Your Business Credit Card Application was Denied, Now What?

You’ve applied for a business credit card and the application hasn’t been approved, what do you do?  A good place to start is to investigate the reason behind the decision.

Credit History Factors
If your business is a sole proprietorship, you may be denied based on your personal credit history.  If your credit history is bad, you’ll need to work on improving it in order to qualify for a credit line, just as you would with your personal situation.  If you have a larger organization and you’ve incorporated it, the business has its own independent identity and therefore will apply for credit on its own.

Why Was I Denied Credit?
As with any credit card application, you’ll get a notice in the mail about why you’ve been denied credit.  Generally, this takes several weeks to go through.  If you are very anxious, you could call the company’s customer service line (usually provided in the Terms of Service on your application) to inquire about the reasons.  Most often, the reason is either you don’t make enough money through the business or your personal credit is not stable enough.

Improving Your Business Credit
The best way to get yourself out of this picture is to work on improving your business’s credit identity or improving your own.  Pay down debts you have, improving your long term credit history by using smaller lines of credit you may already have, and pay your bills on time.  If possible, secure a pre-paid business card using the business’s federal tax id number to begin building its credit if it is not yet established.

These factors show that you are a responsible borrower and help the company to insure you’re worth the risk.  If your personal credit is getting in the way, you may wish to contact a lawyer about incorporating your business which will give it its own identity, free from your own.  Talk to your attorney about the benefits of doing this for your business.

Ways to Raise Capital
If you are in need of capital for your business, you may not have months or longer to wait for improvements on your credit score to happen.  There are several options available to you. 

Borrow from a Local Bank
Get a loan from a local bank that you’ve done business with in the past.  Request a line of credit through them, but first outline a business plan to them, showing the executives exactly where your income comes from and how reliable it is.  While you can’t haggle with the internet companies, you can do so by picking up the phone, too. 

Apply for a Secured Credit Line
You may be able to get a credit line based on the value of assets you have in your business.  If you have expensive equipment that is bought free and clear, secure a loan on its value.  If you have property that is for the business that you own, you may be able to tap into the equity there.  Lines of credit like this are often affordable and they often give you the opportunity to prove your value to other lenders over time.

Apply for Another Business Card
Just because one credit card company turned you down doesn’t mean another will.  However, be cautious as you consider applying for other business credit cards.  Applying for too many will negatively affect your credit rating because it shows a pattern of being denied credit, which can raise a red flag.  Instead, apply for one or two, find out why you weren’t approved and look for another option for borrowing.

Equipment Leasing Program
If you are still having trouble obtaining capital and you have equipment that you own, you can consider an equipment leasing program. Depending on the type of equipment, the leasing company will purchase it from you, allowing you to keep it while you pay the lease payments.

Peer to Peer Lending
Another option if you need a short term loan is to try peer to peer lending using either Lending Club or Prosper. These companies allow you to post a profile requesting money. A pool of potential lenders will view your profile and potentially fund your loan request. If your loan request is funded, you will be told the interest rate and given the choice to accept the loan. If you choose to accept the loan, you will pay the site back directly on a month basis until the loan is repaid in full.

Factoring – Selling Your Invoices
If you have accounts receivable, you could consider factoring. Factoring involves selling your invoices at a discount so that you can obtain your company’s cash quicker. The factoring company will purchase your invoice from you, typically paying you 80% of the total up front.

From there, they will manage the collection of the invoice. Once the invoice has been paid, the factoring company will pay you the 20% remaining on the invoice minus their fees. Factoring companies charge anywhere from 1%-5% of the invoice total based on a variety of factors.

Merchant Accounts - Small Business Options for Accepting Credit Card Payments Online

Once you have taken the step to establish a small business, you will need to provide methods of payment for your customers to buy your products or services. While traditional methods of payment included cash or checks, the internet has made it possible for consumers to make purchases with the click of a mouse using their credit card.

The Importance of Accepting Credit Card Payments
This opportunity has allowed businesses to change the way that they accept payments in order to make it easier for customers to buy.  Web savvy consumers pretty much expect any business to be able to handle credit card purchases online.  Not offering the ability to pay with a credit card can make or break a valuable sale.

Evaluating Merchant Accounts
Creating the opportunity for consumers to purchase your products and services with the use of a credit card is an important step for most businesses to take, but it involves several choices and considerations when creating it. With multiple options available for accepting payments, it is important to understand each option’s features and benefits prior to establishing your preferred payment method.

Merchant Account Features
Merchant accounts are the most common type of credit card acceptance method used by both small and large businesses around the world. Merchant accounts are specifically designed bank accounts that allow a business to accept and transfer credit card funds through a designated network. Credit card transactions can be completed exclusively online, through a manual credit card processing terminal, or through a shopping cart feature on the company’s website.

There are several reasons why a business would want to establish a credit card processing system or a merchant account, including:

• Elimination of bad checks written by customers and the hassles and fees associated with this problem.
• Credit cards offer a quick payment option for vendors, customers and clients both online and offline.
• These payment options offer easy transfer options directly into the business’s primary banking account.
• Credit processing systems and merchant accounts often offer a consolidated reporting option, allowing for a more simplified accounting system for checks and balances within a company.
• When making the decision to add this type of payment option to a business structure, the fees and the services offered are primary considerations.

Merchant Account Fees
Merchant accounts companies often charge 3 separate fees to establish a relationship: an upfront fee for the equipment if is needed, a monthly fee and a per transaction fee, ranging from 1.5%-4% depending on the company and the type of credit card used by the consumer. When you are ready to establish a merchant account, you will be required to submit an application and they will run either your personal credit or your business credit to establish a lease for their provided equipment.

Paying the Fees
Once you have established a relationship, the merchant account company will link to your business bank account to deposit money as your payments are collected from customers. The merchant company’s fees will be automatically deducted from the consumer’s credit card payments and you will receive a monthly statement showing all of your business’s account activity.

Opening a Merchant Account
If you want to open a merchant account, talk with your local bank, look online and ask other business owners for referrals in order to generate a comparison list of companies, their fees and their service options.  For small businesses just starting out the cost of a merchant account might not make financial sense.  The good news is there are options other than a merchant account that allow small businesses to accept payment.

Merchant Account Alternatives
In addition to merchant accounts, businesses also have the opportunity to leverage 3rd party payment processing companies such as Paypal or Presto Sell.  These are perfect for entrepreneurs that don’t have established enough transaction patterns to make a merchant account affordable.

Presto Sell
Presto Sell is one of the least expensive online shopping cart like features leveraged by small businesses. It is easy to install, reasonably priced and offers an immediate opportunity for an online credit card shopping cart feature. One of the most common challenges to small businesses when it relates to online shopping cart features to offer their products and services is the overall cost; shopping cart website features are traditionally very expensive.

Presto Sell and companies like them offer an inexpensive web addition option to make this transition smooth and affordable. They charge a monthly fee for their service and a nominal transaction charge. This system allows for customers to make purchases online, but does not allow the business the flexibility to manually swipe and accept credit cards over the phone or in the business location.

PayPal
Paypal is one of the most common online payment systems since it is easy to set up and universally used around the world. Paypal also charges a per transaction fee for their payment processing systems, but they don’t require the up front fees that merchant account companies charge and there is no processing equipment required.

One of the challenges of using Paypal as a primary credit card payment acceptance tool is that it requires to customer to enter in their information online, eliminating the opportunity for the company to take phone or manual credit card orders.

Accepting Payments Online
Merchant accounts, shopping cart features and Paypal accounts are just a few of the primary payment processing options that are available to assist a business in developing a strong business payment model. The fees are a big consideration and the decision to pay them will depend on the type of business you own, the volume of credit card transactions per month, the need to have equipment in your business location to accept credit cards and your overall budget.

Open a Business Bank Account for Your Small Business Today!

If you want to start your business off on the right foot it is essential to open a business bank account.  There are no two ways about it; it’s just smart business. Don’t stop reading here, I’m sure I can convince you.

Why Do You Need a Separate Account?
Your personal account is just that- personal.  That is the account you buy your groceries with and pay for home repairs with.  This money absolutely cannot get mixed in with your business expenses or you’ll be in over your head. There are several reasons why smart business owners have a separate bank account for their enterprise.

Simpler & Cheaper Income Tax Preparation
If you hire an accountant, they’ll have to spend much more time sorting through your personal and business transactions as they prepare your taxes.  If your CPA charges by the hour not having a business bank account could cost you alot of money.

If you ever have your taxes audited you’ll be required to provide accurate accounting information for every business transaction.  If those transactions are mixed together with personal purchases you’ll have a nightmare proving your case if the situation arises.

Business Credibility
Another reason to create a business account is because people will take you a lot more seriously if they can make checks out to your business.  If you keep asking them to just make them out to your name it can signal shady businesses practices in the eyes of some people.  It will also send the signal that you’re not in it for the long run.  Those without a business account come off as if it’s a hobby.

Better Money Management
It’s far too easy to accidentally intertwine your purchases if you don’t create two separate accounts. When that happens you’ll be a lot more likely to have to choose between making a house payment or buying a new copier.  Keeping these two accounts separate will make life easier and give you a better handle over where your money is going and why.

Reduced Liability
Many of us formed a corporation or LLC to help protect our personal assets.  The legal protection & tax benefits of the “corporate veil” can be removed if the government determines you aren’t running your enterprise as a business.  One of the things that indicates you aren’t a true business is commingling your business and personal funds, or treating your business’s money as your own.  If you use the same bank account for your business and personal needs then you really are putting your business and personal assets at legal risk.

Can I Wait to Set up My Account?
Since I’ve convinced you (hopefully) that it’s a necessity to get a business account you probably have more questions.  One of the money is when is a good time to set up a business account.  The answer is easy- right away!

Some people think it’s fine to wait until they are more established or think it’s fine to wait until their business has ‘settled’.  The truth is that you should open your business account right after you’ve chosen a name and registered your business.  This will start you off on the right foot and will mean the difference between a business and a hobby.

When you set up a businesses account from the get go you’ll also be saving yourself a lot of work.  Think of this- if you set it up months down the road you’ll eventually have to do hours of accounting to figure out how much you need to switch over, etc.  That will not be a lot of fun, especially if you are busy as a bee.

I made the mistake of not setting up a business account and boy was that a mistake.  I’m still going through and doing a self-audit to make sure that everything is separated properly.  I’m also struggling to find the purchases that are eligible for a business tax deduction.  How could I have saved myself hours of time?  By setting up my business account right away.

What Will I Need?
You will need several things for when you set up your business account.  It’s important to find a good bank because they all have different rates and fees associated with business bank accounts.  Believe me, you really want to investigate this because business accounts are generally a lot more expensive than personal accounts.

Since you are a business, you will need the documents to prove it.  This will include things like your articles of incorporation (if applicable), state business license, and proof of the type of business you run.  There are different accounts for sole proprietors, partnerships, corporations, and non-profits.  Check with your bank to make sure you will have everything you need because there are different requirements depending on the type of business you have.

If you are a sole proprietor like many small business owners you will need a fictitious name certificate if you’re going to have customers make out checks to your business name (recommended).  The bank will keep your name and signature on file (as well as any that of any partners you have).  If you are tax exempt you will also need to provide evidence of this. 

No matter which type of business account you’re opening you will need to provide your social security number and/or Employer Identification Number (EIN).  Just be sure to call ahead so you can gather up everything you need for your specific type of business.

How Do I Find a Good Bank?
Keep in mind that you shouldn’t just choose the first bank you come across.  You do need to take the time to look at fees.  Remember, these cost more to open than personal accounts.

  Here are some things to look into before you settle on one:

• Minimum opening balance
• Minimum balance requirements
• Check writing abilities (some limit this!)
• Interest rate earned
• Internet Banking
• Merchant Account availability
• Ability to grow into a bigger account

Open Your Business Account Today!
Opening a business bank account for your small business is one of the best decisions you can make.  Remember, it’s just good business when you do!  You’ll spend less time on accounting, make things easier during tax season, avoid legal issues, and look more credible in the eyes of your customers.  How many more reasons do you need to open a business account today?

Apply for a Business Credit Card at Your Local Bank

Getting credit as a new small business can be frustrating.  Think back to the catch-22 that many college graduates face, companies only want to hire employees that have experience but how are new workers supposed to get experience in the first place if no one will hire them?

Managing Financial Risk
It can be the same with a new small business. Banks don’t want to lend you money since your business doesn’t have a credit history to indicate whether you’ll pay back the money you borrow.

You can definitely understand the perspective of the employer and bank, they’re both trying to minimize the chance that they’ll lose money when taking a risk on an unknown employee or borrower.

What’s one way that companies use to build trust and reduce risk when looking for future employees?  They setup an internship program where they can get to know prospective workers without the cost of full time salary and benefits.

Open a Personal Bank Account
You can use the same principle when applying for a business credit card by already having a personal account at the bank where you apply.  When you approach your local banker about opening a business card, you’ve already gone through a trial period by having an account at their branch. 

They can see your account balance history and whether you have any personal credit cards through the bank.  Since banker already has a financial relationship with you and can speak with you face to face about your current financial situation and your plans for your business they are better able to gauge the risk of opening a line of business credit.

Open a Business Bank Account
Of course, simply having a personal account with a bank doesn’t automatically qualify you for a business credit card.  The best approach is to first open your business bank account at your local branch.  Once you have that established, talk to your banker about your need for credit for your business.  Ask what different options they offer and what you need to do to get approved for a credit card. 

Build a Solid Financial Record
Just opening the bank accounts isn’t enough.  You’ll also have to be responsible with your personal finances to set a good track record.  No bounced checks or late credit card payments.  Keep a steady balance in your business bank account to establish a track record of financial liquidity.

Having a personal and company bank account at the branch, a relationship with the bank manager, and a history of managing your money wisely will give the bank more information to help them gauge the risk of granting your business a credit card.  Of course this isn’t something you can just do overnight so your best bet is to get started today.  If you can build a good track record and a personal relationship, your chances of being approved for a business credit card look pretty good.

You Work Hard for Your Money….

So you’d better treat it right!

Honestly, how many hours did you put in this week? Probably many more than you’d have liked to, am I right?

Running a business is challenging, exciting, and fulfilling but at the end of the day what matters most is how much money you earned.  Even more importantly, how much of what you made do you get to keep after paying taxes and expenses?

It’s so easy to get caught up in the daily operations of your small business. We work so hard to keep it up and running that we simply don’t feel like we have enough time to optimize our income. 

We know we can make more money by working harder but there are only so many hours in a day.  If you work an extra 4–5 hours, you’ll bring in a little more money but you can’t keep that schedule up forever, can you?

Take a few minutes to think about how hard you work and how much extra time you have to put in to grow your income.  Rather than pushing so hard to earn more money, why not try to optimize your profits? 

Here at EntrepreneursMoney we’ll look at how to apply the 80/20 rule to your business and see what efforts give you the maximum return.  We won’t stop there, we’ll look at ways to manage your finances better and pay fewer taxes so you don’t need to earn as much money to live on in the first place.

The end result should be that you won’t have to work as hard and you’ll make just as much money; probably even more than you used to!