people is a great place assortment Angie’s List for bookkeepers and CPAs and I find it super helpful. so But the bottom line is your lender is going to scrutinize those statements and it is. very very important that they are crisp and super clean.So don’t wing it.In slide 2,I wanna talk about thinking like a banker. And, here is something no one’s ever gonna tell you that banks or lenders are not in the business of taking long risks.They are in the business of making money.They take on risks simply because it is the necessary evil and work for them to make money on the interest rates they charge for their loans. So, the way that they win is they wanna reduce risk as much as possible and they wanna lend to those businesses that represent the least risk and have the highest probability to pay back.Now we sort of know that intuitively but the way that plays out practically is the following and Rohit talked a little bit about this. You don’t apply for a loan when you need the money. Now that sounds a little counterintuitive, but if you do apply for a loan when you need the money and you are cash- strapped, it looks like your business is on life support.It doesn’t look like you have a going concern which in the lender’s eyes looks as though you’re far higher risk.Now, most of us have businesses that have a seasonality to revenues into cash flow. so , if you’re a photographer or a retailer, even better example, in the 4th quarter, most of your revenues are back loaded, but you know that in advance so the best time to apply for a loan is when your bank account is nice and fat and you look like you’re a low risk. You have a pretty good idea what your expenses are going to be, so applying for the loan frankly when you don’t need it is going to be a lot easier for you to close that loan. The other things that’s really important is and Rohit again he mentioned this your personal life and your business life are a part of the same eco-system when you are being evaluated for a loan for a business. If you are running a privately held business and most of us on this call are, , then the bank is gonna look at your entire net worth as if it is coming from the same place.So, please don’t go and buy the big house and buy the expensive car at the same time you are applying for a business loan because the obvious response from the lender is will why are you expanding on the personal side and the business side at the same time.You look like you’re much higher risk, in fact you are. So, the business is the engine that drives your personal life. Take care of the engine and the engine will take care of your life and your lifestyle. So, that actually came from a senior Vice President . from HSBC I sat down with her and chapter 8 of the book that Anita mentioned to you earlier ‘Accounting for the Numberphobic’ is called ‘How to Win Friends and How Influence Bankers’ and which she basically did as she went through these 5 mistakes that a lot of loan seekers make and she said you’ll be amazed at how many people who are running businesses are taking on all kinds of debt in their personal at the same time they’re applying for a loan and what happens behind the scenes at the lender is all of these. are lending, whether they are bankers or lending institutions They look at everything one of these loan applications as a part of their portfolio and the way they make money and they get to keep their jobs is they need to lend to where they want to lend to. As i said earlier, the lowest risk, highest return. they want to make the highest return loans so, they are looking at all these loans from a higher risk orbit view and they are looking to cherry-pick those companies, those businesses that have the highest payback rate and the lowest risk for them. So, at any rate, apply for loan, when you have strong cash flow. And the lending committees will look at you far more favorably if you do that. So the 3rd tip if you win, you gotta be really clear on how you use the money and I know that sounds pretty basic.You’ll be shocked when you look at some of these loan applications how poorly the businesses seeking the loan actually describes how they’re gonna use the money and Rohit mentioned earlier, whatever loan money , whatever money that you are applying for rather in a loan has to drive one or more of the following three things.It has to help you drive profitability.It has to help you drive or has to help you build you asset base faster than your liability base. So what happens is if you are play it down your head and you get a loan, on the balance sheet what effectively happens is your cash goes up so your assets go up but your liabilities go up exactly the same amount.
Now the question becomes what do you do with that cash that just came in or the access to cash cash in a credit line?Are you going to improve your system’s backbone so that your cycle time goes down so your productivity goes up? Are you going to invest in, are you gonna scale a marketing campaign that was very effective but now you wanna reach to broader audiences and that’s gonna drive your revenues? Are you going to find a way to spend money in or invest money in property plan to …. so you can drive down cost of goods and improve your gross margin.So, what you need to do is not only say how you gonna use the money,but how you connect the dots between how this loan is gonna help you drive again, profits, cash flow and essentially net worth on your balance sheet. So that’s what this whole expanding operation to meet demand or effective marketing or assistance and IT to improve productivity is all about. The other thing is you wanna build your asset base.At the end of the day we all are in business and the business itself becomes an asset. At some point in the future, we all play our cards right, most of us don’t, we’d like to have this asset that has some terminal value. you know We wanna not just be able to pay the bills in a little bit left over for our personal lives, but we wanna be able to sell these businesses at multiples of cash flow and the only way that’s gonna happen is if we build our asset base faster than our liabilities. And assets are of course the current and the fixed assets, but one of the things that a lender is gonna look at is they gonna look at how well you manage your account’s receivables. Because in 8 out of ten cases, and I’ve spoken to thousands and thousands of business owners. In 8 out of ten cases they do a really terrible job of managing their outstanding invoices to clients that owe them money. So they are applying for a loan because they are in a cash-crunch because they are not managing their AR very well.So if your accounts receivables are older than 30 days, don’t apply for a loan, get on the stick with your accounts receivables first, prove to the lender that you know how to collect on outstanding invoices, your business is gonna be a lot more stable and frankly that’s of . you Work on your accounts receivables first and then apply for a loan.And I have to tell you a very funny story.One of the greatest episodes on Shark Tank was there were 3 founders out there and they were pitching their business to the investors and obviously very savvy people. And, Lori Greiner asks a very simple question She says what are you gonna do with the money? And one of the founder says “I’m gonna pay myself more in salary” and everybody started groaning, rolling their eyes …. That’s a bad answer because if the business is not generating enough cash flow to pay you what you think you’re worth, you gotta fix the business.You can’t expect an investor or a lender to lie in your pocket. So Mr. Wonderful turns around that “You’re dead to me!” which is essentially …. that’s the bad answer my friend.Ok, so you’re not gonna make the same mistake. Slide 4 is gonna explain how you intent to repay the loan and one of the things I always say is getting the loan is the easy part and it’s not easy of you can remember with those closure rates were that Rohit talked about. But paying it back is the hard part and your cash flow projections are absolutely essential and those cash flow projections have to be grounded in assumptions that are supportable and where you have adequate evidence. So., your cash flow projections you really need to think that through and everything from what’s in your sales pipeline, what kind of orders you already have in your hands,repeat purchases with your existing customers, all of those things are going to be very important. Lifetime valuable customer is important because they help the lender look forward. What your financial statements do is your financial statements basically are evidence that your business is in a going concern and you are the right one to run it but your financial statements are . in a fact are forensic It captures everything that already happened.What we are trying to do is give the lender a level of confidence about where we think the business is going and why which is why your roadmap, you business plan is so important. Because that’s how you’re gonna navigate the near future and why the documentation is so important is because that’s the evidence they know what you are talking about.So, we talked a little bit about how lenders run the business of making money. They are not in the business of taking on risk all that they do because they have to. Well, one of the most profound things anybody ever told me in business came from Norm Brodsky, and in “ Accounting for the Numberphobic’, he is it’s basically a transcription of a 2 hour conversation that I had with him and that’s chapter 10 And he said something that just blew my mind.He said if your working capital is negative, in other words if your currents assets minus your current liabilities is negative, you will go bankrupt- it’s just a matter of time. And i said, Holy cow, I’ve never heard anybody say that! Why do you say that? And he said because your current liabilities namely things like credit lines and short term loans and things like that can be called at anytime. So, if you don’t have enough cash or enough liquidity, on the current asset side, your business is at risk is essentially what he is saying So, what you always need to keep an eye on is this working capital at least positive, so that you don’t frankly have to worry if a credit line is called and so you should play offense is the point, and this is really about loan management strategy. So last but not least, you should really, next slide please, ok, match the life of the loan to the life of the asset you are financing. Now, we sort of know this intuitively, but it’s really useful to keep in mind make sure your business has that viable long term plan that Rohit was talking about And you should have probably a 12 month, 18 month plan, and then you should have a 3-5 year plan. You gotta look at your inventory levels and other credit lines. So, for example, when I had my t-shirt business a thousand years ago, and we were selling through ……. stores and to some of the big retailers in Chicago, the faster we were able to turn our inventory, cash we needed to run the business because every time we sold the t-shirt, we actually made money on it because we made gross margin. We were expanding our cash position by doing that so it’s not just your inventory levels but it’s also your inventory turn that will help you manage cash more effectively and other credit lines A lot of suppliers by the way will extend credit specially if you are buying things like property plant equipment they will, specially equipment, they will provide financing opportunities which actually helps your cash flow at least for your you’re getting up that and running. The other thing I just wanna say is ask for more than you think you’ll need because the absolute worst thing you can do is you can apply for a loan, get the loan and end up in a cash-crunch 3 or 6 months late and then feel the need to go back out to the capital markets and apply for another loan. That’s really a big no-no and it’s not well received. So, ask for more than you need. You can most of the time you can prepay without penalty. The other thing too is to evaluate the benefits of short versus long term.Rohit was talking about the cost of capital with all these various permutations and opportunities from lenders and it really makes a very very big difference.You might even wanna pull in your chief financial officer certainly and possibly your account too have this kind of conversations and of course if you have machinery and other equipment, you’re gonna match the life of the loan to the life of the asset and what I’m finding is as technology keeps changing and it’s such a dynamic environment is changing so quickly that the life of a technology asset it to me anyway and Rohit you may have a different point of view but it’s getting shorter and shorter. So what you are buying today and installing today 2 years or 3 years from now could be a dinosaur.so just keep in mind you don’t wanna be you don’t wanna take out a loan on an asset and continue to pay on that asset if that asset is not working hard for the business. So at anyway, that’s the end of my presentation.There are 5 simple steps that you can follow and lock in profit in your business and you can feel free to visit the Hidden Profit Prophet.com and pick up a free report that will kind of take you through those 5 simple steps, but I hope this was helpful and feel free to ask any questions that ………… Well thank you very much Dawn.That was fabulous, really great points and I know we have a number of questions.Will be getting to those in just a moment, but I would like to take an opportunity to go through quickly 10 steps to securing credit. Now I’m gonna emphasize points that have already been made in some respects by Rohit and also by , Dawn, but I think it’s a good recap.So the first thing to do is build a business credit history.Even though you are applying for loan and your personal credit will be taken into account if you are a small business owner. You also want a separate credit history for your business and that doesn’t necessarily happen automatically. I’ve heard Rohit advice before that first step is to try and get a business credit card because it is easier to get a business credit card first than to apply for a big loan and make sure you are paying it. Your payment history is gonna be really important.Create a consistent payment history- that’s gonna be very good. and Also, make sure that your business itself is just as a separate entity.as a separate entity.Separate and apart from you as the business owner. Step 2- gather your documentation. Dawn emphasized. the importance of having good financial.The importance of of getting you ducks in a row and making sure that the package you you present to the lender is a complete package because that’s all they’re gonna have in front of them. So be sure that you have all of that information that you’ve taken the time to go through it. That you have it collected that everything is in order and that your books are up-to-date. Number 3- the next step is to line up references.Make sure you’ve got references in case they are needed by the lender and very often that’s going to be customers and importantly suppliers and vendors. Any business partners you might have or even colleagues that you work with These are gonna be very important because lenders will ask for some references At least careful lenders do ask for this and you can wanna have them line them up in advance. Make sure that if you give the name of a reference, you are confident that they’re going to say positive things about their experience with you as far as it is related to financial matters. Step four is improve your personal credit score and of course that was mentioned earlier that it’s really really important to have a good personal credit score because for most small businesses, specially those with 20 or fewer employees. The business owner’s personal credit intricately tied in the lender’s mind with the repayment ability as well as the overall credit picture. So, it’s important to have a really good personal credit score and there are a lot of monitoring tools out there today that will help you monitor what your score looks like and they give you educational information that tells you how to improve your personal scores such as not maxing out your credit cards and just making sure that you have information that is correct and accurate in fixing any errors that you see. Step 5 in getting credit is to make sure you do have that separate entity. It really does help because it’s not a direct lending factor.What is says is this is a legitimate business. You’re serious about your business. The business is a separate entity from you. You’re paying all your payments, you are keeping them up-to-date and you have to pay those kinds of things. Step 6: pay down your debt.You don’t wanna be maxed out, you don’t wanna be for money as Dawn had mentioned earlier. That’s gonna be a red flag that lenders gonna look at because it’s just too much risk and she pointed out they are not in the business of taking risk. They are in the business of making money on their loan. Step 7: you wanna stand out from the crowd and build credibility with your online presence. One of the things that was interesting to me whenever I have applied for business credit is how much the lender or the financing entity really took the time to understand the business? I mean even in this day in age if you for a business checking account, any responsible bank will not take the time to talk with you and understand the kind of business that you are in. They are accessing you, they want to make sure you are a legitimate business. They want to know , you know that who they are dealing with and they gonna know about you. And of course today they’re gonna look you up online so all those things that we have out there about our businesses – any negative customer reviews on open and Facebook profiles and Twitter profiles and so on. These are all gonna factor in, in the impression that you make with a lender or a bank. Step 8- You wanna improve your cash flow and your accounts receivables Dawn talked about that. I think enough said. Step 9- lower those operating costs. Make sure that your financials are really looking good. And step 10- apply to multiple lenders and as Rohit talked about this earlier, I think this is one of the tremendous advantages of something like Biz2Credit .com is the ability for you to reach out and touch multiple or at least explore multiple lenders because every lender is not the same, every loan,every type of financing is not the same- they are all very different and part of the secret to success is finding a good match between your current situation and your needs and what a lender has to offer correctly in those terms and whether those two things match up, and that’s where a technology platform like Biz2Credit and the kind of advisers at Biz2Credit can really help you because they can connect you with multiple lenders without you having to run around and do a lot of labor intensive time consuming legwork or potentially have to put your business on hold while you are going out and looking for a loan So, ten steps to securing credit and at this point we have a few minutes. I’d like to open it up to questions. We do have some questions here and so I have a question, actually several . questions for Rohit. The first question concerns SBA loans. Rohit, you mentioned a little bit about what SBA loans are. Who do you apply to for an SBA loan and how do they work? So I think that’s a very good question and SBA loans are not given out by small business administration. They are guaranteed by small business administration and there are almost 2500 banks in the country some of the large or most of the large banks. The process is a little tedious, so what we have at Biz2Credit is that you can come, apply and we have a whole digital platform now where you can get your SBA loans also from some of the large as well as small SBA lenders and you either you can do that or you can go to your neighborhood bank and can ask them on SBA loans and they will give you realm of forms to go and fill. So it’s one of the most or I would say t one of the oldest government guarantee programs in the world and also the most established program and the good news is you can get money at pretty low cost but the bad news is that there is a lot of paperwork involved and it is a slow process process so that can take anywhere between 60-90 days to get an SBA loan. So, one needs to plan well ahead of time. So, not necessarily the fastest type of financing you get? No.
. Alright, good.
Alright, here’s a question for Dawn.Dawn you mentioned something rather startling, may be not to you, because you’ve heard of it before but to some of us it was rather startling and you mentioned that many small business owners do not update their financials until tax time. Did I hear that correct? Yes, you did! So that sounds amazing.Tell us a little bit more about that. Well, it’s sort of interesting. you know We are all so busy Anita working in our businesses, servicing customers, putting out fires that we ignore the financials and the financials are sort of like your spouse. They are always talking to you, but you gotta pay attention and listen because at some point you know is the business guess you wanna know what’s happening in the business before you end . up in crisis.You certainly don’t want your lender to tell you oh by the way do you know you are bankrupt. That’s a problem. So, what a lot of business owners is first of all I think is first of all I think in to I think in to just came out with a research study that said 85 percent of the business owners do their own books and 40% of them admit to financial illiteracy . Now if 40% admit to financial illiteracy and they use those words exactly, then you have to know the real numbers probably closer to twice that. So imagine like you are doing your own books and you have absolutely no idea what you are doing so put those two data points together and you have a disaster. So the first thing that needs to happen is you make sure you have the right people supporting you on the day-to-day and monthly basis capturing all the transactions and all the cash flows that are going in and out of the business and that’s why I mentioned something about a bookkeeper. Almost everybody has an accountant because it’s so complex to put our taxes together, but a bookkeeper will help you with the day-to-day stuff and then what I do, because I have both a bookkeeper and a accountant. That bookkeeper reduce my accounting fees to half because she basically does all the reconciliations that we handed all in a nice clean package to the accountant.He can the get the job done for the IRS in half the time.Well, what’s even more beautiful about that particular process is that she sends me my reports, I don’t even have to pull them.She sends me to me.
I look at them.My cash flow statement, my income statement and my balance sheet on a regular basis.I know exactly what’s going on in my business and then periodically I bring in a forensic accountant to just do a surprise to keep everybody honest and make sure that everything’s copacetic. And it works out very nicely, so the point is, a business owner should not be their own books They really should not. They should have a professional doing their books because their time is better spent managing their stuff, developing their stuff, developing new markets, developing new products and services because that’s what’s gonna drive the business forward. If they have the right people on the and they should be spending their time on the revenue producing side. Thank you.
That was some great advice and one follow-up question. It is expensive to get somebody to keep to enter your accounting information and make sure your books are kept up-to-date each month?Is there any kind of a range that you can look at when we are talking of thousands of dollars Oh no. No it doesn’t have to be anywhere near that. Bench .co is an organization that is specifically structured for small businesses solepreneurs I would budget probably only a few hundred dollars a month.May be two or three hundred dollars a month,it depends on how your complex business is, how many transactions . you do.But if you have a banking relationship for every thing is online and they can just download your bank statements and do the reconciliations for you. I mean that is a huge time saver, and bookkeepers, depending on where you are in the country range anywhere from say 30 bucks and hour to 60 bucks an hour which is a heck of lot less expensive than the 250 that most accounts anywhere from 150 to 250 that accountants charge. So, it costs me, right now I have a consulting business, it costs me around $150 a month to do the book keeping and my accounting fee is about $1500 a year, which I think is a cheap date. Ok. Thank you for that insight. I agree. That is very little money in the overall scheme of things and just think how well that could serve you that could help you get better financing and better terms. That’s right.
Good. Question for Rohit. And Rohit, this concerns PayPal this concerns Square and other services like today, but today you can go on your websites

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