The Truth About Business Funding No One Tells You

Hello again. Business funding lines of credit. We we dealt with them a lot in the past. I'm currently put off in the files with him. Um and happy smooth process smooth service and he's delivering as well. So funding and mistakes post questions. Get the questions. So let's let's dive in a little bit in the in industry and we work a lot together and let's see what we can how we can help others. >> Absolutely. Sure. By the way, it's a pleasure to be here. >> Beny, thank you Ben. Thank you co-inance. team. It's always a pleasure to work with you guys. Um so far like we've worked on many files and we have now a few currently and I can co-inance with Khali personally is says Alice in Iron House the communication is amazing but if I need for a client documents if it's tax returns if it's corporation documents whatever it should be smooth it's easy and it's just a pleasure to work with you guys I can't I don't take credit for myself. The team that you have set up is topnotch. >> Um, let's let's go. Let's go. >> Sure. Let's dive into it. Um, a line of credit versus a mortgage versus a business loan versus a no loan versus a um SBA loan, a credit card differences. >> Absolutely. Great question. So, the difference in products is very simple. There's multiple different products, multiple different options. situation. So, let's just break it down a little bit. Um, mortgage obviously that's for property usually, >> correct? Um, in the mortgage industry, which is also called HELOC, which is a home equity line of credit, and that is a little bit more similar to what we're going to be talking about, but the business financing. So, business financing, you have multiple options, including loan mortgages. It's let's say departs from the bank $1,000 of you whatever you want and it's monthly payments until you pay it back and very easy very very simple a line of credit is a different idea there's no monthly payments really it's there is there's the interest but the way it works is whatever the number is whatever the story should be for whatever reason you want expand, you want to grow access, you just transfer out money,000%. I know that right. >> So, so reality 100%. So again, a line of credit I look at as like a safety net. You know, it's not something you want to rely on, but you want to have it in case something comes up, you know, in different industries. You know, it might take longer to get payment or whatever it is, and you want to be able to manage your cash flow. So, it's just having a safety net. If you don't use it, you don't pay nothing. set of the business healthy it's not a it's not an emergency fund e >> correct this is in addition to the emergency fund in addition to your daily cash flow obviously you don't want to rely on this from day to the um operations, but it's there in case of emergency, in case of a crazy deal or the aggressive amount inventory or whatever it should be. You want to hire a new worker, you want to open up a new location, whatever it is, the access to guilt and it gives you a little bit of peace of mind that gives you opportunities. >> Beautiful. So this is aligning credit for aligning credit most usually for get an amounts there is quite a bit of documentation from DASM starting with obviously with tax returns and um the different amounts you need different financials but that's usually what we need for a loan and a line of credit then there's another option which are easier options so the host 0% interest credit cards which simulus is this is a business credit card that gives you 0% interest for let's say anywhere between 9 to 12 months on average and that's an excellent option for short-term expenses marketing campaigns whatever it is it's a great way of just getting access to money without actually paying interest at a bank that's credit cards and then there's another option which is low do line of credits which is no worry relationship don't worry we're Exactly. Things are important. Things are emergencies, but they're not not that much of an emergency. Exactly. Right. It's a very overused word. Yeah. Exactly. So, back to the low. Low is a line of credit. It's obviously going to be smaller amounts, but the defendment return for whatever reason. >> This is the >> low line of credits. usually just with good creditments. That's basically the last one which is the most popular SBA loans government. Unfortunately, but there is a government program. Um they have two main different programs, the SBA 7A and SBA 504. 504 is made for real estate and larger purchases like that. We're not going to get into that, but SBA 7A is a great option for a company loan. The model of def is obviously the main one is they're going to give you longer terms via any regular bank. So going back to up to 10 years with the SBA program and it's not that the SBA is giving you the money which is the biggest misconception. They're guaranteeing the loan. So there certain advantages certain but it is a beautiful product. >> Got it. Correct. Business acquisitions, partner buyouts, that's a beautiful thing to use it just because again you have that longer time frame to pay it back. Got it. We shouldn't go into details. Startup loans. >> Correct. So startup loans obviously in your first year business. So there are a few banks that would lend to that as well. um is usually planned on amounts but it's the idea is it's they offer to you to help you kick off operations he says of websites he says just managing the initial startup expenses >> so satan they they list that in some of the discuss mortgage bro mortgages and he lacks guard >> correct he's going to be more knowledgeable in that field yeah it does cross over sometimes but the main idea is that I'm a big believer on a jack of all trades is a master of none so I like to stick to the business funding side of it and there's a lot of very knowledgeable mortgage brokers out there that can guide you with mortgages and helax and get all the related products. >> Got it. Very nice. What would you say the biggest mistakes these days business owners? >> Great question. So meaning Exactly. Exactly. So the idea which is going to get us the best approval is guilt. There's a big difference to that desperate bank account. I'm already at that stage where I'm scrambling for money. They're very hesitant, you know. But in a healthy spot, everything is going good. The cash flow is good. People are paying on time. Every no surprise expenses. But you want to set it up. If you're thinking about the future and you want to just plan ahead, banks love that. >> Very interesting. Basically, line of credit before you even think you need it. >> Correct. In business and you're doing hostility, that's the time to take a line of credit. >> Correct. >> What you say is in a mention. >> So, says the mention was planned ahead as usually once they've already recovered from a hard time. I'll give you an example. Right now, there's a government shutdown, right? And there's a lot of businesses sees I've bidden of government contracts or whatever it is, they're working with the government and they're not getting payment from them. So a lot of these companies that have been through this in the past with previous shutdowns for family and friends and whatever and then right afterwards they set themselves up with lines of credit and how they could take as opposed to a lot of newer companies now they didn't plan ahead are right now unfortunately having a little bit of a hard time you know and we don't know how long it interesting. Um what else? >> So especially businesses when they start out is using personal credit cards for business expenses. >> Okay. Ex explain >> the reason is very simple. Personal credit cards. Sorry. The bank loves when things are clear and I'm sure your accountant will love you for that. Keep your business and your personal expenses separate. What I see a lot of times is I mentioned a personal credit card limit and minist it's it's actually a business credit card just on this personal >> correct but the problem is like this >> is that a problem >> it could be a problem it could be beautiful it could be a problem the fact is personal credit cards report to your personal credit score >> if you're doing marketing you're buying equipment whatever it should be and you're using a decent percent of the card or you're maxing out the card even right yet if you want to go for more options your score drops because you have high utilization. Utilization is a gross impact of our credit score. The benefit from business credit cards is it keeps it separate. It reports to your personal to the business score for the most part. There are some banks just report and see but most credit business credit cards will report to the business score. >> And the idea by doing that is the laws down personal credit score. I be clean. So whenever you do decide, hey, we're going to find me and I want to there's a new uh credit card promotion if I get the points or whatever it is you want to open up. D personal credit is good. We're going to find mortgage whatever it is. >> Got it. personal credit is get. >> Makes sense. Got it. What else? >> Um, another very important one is business credit. We just spoke about personal credit, but business credit is also very important as I've mentioned overlook it. Start building your business credit early. See different industries have dealing with different vendors report whatever it is. But just start with a simple small business credit card and build yourself up as in the case of our warehouse. Anything mid the business profile business credit should be good and should be sufficient. >> Got it. Um another question was kicking the loans. >> So >> is it on tax return? Is it done credit? Is it spider? >> It's a combination of everything. So the sweet spotic is you want to have again perfect line 740 plus credit score at least two years in business file tax returns obviously credit lower there's still options if you don't have the two years there's still options or there's always options but that that would be the sweet spot So I would obviously recommend allowing a credit on a loan. You don't want to give up equity business. There's a lot of long sleepless nights and effort a successful business that will be successful one day for sure. Okay. So the more that grow that business got vox and a box and a vox and so will his equity versus when he just blinks it on the bank as a we'll call it as a part-time investor you know because after all the bank is still investing in your business when they're risking their money in your business in your idea >> but the equity you're trading that for abyss of interest and my opinion I'd rather pay a little bit of interest over the long run if I gave an equity in companies. Whatever million the payments of you need to know your next move. The loans $15,000 payments monthly is the SBA loan and the correct the loans which is a lot of money additionally budget. So >> correct. So again, obviously it goes by case by case scenario. Their situation is very very different for one person that might make more sense to do it this way from one person that might make more sense to take on investor. When you bring on investor, you're bringing in another person's experience. You're not just relying on effortion. partners. There's pros and >> cons and consation. >> Exactly. So, there is a time for an investor and there's a time when I personally think it doesn't make sense, but it's a case by case scenario. There's no wrong answer. >> Anything else that you have to add? Questions. So, >> sure. Let's hear some questions. I'm curious what thinks >> but question my credit is 56 do you think I can get something something for my business lol question is the bottom line can >> so great question actually um unfortunately the way it works is like this most big banks um national banks regional banks they are going to want to have a 680 plus credit or 680 is usually the bottom and for credit cards I believe as well sdu as credit unions and community banks would that would go down a little bit lower um I think the lowest that I've seen is like 660 or 640 but it also there's a case to be made the business the financials are perfect on deposits are perfect consistent that's and credit the move there local community think as rough as it sounds, they don't really need you. They want to work with small businesses and you move over your banking relationship with them and you actually want to you show them that you're serious to work with them. A lot of times I've seen that they're willing to work with [snorts] you. So the as it chance very interesting um question is it okay to to do a loan for a business when you you know or feel they will default? Um I don't know if I'm the best guy to answer that. Just want to put some I put disclaimers out there. I mentioned teen days cuz first of all the business they're not going to come after me. Unfortunately, it's not really true. The credit card the loan there's a PG. There's a personal guarantor and >> business the second they have a judgment they can start taking out money without you. >> Correct. And and they're also going to usually go on the personal as well. Like even if they drain all the business assets, if they didn't recover their funds, they're coming after you >> 100%. >> It might sound nice in the short term, but in the long term, this is it's a headache. And is it worth it for $100, $200,000? >> I'll let you make that decision. >> I almost got it. Um but basically, it's not a yes or no question. That's not a yes or no question, >> but he answers for the for the for the person that wants to take out the loan. The question is, let's say probably not. No, cuz it's industry. It's all relationship banks having relationships with the bankers and the underwriters and it just wouldn't make sense and morally I think I would have a problem with it. It's not something was I would entertain. >> Got it. Questioning. I'm in construction business. I'm running multi-million dollar operations. However, since I started out um quite recently, I'm having very hard times securing credit cards and lines of credit since I don't have enough enough to show for fact. I press over 100k in in salaries um a week and I and I would it would be helpful to get to get some credit cards and over 750 um credit score with zero late payments. What would be the option for? So the option as I mentioned again there is the startup line of credit like we've mentioned in the beginning it's not going to be allowed obviously but we processed over 100k in sal you don't client so probably not going to help >> correct so the options again there's credit cards always you know there's especially the um charge cards and the flexible spending accounts the there's not a fixed limit they go based off of your accounting and stuff like based off of that deposits and bank statements. Um, that would probably be a very good option. Um, not a good option is going back to the same guy with the 560 is just working with a smaller bank. Somebody that you might not meet the criteria from the bigger national banks, but a smaller bank would be more willing to work with you. And even though even even though the has the return proven as the business is successful but just from your day-to-day operations and maybe the host has um past experience that we can show as hey this works I I know what I'm doing I could do this they might also that might also be >> in in in real estate you prove the bank they give they approve you without anything >> um um anything else that you want mad. >> Um, no, that's basically it. Again, guys, that the main idea is just a few pointers is you're going to the business is going to have um like a deposit in my account,000. I got somebody to to transfer me $100,000 $100,000 $100. Is that going to be good for a bank? Um, banks like to like consistency return bank statements, whatever it is, year-over-year growth, bank statements, they want to see average, deposit, deposits, all that inconsistency makes them worry a lot. And the last thing was just a pointer is I know nobody likes to pay a lot of taxes and especially they say, you know, working with your clients, tax planning and everything. Yeah. >> Um, but if you are thinking about taking funding in the future, just keep in mind as you have file an law return is going to save you a few dollars in tax season, but it also really limits your options as far as getting funding in the future. >> Very nice side question of credit is getting easier now. So definitely you know >> exactly good question. So in obviously you know you know banks um over the last year or two banks did definitely get a little bit tighter. But again, as long as you have as actual business, if you have something real going on, if if the business is functioning and you're doing it right, banks are more than willing to lend right now. >> Got it. Um I think >> maybe they're out of business. They need >> Yeah, they're too big to stop. Um, please like, subscribe, comment, ask any questions, like Ellie's contact info in the description. Um, check a good guy. >> Just one more thing I want to add. The point is in a healthy business funding. It's a beautiful thing to have set up. But more important than that, have your have your savings business savings. If it's three months, if it's six months, whatever the heels make off the ball as in case a hard time, you have your own cash reserves to jump to dive into and depend of the point. Exactly. [music]