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The Problem With Discover’s Business Credit Card 0

By Tom Gazaway

To cut straight to the point, the main problem with the Discover Business Credit Card is that Discover will report the monthly activity for this business card to all three of the personal credit bureaus. So the business-related expenses you charge on the Discover business card will impact your personal credit rating. Yikes!

Discover is not the only lender that does this, but it does beg the question, “Then what is the difference between this business credit card and a regular, personal credit card?”

Well, since you asked, the simple answer is NOTHING.  This is all part of learning to build your business the right way.

OK, now I know this may not be a deal-breaker for everyone, but why in the world would you want to have a business loan or a business line of credit show up on your personal credit report?  Especially when it doesn’t have to be there.

You wouldn’t… so let’s move on.  The Discover business card does not traditionally have great rates, either, but if you know my stance on rates then that’s not really a big factor in a well-planned credit and lending strategy involving unsecured business lines of credit (UBLOCs) anyways.

Without creating a whole other blog tangent here about rates (we’ll do that another time) let’s just say that rates are always important, but they should almost never be the most important part of the decision-making process when we’re talking about a business credit line.

This doesn’t mean they’re not important, but you should not “shop rates” on credit lines — which represent short-term borrowing needs — in the same way that you might “shop rates” on long-term and fixed-rate debt instruments such as mortgages.

If you have any comments or questions let us know… but please avoid the Discover Business Credit Card in your search for business capital.  If you are looking to start, build, or grow your company and need capital now — or you will in the future — contact us online, or stop by one of our offices at Hawkeye Management, in New Jersey or Arkansas. We’d be happy to explain more about who we are and what we have to offer you.

Photo via Flickr user The Consumerist

Posted on: 08-26-2010
Posted in: business credit

Credit Card Offers Ramp Up Again 0

By Tom Gazaway
It looks like more credit-card offers are starting to arrive in the mail again.

As stated in the Wall Street Journal recently, “Now that they know the new rules of the game, [card issuers] are beginning to extend new credit.”

Market-research company Synovate recently reported that 398.5 million solicitations were sent out in the fourth quarter of 2009…that’s a 46 percent increase from the third quarter last year.

The increase is substantial, and indicates that there’s some desire by credit card issuers to return to lending. It’s also important to note that this increase is still a long way from the 1.5 billion solicitation offers that were sent back in the fourth quarter of 2006.

It’s interesting that about 84 percent of those nearly 400 million solicitations mailed out in late 2009 were sent to “A-Paper” candidates — those with 720-and-above FICO scores. Mailings to borrowers with under 620 FICO scores made up only 6 percent of the total. So it’s also clear that this uptick in solicitations is clearly focused on prime borrowers.

If you’re a small business owner looking to start, build, or grow your business, my company Hawkeye Management, can help. We specialize in unsecured business lines of credit and unsecured business loans. Feel free to call us toll-free at 1-888-783-1503, or fill out our convenient online contact form.

Photo via Flickr user Andres Rueda

Posted on: 08-23-2010
Posted in: business credit

What I Learned From a Competitor’s Pre-Qualification Process 0

By Tom Gazaway

There’s always more to learn, no matter who you are and what you do.  Occasionally, I walk through the application and funding process with one of our competitors.  It allows me to see where we do things differently and better than they do and, on occasion, we learn something that we adopt into how we work.

So here’s my latest story of doing this.

A large competitor of ours provides unsecured business lines of credit (as do we at HawkEye). We’re currently going through their pre-qualification process.  Our borrower has 720-730 FICO’s and the only real issue we expected to have them bring up is utilization – the credit report shows she has about $37,000 in “revolving” credit card debt.  Of course, I know something about that $37,000 that makes it very deceiving, but I left things as they are to see how they evaluate this and how they advise us to deal with the situation.

So we start the pre-qual and the first red flag goes up when the ONLY credit report they need us to set up for our borrower is with creditchecktotal.com.  Now, nothing against the good folks at creditchecktotal.com (which is owned by Experian), but CCT (as I’ll call Credit Check Total) does not use a FICO-based credit scoring platform…so they don’t know the FICO score as you start the process with them.

I do want to say at this point that this “red flag” of their not utilizing FICO scores in the pre-qual process is not a complete deal breaker, but it’s definitely something to note.  It’s pretty well-known that FICO scores are facing a pretty serious challenge from VantageScore, but CCT is NOT using a VantageScore, either. So even if you think of VantageScore as a serious contender to the title of “Credit Scoring Big Dog,” this credit screening site doesn’t really add up.

So here’s what happens next.  We submit our report to CCT for them to review.  Our “rep” is a very nice gentleman.  He certainly doesn’t strike me as highly knowledgeable and he doesn’t overwhelm me with any insight but, hey, sometimes sales is just a numbers game right?  Talk to enough people and the sales will come…maybe it’s like the old theory that you have to kiss a lot of frogs to find your prince!

Anyway, he forwards our information to the underwriter.  At least we’re getting somewhere now.  The underwriter comes back and says that we need to pay down over $19,000 in credit card balances! She offers that some of this paydown could be with other credit cards, but that some of it would need to come out of pocket.

So here’s an observation that she is missing:  At this point, after reviewing the credit file in CCT, she does not know that over $23,000 of the total debt is NOT the borrower’s.  This is another one of the flaws of CCT — it does not identify Authorized User accounts or tradelines.  So she cannot see that these accounts need to be treated differently than the other revolving accounts and tradelines.

This is where we’re at right now, so stay tuned for the rest of the story.  There’s a few things here that don’t look so good, but let’s see how the rest of the story goes before we draw any conclusions.

Want to learn more about small business financing? Visit our free education center full of helpful articles to help you grow your business.

Photo via Flickr user somegeekintn

Posted on: 08-13-2010
Posted in: business credit

The 3 Kinds of Unsecured Business Lines of Credit — Part 3 0

By Tom Gazaway

This is the 3rd in a three part series.  If you haven’t read the first article read it here.  The 3 Kinds of Unsecured Business Lines of Credit (UBL’s) Part 1.

And the 2nd article can be read here.

3 – This last type of UBL…Well, I’ll be honest – it’s a bit of a stretch to call these UBL’s and I personally do not refer to them as UBL’s but technically they are so I guess they belong on the list.  These are the Vendor Lines of Credit.  What’s a Vendor Line of Credit?  It’s a line that is given by a store, a company, or a business.  For example, I have many of these Vendor Lines of Credit for Hawkeye Management.  My Staples card is technically a UBL because I did not provide any collateral and it is a line of credit.  I can buy at the store, online, or through the Staples catalog using our Staples card.  It is great and I like having it but it can only be used one place – Staples.  I cannot turn this into cash, I cannot finance receivables with it, and I can’t use it for anything other than buying products and services from Staples.  So these business lines of credit are not Cash UBL’s.  They have some value but their value pales in comparison to the other two types of UBL’s that can be used for anything under the sun.

The other thing to note here is that these Vendor tradelines or Vendor Lines of Credit are often part of a strategy that is designed to build business credit.  Also, if this is done properly, these Vendor Lines of Credit are obtained WITHOUT a personal guarantee.  I will also say this at this point.  I do understand this strategy pretty well but when and if we get involved in a business credit building strategy where we want to help someone build up their D&B and other business credit reports we will bring in a third party provider to do this.  We don’t consider ourselves to be experts at this strategy.

Now, with that being said, it’s also only fair to point out that most of the companies that are collecting fees for doing this are not really truly experts.  If you know me at all you know that I do not consider you an expert if you know a little more than the average guy knows.  So be careful and use caution with this strategy if you hire someone to assist you with the process.

The other knock I have against the “business credit” providers is that they often sell it or promote it with a carrot that doesn’t really exist.  What do I mean by that?  Well, if you build your business credit up to where you want it then it’s still VERY UNLIKELY that you can obtain CASH lines of credit WITHOUT a PG or personal guarantee.  Did I say this is VERY unlikely?  In other words, if you think that a good business credit report will get you any traditional credit lines or business credit cards without a PG then think again!  I’ll tell you like this.  At Hawkeye Management we have an 80 Paydex score, a 2r2 rating with D&B, 25-30 tradelines reporting, and we also have a 99 Intelliscore (out of 100) with Experian Business.  With all of that we can’t find anyone who will get us unsecured business credit without a personal guarantee. I’ve had numerous people tell me that they could do it and, as one of my good friends would say, “it ain’t happened yet dude.”  So just know what you’re getting and don’t fool yourself into thinking you’ll get something on the other side that really isn’t there.

I hope you enjoyed this 3-Part series about UBL’s.  If you have any questions or comments then let us know.  Our mission at Hawkeye Management is to assist entrepreneurs and Small Business owners with achieving their goals and dreams.  We do this by assisting business owners who want to start, build, or grow their companies.  If you need some capital to grow your business then we are passionate about helping you do it the RIGHT way.  Go to our “Contact Us” page on our website or give us a call and we’ll assist you and give you some HONEST feedback.  Have a great day!

Tom Gazaway, CCEW, FICO Pro, CMPS, XCO

Hawkeye Management LLC

888.783.1503 Ph

Posted on: 08-2-2010
Posted in: business credit
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