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Finance & Accounting

How to Check Your Business Credit Score

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A top-tier business credit score can unlock preferred rates on financing and business insurance, and it can also open the door to potential partnerships and trade credit arrangements.

Unlike personal credit scores, which are standardized and available for free, each business credit bureau uses a different scoring system, and you often need to pay to view your report.

Your business credit score is also available to the public — meaning potential investors, partners and lenders can take stock of your company’s financial health, so it’s important to monitor your report.

Checking your business credit score

You can stay on top of your score, and check the financial health of other businesses, by pulling reports from the three main business credit bureaus: Dun & Bradstreet, Experian and Equifax.

Lenders may use different bureaus, so it’s smart to check your business credit score with multiple agencies.

Dun & Bradstreet

Businesses don’t automatically get a credit score from Dun & Bradstreet. You first need a DUNS number — it’s free to apply but can take up to 30 days to receive. Once established, Dun & Bradstreet rates your business’s financial health and assigns a Paydex score, a delinquency score and a failure score, along with several other ratings and predictors.

Paydex evaluates payment performance and companies are scored between 0 and 100, with a higher score indicating better payment history. The delinquency score (101 to 670) assesses the likelihood a business will pay late (91-plus days) in the next 12 months. A higher score translates to a lower risk.

The failure score, previously referred to as the financial stress score, ranges from 1,001 to 1,875 and predicts whether a business will file bankruptcy or shut down without paying its debts within the next 12 months. A low failure score equals a high risk.

You can check your Paydex score (and three other ratings) for free with Dun & Bradstreet’s CreditSignal package, which includes alerts for score changes and business credit inquiries. Upgraded subscriptions offer access to more ratings and deeper analysis, plus additional alerts and monitoring, for $15 or $39 per month.

Experian

Experian’s CreditScore report includes your business credit score, financial stability risk rating, payments trends and account histories.

The business credit score (ranging from 1 to 100) looks at payment behavior, primarily on commercial accounts, including the number of delinquent accounts and the number of accounts with payment terms beyond net 30 days. A higher score equals a lower risk for delinquent payments.

According to its website, Experian’s financial stability risk rating (1 to 5) “predicts the likelihood of payment default and/or bankruptcy within the next 12 months,” using factors like commercial collection accounts, credit utilization, and business and industry risk factors. A low score indicates low risk for serious financial distress.

You can purchase your CreditScore report through Experian’s website for $39.95 per report or subscribe to Business Credit Advantage for $189 per year for unlimited access, plus alerts, monitoring and additional analysis. Experian does not offer a free business credit report.

Equifax

The credit risk score ranges from 101 to 992 and evaluates the likelihood of business failure or delinquent payments. A higher score equals lower risk. Payment index scores (1 to 100) evaluate payment history, with delinquent payments leading to a lower score. And the failure risk score (1,000 to 1,880) aims to predict the odds a business will shut down operations in the next 12 months. A lower score equals a higher risk of failure.

Owners can request their company’s report at no cost, but there are a few caveats. First, you can only get your own credit report if you’re applying for business credit, like a loan or credit card. Second, you have to contact an Equifax representative and provide proof of a business credit application.

Want to get insights on another business? You can contact Equifax to purchase a credit report for a competitor, partner or supplier. Unlike other business credit bureaus, Equifax does not publish pricing on its website.

Credit bureau

What’s included

Dun & Bradstreet

CreditSignal: Free.

  • Paydex score, delinquency score, failure scores and supplier evaluation risk rating.

  • Alerts for business credit inquiries and changes to scores and ratings. Access for 14 days.

CreditSignal Plus ($15 per month) and CreditMonitor ($39 per month) also available for unlimited access, additional scores and ratings, and credit monitoring and alerts.

CreditScore report: $39.95 per report.

  • Business credit score and financial stability risk rating.

  • Payment trends, credit summary and score factors.

  • Judgments, liens, bankruptcies and collection information.

Business Credit Advantage ($189 per year) also available for unlimited access to your score and detailed business credit report.

Business credit report: Free when applying for business credit.

  • Credit risk score, business failure score and payment index score.

  • Credit utilization and summary of credit accounts.

  • Public records, such as bankruptcy or tax lien.

Factors that go into your business credit score

Each credit bureau weighs different factors when calculating your business credit score, but most look at a combination of the following:

  • Company size and age.

  • Age of your oldest financial account.

  • Available revolving credit limit.

  • Established trade lines.

  • Payment history to creditors and vendors.

Building your business credit score

A low business credit score — or no score at all — can make it difficult and more expensive to get business loans and payment agreements with suppliers. A business credit card can help you establish credit if you’re starting from scratch. Making on-time payments, establishing trade lines with suppliers and working with creditors that report to the main business credit bureaus are good places to start.

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Finance & Accounting

4 tips to find the funding that fits your business

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The facts are clear: Startups are finding funding increasingly difficult to secure, and even unicorns appear cornered, with many lacking both capital and a clear exit.

But equity rounds aren’t the only way for a company to raise money — alternative and other non-dilutive financing options are often overlooked. Taking on debt might be the right solution when you’re focused on growth and can see clear ROI from the capital you deploy.

Not all capital providers are equal, so seeking financing isn’t just about securing capital. It’s a matter of finding the right source of funding that matches both your business and your roadmap.

Here are four things you should consider:

Does this match my needs?

It’s easy to take for granted, but securing financing begins with a business plan. Don’t seek funding until you have a clear plan for how you’ll use it. For example, do you need capital to fund growth or for your day-to-day operations? The answer should influence not only the amount of capital you seek, but the type of funding partner you look for as well.

Start with a concrete plan and make sure it aligns with the structure of your financing:

  • Match repayment terms to your expected use of the debt.
  • Balance working capital needs with growth capital needs.

It’s understandable to hope for a one-and-done financing process that sets the next round far down the line, but that may be costlier than you realize in the long run.

Your term of repayment must be long enough so you can deploy the capital and see the returns. If it’s not, you may end up making loan payments with the principal.

Say, for example, you secure funding to enter a new market. You plan to expand your sales team to support the move and develop the cash flow necessary to pay back the loan. The problem here is, the new hire will take months to ramp up.

If there’s not enough delta between when you start ramping up and when you begin repayments, you’ll be paying back the loan before your new salesperson can bring in revenue to allow you to see ROI on the amount you borrowed.

Another issue to keep in mind: If you’re financing operations instead of growth, working capital requirements may reduce the amount you can deploy.

Let’s say you finance your ad spending and plan to deploy $200,000 over the next four months. But payments on the MCA loan you secured to fund that spending will eat into your revenue, and the loan will be further limited by a minimum cash covenant of $100,000. The result? You secured $200,000 in financing but can only deploy half of it.

With $100,000 of your financing kept in a cash account, only half the loan will be used to drive operations, which means you’re not likely to meet your growth target. What’s worse, as you’re only able to deploy half of the loan, your cost of capital is effectively double what you’d planned for.

Is this the right amount for me at this time?

The second consideration is balancing how much capital you need to act on your near-term goals against what you can reasonably expect to secure. If the funding amount you can get is not enough to move the needle, it might not be worth the effort required.

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Banking

Overdraft Protection: What It Is and Different Types

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Overdraft fees can be a major drain on your finances. Some banks charge more than $30 per overdraft and potentially charge that fee multiple times per day if you keep making transactions that overdraw your checking account. If you want to avoid these fees, you can typically opt out of overdraft coverage with your bank. It can be useful, however, to set up overdraft protection instead of opting out so you don’t find yourself unable to pay for something urgent.

What is overdraft protection?

Overdraft protection is a checking account feature that some banks offer as a way to avoid overdraft fees. There are several types of overdraft protection, including overdraft protection transfers, overdraft lines of credit and grace periods to bring your account out of a negative balance. Some other overdraft coverage programs might be a combination of these features.

Before you opt out of overdraft protection altogether — which means your bank will decline any transaction that would result in an overdraft — consider how you might need overdraft coverage in an emergency. For example, maybe you’re using your debit card to pay for gas on a road trip. You need enough fuel to get home but don’t have enough money in your checking account. Instead of dealing with running out of gas, you may want to deal with an overdraft.

How does overdraft protection work?

Here are more details about the main types of overdraft protection that banks tend to provide.

Overdraft protection transfers. When a bank allows you to make an overdraft protection transfer, you can link a savings account, money market account or a second checking account at the same bank to your main checking account. If you overdraft your checking, your bank will take the overdrawn funds from your linked account to cover the cost of the transaction. Many banks allow this service for free, but some banks charge a fee.

Overdraft lines of credit. An overdraft line of credit functions like a credit card — but without the card. If you don’t have enough money in your account to cover a transaction, your bank will tap your overdraft line of credit to cover the remainder of the transaction. Lines of credit often come with steep annual interest rates that are broken up into smaller interest charges that you keep paying until the overdraft is paid back. Be aware that a line of credit could end up being expensive if you use this option to cover your overdrafts.

Grace periods. Some banks offer grace periods, so instead of immediately charging an overdraft fee, the bank will give you some time — typically a day or two — to return to a positive account balance after overdrafting. If you don’t do so within that time frame, your bank will charge you fees on any transactions that overdrafted your account.

Other coverage programs. Some banks are taking a new approach to overdraft protection by offering what’s basically a free line of credit with a longer grace period for customers to bring their account to a positive balance. One example, Chime’s SpotMe® program, allows customers to overdraft up to $200 with no fees. The customer’s next deposit is applied to their negative balance, and once the negative balance is repaid, customers can give Chime an optional tip to help keep the service “free.”

Chime says: “Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Eligibility requirements and overdraft limits apply. SpotMe won’t cover non-debit card purchases, including ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.”

4 ways to avoid overdraft fees

  1. Set up low balance alerts. Many banks offer an alert option so you’ll get a text, email or push notification if your account drops below a certain threshold. These alerts can help you be more mindful about your balance so that you can put more money into your account or spend less to avoid an overdraft.

  2. Opt out of overdraft coverage. If your bank doesn’t offer overdraft protection — or if its only options cost money — you may want to opt out of overdraft coverage, in which case your bank will decline any transactions that would bring your account into the negative. Keep in mind that this option could put you in a sticky situation if you’re in an emergency and can’t make an important purchase because you don’t have overdraft coverage.

  3. Look for a bank that has a more generous overdraft policy. Many banks are reducing or eliminating their overdraft fees, so if overdrafts are an issue for you, do some comparison shopping to see if there are better options available.

  4. Consider getting a prepaid debit card. Prepaid debit cards are similar to gift cards in that you can put a set amount of money on the card, and once you run out, you can load it with more money. The prepaid debit card can’t be overdrawn because there isn’t any additional money to draw from once its balance has been spent.

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Business Ideas

Startup Business Grants: Best Options and Alternative Funding Sources

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Startup business grants can help small businesses grow without debt. But if you want free money to start a company, your time may be better spent elsewhere. Competition for small-business grants is fierce, and many awards require time in business — often at least six months.

Some grants are open to newer businesses or true startups. And even if you don’t qualify now, it can pay to know where to look for future funding. Here are the best grants for small-business startups, plus alternative sources of startup funding to consider.

How Much Do You Need?

with Fundera by NerdWallet

Government startup business grants and resources

Some government programs offer direct funding to startups looking for business grants, but those that don’t may point you in the right direction or help with applications:

Grants.gov. Government agencies routinely post new grant opportunities on this centralized database. If you see an opportunity relevant to your business idea, you can check if startups are eligible. Many of these grants deal with scientific or pharmaceutical research, though, so they may not be relevant to Main Street businesses.

Local governments. Lots of federal grants award funding to other governments, like states or cities, or to nonprofit economic development organizations. Those entities then offer grants to local businesses. Plugging into your local startup ecosystem can help you stay on top of these opportunities.

Small Business Development Centers. These resource centers funded by the Small Business Administration offer business coaching, education, technical support and networking opportunities. They may also be able to help you apply for small-business grants, develop a business plan and level up your business in other ways.

Minority Business Development Agency Centers. The MBDA, which is part of the U.S. Department of Commerce, operates small-business support centers similar to SBDCs. The MBDA doesn’t give grants to businesses directly, but these centers can connect you with grant organizations, help you prepare applications and secure other types of business financing.

Local startup business grants

Some local business incubators or accelerators offer business grants or pitch competitions with cash prizes. To find these institutions near you, do an online search for “Your City business incubator.”

Even if you don’t see a grant program, sign up for their email newsletter or follow them on social media. Like SBDCs and MBDAs, business incubators often provide business coaching, courses and lectures that can help you develop your business idea.

Startup business grants from companies and nonprofits

Lots of corporations and large nonprofits, like the U.S. Chamber of Commerce, organize grant competitions. Some national opportunities include:

iFundWomen. iFundWomen partners with other corporations to administer business grants. You can fill out a universal application to receive automatic notifications when you’re eligible to apply for a grant.

Amber Grant for Women. WomensNet gives two $10,000 Amber Grants each month and two $25,000 grants annually. Filling out one application makes you eligible for all Amber Grants. To qualify, businesses must be at lesat 50% women-owned and based in the U.S. or Canada.

National Association for the Self-Employed. Join NASE, and you can apply for quarterly Growth Grant opportunities. There are no time-in-business requirements for these grants of up to $4,000, but you’ll need to provide details about how you plan to use the grant and how it will help your business grow.

FedEx Small Business Grant Contest. This annual competition awards grants to small-business owners in a variety of industries. You can sign up to receive an email when each application period opens. To be eligible, you’ll need to have been selling your product or service for at least six months. Be mindful, though, that each grant cycle receives thousands of applications.

Fast Break for Small Business. This grant program is funded by LegalZoom, the NBA, WNBA and NBA G League and administered by Accion Opportunity Fund. You can win a $10,000 business grant plus free LegalZoom services. Applications open during the NBA season, which runs from fall to early summer each year.

Alternative funding sources for startups

New businesses likely won’t be able to rely on startup business grants for working capital. The following financing sources may help accelerate your growth or get your startup off the ground:

SBA microloans

SBA microloans offer up to $50,000 to help your business launch or expand. The average microloan is around $13,000, according to the SBA.

The SBA issues microloans through intermediary lenders, usually nonprofit financial institutions and economic development organizations, all of which have different requirements. You can use the SBA’s website to find a lender in your state.

Friends and family

Asking friends and family to invest in your business may seem daunting, but it’s very common. Make sure you define whether each person’s money is a loan and, if so, when and how you’ll pay it back. Put an agreement in writing if possible.

Business credit cards

Business credit cards can help you manage startup expenses while your cash flow is still unsteady. You can qualify for a business credit card with your personal credit score and some general information about your business, like your business name and industry.

You’ll probably need to sign a personal guarantee, though, which is a promise that you’ll pay back the debt if your business can’t.

Crowdfunding

If your business has a dedicated customer base, they can help fund you via crowdfunding. Usually businesses offer something in exchange, like debt notes, equity shares or access to an exclusive event.

There are lots of different crowdfunding platforms that offer different terms, so look around to find the model that works best for you.

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