SEPTEMBER NEWSLETTER

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Let’s get down to business. If you’ve ever applied for a loan, mortgage, a credit card, utility, or another similar service, you’re probably aware of the significance your credit score can have on your finances. The same applies to your business. Every business has a credit rating and that rating can play a major role in obtaining funding, directly impacting your business’ potential for success.1,2

 

What affects your business’ credit score? Multiple components contribute to a business credit score: how long the business has existed, the size and category of the business, legal adjudications, how its repayment history compares to other similar businesses, and one major component called credit utilization ratio (CUR). Financial professionals say that keeping your business’ CUR at 10% or lower is ideal and if a business has a CUR of 30% or higher, it can start negatively affecting its credit rating.1,2,3

 

To lend or not to lend.  At one point or another, your company may need an external funding source and your business’ credit score may impact your ability to do so. Commercial credit scores are used for a few different reasons.

 

  • Credit ratings give potential lenders an idea of whether they believe your business is a good candidate for a loan. A higher score can indicate a higher likelihood of your business being able to repay the loan in a timely manner.1,2

  • If approved for a loan, your commercial credit score may affect the amount of funding an institution will provide to your business.1,2

  • When your business’ credit score is lower, high-interest rates may be applied to your loan.1,2

  • A good credit standing may even influence prospective customers’ decision to do business with yours.1,2

 

At ThermoCredit, we do things a little differently. We’re a funding company that gives our clients options. As an alternative to banks and venture capital firms, ThermoCredit won’t take equity from your company in exchange for funding. We focus on your business plan and assets, meaning you remain in control of your business. Unlike banks, which thrive on debt financing, ThermoCredit can bring solutions to your situation for debt and equity funding. Banks generally provide 80% of the funds a business requests with very long, drawn out approval processes, requiring years of financial records. Even then, there is no guarantee you’ll get your loan. If you are applying for an SBA loan through a bank.  In either case an unlimited personal guaranty is required and a pledge of personal may need to be provided.

 

ThermoCredit is about relationships. We take the time to meet you and understand the needs of your business, find ways to help you overcome your financial obstacles, and bring the right kind of funding to the table so you can meet your company’s goals. Our approval rates are considerably higher than with banks and VCs, have shorter approval times, and bring a level of flexibility our competitors cannot match.

 

Whatever the best options are for you, ThermoCredit can help you find them. We’ve loaned over $1 billion to hundreds of tech and communications companies over the last 20 years. The ready capital ThermoCredit provides has helped fund acquisitions, recapitalization, payroll, debt management, and so much more—regardless of the size of your company.

 

Is ThermoCredit the right choice for you? Call us at 504-975-8599 or visit www.thermocredit.com to schedule your free consultation and find out how you can obtain capital while keeping control of your company.

 

References

  1. https://www.business.com/articles/what-is-business-credit-score/

  2. https://www.investopedia.com/terms/b/business-credit-score.asp

  3. https://www.forbes.com/sites/serenitygibbons/2020/02/11/what-every-small-business-owner-should-know-about-credit-utilization/?sh=26e3488d6abf

 Do You Know Your Business’ Credit Score?

What it is, and why it’s important.

 Using Your Assets as Collateral

 How should you prioritize which ones to choose?

Asking for collateral is a common practice many lenders may choose to employ to ensure the funds they disburse are paid back in a timely manner.

 

What is collateral? Collateral is a tangible or intangible asset an individual or business might use to help secure a loan from a financial institution or an investor. Some loans have the collateral built right in like a mortgage or car loan. Personal loans and general business loans designated for operations do not necessarily have collateral included. Collateral can be a physical asset like equipment or in the form of financial security, such as an IRA or other retirement account.1

 

What’s the purpose of collateral? Lenders use collateral to minimize the possibility of a borrower defaulting on their loan. For example, if a borrower uses their home as collateral for a personal or business loan, they have a tremendous incentive to prevent losing that asset. The result means they’re more likely to repay what they owe in full and on time. As a secondary benefit to the lender, collateral can give the financial institution the ability to recoup its losses, should a borrower default on the loan’s terms and agreement.1

 

Collateral for commercial loans very often includes:

 

  • Real property2

  • High-value equipment or other physical assets2

  • Cars, vans, trucks, or other vehicles designated for operations2

  • Accounts receivable2

  • Liquid assets, like cash2

  • Financial investments and securities2

  • Personal assets2

 

Borrowing against your personal assets for a business loan can be especially risky, but it’s done every day. It’s quite common for lenders to require personal assets as collateral for commercial loans. Some companies with little to no business assets, such as startups, may have to utilize personal collateral to obtain the funds they need.

 

It’s always important to explore your options. There are many other ways to obtain funding for your business that don’t require collateral, but typically there are other tradeoffs. For example, venture capital firms may not require any sort of collateral to invest in your business, but they may provide funds in exchange for an equity stake in your company. Crowdsourcing is another option, but the time and labor involved can be exhausting, the results are unpredictable, and may still not come close to meeting your financial needs.

 

For more information about the right funding strategy for your company, drop us a line at info@fundingstrategies.net, and we’ll be happy to answer any questions you might have and even help you find the right partner to meet your business needs.

 

 

References

  1. https://www.investopedia.com/terms/c/collateral.asp

  2. https://www.forbes.com/advisor/business-loans/collateral-for-business-loan/

  3. https://www.valuepenguin.com/small-business/how-much-collateral-business-loans#:~:text=Lenders%20use%20collateral%20to%20reduce,to%20secure%20a%20business%20loan.

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 Funding Strategies: What to look for in a legitimate lender

Many small to medium-sized businesses (SMB) need flexible loans or financing to meet overheads, expand operations or invest in inventory. However, they may not always be able to (or want to) obtain conventional bank financing. This is where marketplace lending can be a good solution. Marketplace lending—non-bank financial platforms—is a fast-growing sector and offers SMBs more flexibility and alternative financial products. In 2018, over 30% of SMBs applied for online financing, often from relatively new lenders.

 

Predatory lenders have also kept pace with changing financial practices. They prey on SMBs by charging excessive interest rates or unmanageable loan terms, or by failing to reveal terms and conditions upfront. Despite an evolving regulatory environment, predatory lending is still a very real risk to SMBs. So how can you protect yourself and your business?

 

The answer is simple. Always ensure you’re dealing with a legitimate lender who offers secure credit and transparent and realistic charges and terms. Here are ways to tell legitimate lenders from the ones you want to avoid:
 

  1. Legitimate lenders won’t guarantee financing approval right away. They’ll want to check your credit history, your company’s debt-income level or the amount of outstanding invoices your business holds. 

  2. Make sure the lending company is registered in the state(s) where you do business. The Federal Trade Commission (FTC) requires that lenders are registered in the same state as borrowers.

  3. Legitimate lenders will have physical addresses, contact telephone numbers and often list staff names so you can easily contact the right person.

  4. Legitimate lenders won’t pressure you to sign a contract or use other aggressive tactics, such as immediate deadlines. They’ll give you time—days or weeks—to agree to a loan or financing package.

  5. Make sure any fees and charges are transparent. Legitimate lenders may charge application or appraisal fees, but they will tell you this up front. Make sure you understand and accept the financial commitment you’re making—including loan repayments or interest rates.

  6. Only trust a lender with a proven track record of success. You can ask for client testimonials and check the lender with your local Better Business Bureau.

  7. The FTC offers free information about marketplace lending, including scams and predatory practices to watch out for. 

 

At ThermoCredit, we’ve been lending for over 20 years and have built a solid reputation for reliable and transparent financial services in the telecommunications and technology industries. We’re a trusted lender which has supported hundreds of businesses and offers a range of financing options and liquidity for small to medium businesses. At ThermoCredit, we understand that companies need financing for different reasons—such as cash flow, acquisition or growth—so we offer customized financial solutions, not a “one size fits all” approach

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