Today is potentially a historic day in American Business.  The Facebook IPO is here.  Mark Zuckerberg just rang the opening bell for Nasdaq.  The amount of wealth that is being created today for a large number of young people is not only historic but will have ripple effects that will be felt for years to come.  A 28 year old who started Facebook in his college dorm just became a multi-billionaire and, perhaps, raised the bar for young people about what it means to live the American Dream.  There are hundreds and maybe thousands of millennials – aka the “me” generation – who became multi-millionaires today – some of them made hundreds of millions!  Most of them are also likely people who are highly engaged in technology and the social sector.  As that wealth is realized over the years to come we’re going to see more than just comsumption through the purchase of expensive homes and cars and exotic vacations.  We’re going to see many new Angel Investors who bring their newly generated wealth to entrepreneurs and wanna-be entrepreneurs throughout the country and likely the world.  They’re all going to be looking for the next cool tech company and the next Mark Zuckerberg.

All these aspiring entrepreneurs need seed capital for their ideas and companies.  Who better to be your investor than someone who was in on the ground floor as part of Facebook?  Seed capital can come in the form of debt or equity.  Although debt is almost always cheaper and less expensive than equity – and approximately 4/5 business owners use some form of debt to fund their businesses even if it’s something as small as credit cards – we cannot underestimate the value of a true strategic partner.  Nothing demonstrates this better, in my opinion, than the ABC primetime show Shark Tank.  Numerous entrepreneurs and small business owners have literally doubled, tripled, and quadrupled their revenues overnight after appearing on Shark Tank.  Why?  Because a true strategic partner not only writes a check.  They also pick up the phone and in hours or even minutes has your product or service being offered through very large distribution channels.  It may be Daymond John putting your product in Macys or JCPenney because he has the decision maker on speed dial and probably vacations with the CEO.  Or it may be Lori Greiner who will have your product on QVC within weeks and you’re now selling hundreds of thousands of your widgets overnight.  So it nearly always makes sense when you’re looking for Seed Capital to use some debt along with seeking equity but remember that the value of equity investors should go beyond the check they write.

Regardless of where you are about Facebook and whether you like it or not and whether you think it’s a good investment or not, today is going to have an impact on the way younger people in high school, college, and beyond think.  Many of them are witnessing something tangible that they can touch and feel and if there’s any entrepreneurial blood in them then it’s going to get sparked.  Do you need seed capital to start,  build, or grow your dream into reality?  Look no further than today’s Nasdaq trading and the thousands of employees of Facebook in Menlo Park, CA and tell me why you can’t do what Mark Zuckerberg just did? It may be an unsecured business loan, $1,000,000 of seed capital, or a specific kind of strategic partner that you’re looking for.  It’s out there and only the strong and persistent survive and thrive so go change the world with that dream of yours!

Getting small business financing from a bank is quite different than getting it from a non-bank source. Perhaps even more so than you might have realized. This is true whether it’s unsecured business funding you need for working capital or if you need to finance a new piece of equipment for your manufacturing plant.

This is an important distinction, for reasons I’ll explain shortly. Banks and independent lenders are unencumbered by some of the very real regulations and challenges banks face, and they don’t have the same institutional inertia.

Banks, in turn, have the long-held reputations and the sheer force of dollars that many independent lenders struggled to match. Being aware of these differences will serve you well when you slap on that helmet and go spelunking for financing.

In all cases, be sure to verify that the lender you’re working with is trustworthy and a good fit for your business. With that disclaimer out of the way, let’s take a closer look at what separates banks from non-bank sources.

The Differences

As I see it, the chief advantages of going through an independent firm  as opposed to a bank are the speed and ease of the transaction. Independent lenders are not encumbered in the same way banks are, and they don’t have the reluctance that banks have to lend.

In fact, though, there is a sharp divide between what banks can give you and what independent lenders are willing to lend. Ever since the recession that took the knees out on the economy, banks have gone into their shells, and it’s harder than ever to get the thousands of dollars you need for that vital piece of equipment.

Independent funding sources are more agile, period.

Banks have the advantage in many cases of being backed by federal dollars and having an established presence in their local communities, and these are both great but it becomes a matter of priorities, efficiency, and execution.

Why It Matters

As a small business owner, the last outcome you want is a month of stalling while that piece of equipment you so desperately needed to keep your business running goes up in price and your financing inches forward through a bank.

Knowing that you can get a quicker, less paperwork-intensive deal on your next piece of equipment can make a huge difference. It allows you to proceed with confidence and, if that new bulldozer becomes available out of the blue, the kind of speed you’ll need to get the best price.

Thanks for reading, and be sure to come back for my next article about equipment financing, where we’ll be discussing the differences between buying and leasing equipment.  I’ll have some additional thoughts to what we learned here last year about this.  We’ll get to this topic later but don’t forget that, as a rule of thumb, you do not want to use short term, working capital such as your business line of credit, for purchasing large or expensive equipment.  In the financing world, that’s one of the reasons why you have an entirely separate sector of business financing for equipment financing.  Financing equipment is like any other form of financing – you can do it the right way or the wrong way so stay tuned to learn more about how you can make the right credit and financing decisions that will allow your business to grow more efficiently and more profitably.

Where do you turn when you’re looking for financing?

Dave Choate is the editor of Point Blank, a finance industry blog associated with Direct Capital. You can follow him @DirectCapital on Twitter or check out http://www.facebook.com/DirectCapital.

If you didn’t watch the PBS Frontline special tonight entitled Money, Power, and Wall Street then you can watch it here.  A couple of the biggest things we lack as small business owners are knowledge and understanding.  We get frustrated about this or that but we don’t understand “why” things are the way they are.  I used to be a student of Jim McMahon and he always talked about the “why” behind what was happening.  “Why” are things the way they are?  Watching this documentary will help; it should be required viewing by all CEO’s.  The doctors used to say “take 2 aspirin and call me in the morning.”  Well, the prescription for understanding today’s economy is to watch this PBS documentary, then watch Too Big to Fail, and Inside Job and then you’ll be wiser in the morning…and as a small business owner this can be done in just a few hours so it’s not too time consuming. 

I understand that we’re all about business lines of credit and borrowing money without collateral at Hawkeye Management so you may think we’re off topic.  However, if it’s our goal to really take care of small business owners and to truly be a trusted advisor then this means we have to have knowledge and understand about credit and lending that helps them solve their problems.  We can’t just learn about how to fill out applications and then try to jam a loan product down an entrepreneurs throat.  Do you really understand the financial world we live in if you don’t know the names Geitner, Paulson, Summers, Bernanke, Volker, Rubin, and the like?  I question whether you can really be a trusted advisor if you can’t put these pieces together and if you don’t even know the names of the key players who were at the epi-center of the crisis and the solutions that were put in place by the Fed.

You may not agree with some of the decisions that were made.  You may not like TARP.  You may be part of Occupy Wall Street.  These kinds of statistics may cause you to cringe.  But do you have a better idea?  Do you know how well thought out and strategic the plan was?  Ironically, if Ben Bernanke wouldn’t have been the chairman of the Federal Reserve he probably would have been at the top of the list of consultants who would have been sought out by the Fed to advise them.  Why?  He’s one of the country’s foremost authorities on The Great Depression.  The problem back in the late 1920′s was that the Fed let thousands of banks fail and they let the money supply contract far too much.  So it was actually the Fed in the late 1920′s who let a recession turn into The Great Depression.  So Bernanke learned from that mistake and wanted to the Fed to play a role that helped this economy in this crisis.  With the help of Hank Paulson and Timothy Geithner they decided to let the banks recover first because if they let the banks fail or if the banks stopped lending then our economy would have got far worse than it ever did.  Did you know that the Fed made money and didn’t lose on the TARP “bailout”?  It worked.  Yes, I agree that it sucks that the bankers took huge bonuses after they caused the crisis but I like that a lot better than the alternative.

So if you’re a small business owner then I think there’s some key things that we cannot ignore in the midst of our busy schedules and lives.  We have to know our craft obviously.  We have to have good marketing systems such as Hubspot or Duct Tape Marketing.  After all, Peter Drucker said that business boils down to two things: innovation and marketing.  Nowadays, since the internet has changed the way people buy products and services, we need to basically be in the publishing business if we desire to have a presence in the world of search.  Lastly, we are less effective leaders and we’re vulnerable if we don’t understand the basics of the financial, banking, and credit world that we live in.  After all, as a small business owner, you’ll probably want or need a small business loan at some time.  Or perhaps you’ll want an unsecured business line of credit from a great company like Hawkeye Management (hey, it’s my blog I can throw a shameless plug in occasionally lol).  Not only that but you’re likely selling your products and services to other businesses and so they may need a business line of credit just to get you paid on time so that impacts your bottom line too.  No matter how you slice it you’re wise to understand this crazy economy we’re in and have your hands around the basics.  Get started by tuning into the documentart, Money, Power, and Wall Street, on PBS Frontline.

With the birth of my totally awesome new baby boy a couple days ago I felt it was only fitting to talk about new beginnings and new chapters.  My wife and I had our 3rd son on Sunday.  His name is Micah Tyson Gazaway.  We are very excited and now life is suddenly different than it was just last week.  We have a new addition and our family has grown by 25%…how would you like 25% growth for your business this year?  Most business owners would like that but for some with aggressive growth plans that would be disappointing…so we’re all in different places with our businesses, our plans, and our expectations.

Our new child means several things for us.  We won’t get as much sleep.  We need to “balance” our time with our other two boys and not focus only on the baby or else that would negatively effect our other boys.  We need to plan and communicate better.  Just this morning I had to take our 15 month old with me when I took our 6 year old to school and I never had to do that in the past…so he needed to be dressed, we had to communicate on the plan, and we had to leave a little earlier so I could get him in the car seat, etc.  Do you have a new initiative or a new chapter for your business?  Does it require more time?  Does it mean you need a better plan with better communication with partners, employees, etc.?  Great leaders make these adjustments, do the planning, hit the curve balls, measure the ROI and results, and then continue that process.

Last night at the financing event I spoke at for Entrepreneur Works I talked about the importance of great leadership and I shared a formula for success.  That formula for good leadership and success is to plan, execute, measure, and then repeat that process.  I don’t know about you but I firmly believe that the ultimate business strategist always wins.  This means that if you’re properly planning and have a strategy then you simply employ your tactical initiatives to accomplish your overall goals.

The 3 biggest things, in my opinion, that cause businesses to fail to to not be as successful as they could be are:

1 – Poor or lacking leadership

2 – A poor marketing plan or no marketing plan

3 – Lack of access to capital – aka where were my unsecured business lines of credit when I needed them?

We obviously help people start, build, and grow their businesses by properly borrowing money.  If you need unsecured business funding or an unsecured business loan or line of credit then we may be able to help you.  As necessary as it is for most business owners to have access to business credit its also vitally important that there’s a “plan” for how to use those funds that are borrowed and a good portion of your small business loan or your business line of credit should be used for what we call RGA – Revenue Generating Activities.  In other words, use your funding to grow your business and drive additional revenue in the door.

I’m sure we would all like to be the next Instagram but you would be wise to start generating revenue and growing your business wisely rather than banking on selling prior to making any money.  It’s still a great story but whatever your situation is with your business maybe you’re starting a new chapter or need to start a new chapter.  New beginnings can be fun and it doesn’t always mean things were bad before.  Sometimes the best time to shake things up is when things are going well.  I hope you’re continually looking for ways to make your company better.  Improving your product or service or the value that you bring around that is important and, even more important, is the marketing plan that let’s the rest of the world know about you and buy from you…so I hope that part of your new beginning incorporates RGA!

Are you a revolver or a deadbeat?  You may not know but your credit card company does and you’ve been labeled as either a revolver or a deadbeat.  We all know that credit cards and our dependance on them has been firmly weaved into the fabric of our society.  However, what you may not know is how sofisticated the credit card lenders are in how they analyze you, your credit, your spending habits, and it’s all done with their eye on the bottom line. 

To credit card companies revolvers are people who do not pay off their balances in full every month…they “revolve” their balances from one month to the next.  This means they earn interest and that makes you a “more profitable” customer to them.  They love it as long as you don’t get carried away with letting your balances get “too high” and you don’t start making late payments too often.  Statistically, according to Federal Reserve Board survey of consumer finances, about 45% of consumers revolve their balances.  Keep in mind that the “most” profitable customers to credit card companies are people who:

1 – Use credit cards…duh!

2 – Have good – but not great – credit

3 – Revolve their balances consistently…not all the time but at least occasionally

4 – Don’t “max” out their credit cards or overly utilize them

5 – Occasionally pays late – credit card companies love their “fee” income

6 – Maintain stable employment with good income (and possibly have a nest egg or retirement account but nobody would admit this one)

So, now that you’re good and angry lol, what are deadbeats?  Well, the deadbeats are those of you who pay your credit card bill in full each month.  This is about 30% of people.  If you’re doing the math, 45% revolve, 30% are deadbeats, and the other 25% are people who have no credit cards.  If you’re a deadbeat then you probably get few credit card solicitation offers in the mail.  Oh yeah, you still get them but not as many as the revolvers simply because you’re not as profitable.  The credit card companies can still make money from having you as a card carrying customer through transaction fees and maybe an annual fee or an occasional late payment but you’re not as profitable to them.

Now that you know how the credit card companies think maybe it will help you understand why they do some of the things they do.  It impacts how they market to you, how they manage your credit line (increasing it, decreasing it, closing it, etc.), and the decisions they make.  That doesn’t mean there aren’t several other factors that go into their decision-making process because the credit card world has deep waters with multiple caverns and is constantly evolving and changing but hopefully you get the point.  Credit cards are a popular form of unsecured personal credit and a popular unsecured business credit line.  They can have great interest rates or terrible interest rates.  They can offer rewards points and truly be a great tool for your life or they can be a pathway to bankruptcy court.  It’s all in how they are acquired and managed.  Unsecured business credit cards are popular for entrepreneurs and small business owners – and, according to Keybridge Research, they can increase revenues and create jobs when utilized properly.  Since credit cards are easier to obtain they tend to be more common than things such as business unsecured loans or other forms of unsecured business credit.

Like anything else in life, a good thing can be used for bad or have bad results when used or utilized improperly or poorly.  If you’re an entrepreneur or small business owner then statistically over 80% of you will use credit cards as a vital part of your overall funding strategy.  Credit cards are absolutely the most common form of financing that is used by small business owners.  There are some key aspects of making this work properly.  You should evaluate (first) your credit file to make sure it’s as good as it possibly can be.  Then you should properly acquire (second) the right credit card or credit cards.  Then you should use or utilize (third) them wisely – such as taking full advantage of 0% offers, avoiding costly cash advances, etc.  Lastly, you should manage (fourth) your credit cards and make sure you don’t do things like go over the credit limit, pay late, etc.  If you’re a business owner be sure to remember that all business credit cards are not created equal and don’t make the mistake of using personal credit cards for your business.

Stay tuned next week to hear about an obscure Supreme Court ruling from 1978 and how it shaped the future of the credit card industry that we know today.

I don’t want to give the impression that we’re where we should be or that we’re even close to where we were pre-2008 but the Dept of Treasury report released on Monday shows us that we are continuing to see banks doing more lending. This is what we want.  More and more small business loans are being approved.  We want a slow, steady, and wise return to lending.  We do not want to return to the pre-2008 days of unresponsible lending but we do want the pendulum to swing back to somewhere in the middle. 

All the statistics show that businesses fail for a variety of reasons.  When you look at the various reasons and different sources who quantify this data you’ll find that the three most common reasons why businesses fail are: 1) poor or “not good enough” leadership 2) insufficient or lacking marketing plan 3) not enough access to capital.

The thing that doesn’t get talked about as much are the reasons why businesses don’t get started.  I think the two main reasons for that are fear and lack of access to capital.  I have a 2-part article that will publish over on Small Business Trends tomorrow that talks about fear – check it out here.  Don’t let fear keep you from going after your dreams and goals!  Additionally, we can help with startup funding at Hawkeye and we can solve the #1 financing problem facing small business borrowing today and that is the improper use of credit cards.  4 out of 5 small business owners use credit cards and 90% of them use them the wrong way and that results in 6 different problems.  By simply using credit cards the RIGHT way you can turn those 6 problems into 6 benefits so ask us about this and let us help you where we’re strong and then you can focus on building your business.

If you are looking for business credit or a small business loan of any kind then we wish you the best.  The signs are looking better but there’s still a universal truth that banks usually approve around 10% of the applications they receive from small business owners.  Then, from the people who do get approved, it’s common for them to NOT approve the full amount the business needs or it’s also common for banks to ask for collateral when it shouldn’t be necessary or to ask for an excessive amount of collateral.

If you are looking for real answers and want to understand how to borrow money the RIGHT way then we’re always available as a resource for you here at Hawkeye Management.  Look for someone who is knowledgeable and who you can trust.  Look for people who understand unsecured business lines of credit, business credit, and the unsecured business funding space.  Check them out with the Better Business Bureau, and hopefully there are not any required up-front fees.  After all, why would you need to pay me a fee before I get my business funding if I’m actually confident that I’ll get you the funding you’re looking for?  Since the unsecured business credit space is so highly credit-driven it’s also a good idea to look for true expertise in the credit space who can truly interpret your credit profile.  Are their people FICO-Pro Certified and do they help you find the solution that’s best for you?  Will they help you borrow money the RIGHT way so that your excellent credit is maintained and preserved or so that you improve your credit profile as you work with them?  These are some questions to ask but, in addition to listening to their answers, listen to “how” they answer you.  Do they really know and care about these things or are they giving you answers that are what they think you’ll want to hear?

In February we saw the 3 year anniversary of Experian discontinuing their consumer agreement with Fair Isaac, the creators of the FICO credit scoring system.  The Experian announcement has a very interesting “twist” or “angle.”  We’ll get back to that later but the issue here is the confusion that plagues consumers when it comes to checking, knowing, and understanding their credit scores.

By far the most popular and most utilized credit score that is used by lenders is the FICO scoring system by Fair Isaac Corp (FICO).  This is why we’re all familiar with the term “FICO score.”  The problem is that when consumers go online looking for their credit score they don’t know the importance of reading the fine print and making sure that they get a FICO score rather than what we call FAKO scores.  Any credit score that is not a FICO score is a FAKO score.  The only two sites that I’m aware of where FICO scores can be purchased online are myfico.com and equifax.com (where only one of your FICO scores can be purchased but they also offer non-FICO or FAKO scores and you’ll have to look to find the FICO product).

So if you goto the MyFico site there’s a catch.  You can only buy 2 of your FICO scores and not all 3.  You cannot buy your Experian FICO score there.  In fact, there’s nowhere online where consumers can purchase their Experian FICO score.  That’s because in Feb. 2009 Experian chose to not renew their consumer agreement with Fair Isaac.  Basically that just means that they no longer were willing to provide the credit data to Fair Isaac that allows them to generate their FICO score and offer it to you and me as consumers.  Experian wants to sell you a FAKO score and keep all the money.  They had no desire to do what’s best for you and me as consumers and figured that we wouldn’t know any different.  So they sell us “their” FAKO scores and keep all them money for each purchase rather than sharing the money with Fair Isaac and allowing each of us to know our true FICO scores.

So don’t believe the “twist” that Experian tries to sell you about the lack of importance of FICO scores.  It would be correct to say that FICO scores are the gold standard or the industry leader but that there are other scoring models that still provide your credit profile and have value.  But Experian takes a different angle and seeks to downplay the importance of FICO scores.  Additionally, they made a very self-serving decision by pulling out of their agreement with Fair Isaac and leaving all of us consumers on the outside and unable to obtain our FICO scores online.

Regardless of whether you agree with my thoughts on this or not I definitely suggest that you should be using a credit monitoring service to monitor the data within your credit report.  In my opinion, credit monitoring sites do not need to offer you FICO scores because the main purpose of monitoring your credit is to track your data and make sure there’s not any unknown activity happening with your credit profile.  Truecredit is a good credit monitoring service and there are many others too but don’t confuse that with the need for obtaining your FICO scores before you look to apply for mortgages, car loans, or a small business loan.

Your consumer credit report is important to a small business owner, because your personal credit profile and scores are reviewed when you apply for most small business loans.  Have you seen your consumer credit report?   Some people are surprised when they view it for the first time and usually expect to find more personal information on it.  It is important to know what is included and especially what is on your report.

There are basically four sections on the credit report: 1. personal information, 2. inquiries for credit, 3. account information, and 4. public record and other information. 

1. Personal information – This includes names, addresses, Social Security number, date of birth, employers and income.  Middle names, name prefixes (Dr.), name suffixes (Jr. or Sr.,) and maiden names are referenced if they have been used to apply for credit.   Your current and several former addresses are listed, which establish length of residence. The employment and income information are not updated very often, because it originates from loan applications.  The personal information section is mostly used to assist in matching information from data sources.

2. Credit inquiries- Inquiries are placed on your credit report when you seek credit or apply for credit.  This information remains on your credit report for 24 months but the inquiries only have an impact on your FICO® scores for 12 months. For example, you apply for a car loan and the company name and date are recorded on your credit report.  This information is required by law so you know who has reviewed your credit report.  There are hard inquiries and soft inquiries. Hard inquiries are initiated by you seeking or shopping for credit.  Soft inquiries don’t display on the credit report for anyone except you.  These inquiries are from present creditors monitoring your account, you requesting or monitoring your credit report, potential or present employers, and insurance companies.

3. Account information – This consists of current and historical payment information on revolving and installment accounts.  Revolving accounts are accounts which let you carry a balance such as credit cards (bank card and retail card).  Installment accounts include mortgages, signature loans, auto loans, and student loans.  This section contains information on date the account was opened, the last time the account was updated, the balance owed, credit limit (for credit cards), original loan amount (for installment loans), dates of late payments, and current rating.  The current rating is based on how you are paying your bills now such a current (on time), 30 days late, 60 days late, 90 days late, over 120 days late, charge off, or bankruptcy.  Historical payment history includes the dates the account was past due.  This is an extremely important section of your credit report.

4.  Public record and other information - Public records are tax liens, civil judgments, settlements, overdue child support and bankruptcies.   This information includes source of public record, plaintiff, status of the public record and the details, date filed, date resolved, claim amount, liability amount and responsibility. The other category is collection accounts.  When the account has been charged-off by the creditor, it is turned over to a collection agency, which reports it on your credit report.  The collection information includes agency name, account number, the past due amount as of a date (status), date account was open opened, type of account, terms, date of status, monthly payment, date last reported and responsibility for the payment.  All of this information is considered derogatory and has a negative impact on your credit.

If you have business accounts that report to the consumer credit reporting agencies – Equifax, Experian and TransUnion – this information will also be included in your consumer credit report. If business accounts aren’t reported, in most situations they could be if the account goes delinquent or is charged-off by the creditor and turned over to a collection agency.

If you haven’t seen your credit report or haven’t viewed it recently, you should consider doing so. You can obtain a free copy annually from each of the three consumer credit reporting agencies at www.annualcreditreport.com.

I don’t know about you but sometimes the most obvious things elude me.  If we believe that first impressions are important then we should be concerned about things like our website, how we dress, our business cards, and maybe even the cars we drive among other things.  Don’t get me wrong, I’m not suggesting buying a car you can’t afford or being caught up with status-related nonsense.  However, all these things do send a message.  I started to realize that often times I show up at meetings with a blank, ugly file folder.  I realize it’s a small thing but I did some google searches on ring binders, kinko’s binders, and 3 ring binders and am getting a new binder with our logo on it to carry with me on all my appointments.  It’s a small thing but we’re all a compilation of our small habits, gestures, and actions. 

The goal with first impressions is not to deceive but to send a message that you’re a professional and that the people you encounter should think of you in the best possible way.  This may not have much to do with unsecured business funding but we’re ultimately about helping small business owners succeed and borrowing money the RIGHT way is an avenue to that success.  So is how you brand yourself, your business, and the first impressions you make important to you?  It may not be 3 ring binders for you but what is it you need to brush up your branding and make a better first impression?  After all, it’s immediately that people begin to size you up and decide if they want to do business with you or not!

It’s an interesting phenomenon.  As interest rates have been rising, small business loans have been slowly on the rise.  Additionally, credit card chargeoffs are on the decline.  Depending on who you look to it’s a pretty well-known fact that 4 out of 5 small business owners actively use credit cards.  Credit cards are, by far, the most popular form of startup financing and are often the one and only method of seed capital used by entrepreneurs.  For those who actually work with small business owners on credit and lending solutions it’s a reality that they use credit cards and that they love loans and lines of credit that do not require collateral.  You can read more about the 3 different types of unsecured business lines of credit also.

Here’s the problem.  Most of the time when I read articles about credit cards it’s either negative or they miss the most important aspects of proper credit card financing.  There are several factors that can be either positive or negative with credit card financing and it’s all dependant upon borrowing money the RIGHT way.  It’s pretty safe to say that we need a paradigm-shift with how small business owners and their advisors view credit and lending.  If 4 out of 5 small business owners are using credit cards then I think it should be an important priority for us to help them do this the right way.  Unfortunately, most small business owners miss out on all the real benefits of using credit cards by using personal credit cards or by using the “wrong” business credit cards.  So what’s the problem with the Discover Business Card?  The problem is that Discover reports the monthly activity for their business credit cards to the personal credit report of the small business owner or personal guarantor.

If you’re asking why that’s a big deal then remember that 30% of your FICO score is determined by your utilization, or your balances in relation to your credit limits on your revolving tradelines.  In other words, as soon as you start using that Discover Business Card you’ll likely be hurting your personal FICO scores and then that impairs your ability to get other personal or business loans.  There are other business credit cards that report to the personal credit report also but this is the most basic and fundamental aspect of proper business credit card borrowing.  Do not make the mistake of thinking that an interest rate that’s 1% lower makes for a better business card.  Interest rates on credit cards fluxuate.  They are not loans.  They can go up or down based on how you manage them so if you manage them well there’s a good chance your rates will improve and if you pay late, go over credit limits, etc. then there’s a good chance your rates will increase.  Just don’t make the fundamental error of hurting your credit because you think the starting rate is of great importance.

Stay tuned for more about how to borrow money the RIGHT way so you can ensure the best possible credit profile and give yourself the best possible chance of being able to qualify and get the best terms when you need additional financing as your business continues to grow.  Keep livin’ the dream!