You Can’t Do Without Business Credit

As an entrepreneur, there may be many aspects of a business that you can do without but business loan is not one of them. Building business credit is the need of the hour for any business, whether it is new or old.

Don’t!

In the long run, one needs to know how to establish corporate credit. More often than not, this process takes many years in the making. The need of the hour is to understand the difference between business & personal credit. This will help to separate the two from each other.

A credit report is a statement that stands for a person or a business’s ability to make good on a debt. While starting out on a new business, most entrepreneurs commit a very basic error. They confuse their business expenses with their personal expenses. This might not be a problem when one needs to spend a few thousand dollars and dips into his or her personal credit for the money. The problem arises when the need for money and credit increases and begins to negatively affect your personal credit.

Statistics show that of all the new upstart businesses, only 10% make it through the first 5 years. These are the businesses that have concentrated on the creation and maintenance of a good business loan profile. In cases where this was not done, entrepreneurs ended up with no businesses and no personal guarantee worth its salt either.

Truth behind Business Credit

Unlimited business credit can be available to you as long as you know how to capitalize on the knowledge you have of business credit. For gaining an understanding of small business loans, there are a few factual bits of information that you need to have.

The first is about the business credit bureaus. These are the bureaus that give you the business credit scores. Dun & Bradstreet, Experian & Equifax Businesses and last but not the least in any way, Business Credit USA are the ones that you need to be well versed with. These bureaus evaluate your credit profile, if and only if you give them the information by submission of your set of data and credit grantor’s information. This has to a voluntary process. Not many businesses, however old they might be know this and this is the unfortunate reason why they lack any kind of credit.

As compared to the personal credit scores, business credit scores are evaluated on a lower scale of 0 to 100 with 75 being a good score. Most businesses that intend to build a strong business profile aim at scoring 80 and higher.

Seek Attention

It is not essential that you try to build your business credit scores all by yourself. You may go ahead and hire help for you to do so in the form of credit building services. The one great advantage of this is that your business will be able to earn business credit is a much lesser amount of time as compared to your laboring away on your own.

Small Business Owners and Consumer Bankruptcy

Consumer Bankruptcy can help small business owners

As the economy is slow to recover, bankruptcy is becoming a reality for more and more Americans. Many are finding that their hard work is simply not enough to pull them through these tough times, including many small business owners. A common scenario that I see with my small business owner clients is that the fear of what would happen to their business has kept them from filing for so long that by the time they come see me, they are so over their heads with debt, they are struggling to feed their children and pay their utility bills. Bankruptcy law allows for debt relief while suffering financial hardship. To avoid the above scenario, small business owners need to be aware that they have options.

You, as a small business owner, must first distinguish whether or not it is your business that needs to file bankruptcy or if it is you as an individual that needs to file. If the debts are solely in the business’ name, and the business is incorporated or is an LLC, then the company itself needs to file for relief. The business has two options: Chapter 7 or Chapter 11. A Chapter 7 would be appropriate when the business needs to shut its doors and liquidate, or restructuring the debts would not be feasible. Note that if your business is a partnership, the business itself is not a separate legal entity from the general partners and they may be sued individually for the debts. A Chapter 11 is a restructure of the business’ debts and would be appropriate when a business could be profitable if it were not for the burden of the debts. In a Chapter 11, the business may continue to operate and remain in possession of its assets. The Debtor/business will create a restructured plan. Creditors whose legal rights are affected will be able to vote on the confirmation of the proposed plan. A Chapter 11 is a lengthy and costly bankruptcy and should be entered into with caution.

If you are a sole proprietor the business is an extension of you personally, so in this case a personal bankruptcy is appropriate. More often than not, in my practice even in the case of small business owners, it is the individual who needs to file for bankruptcy relief. In addition to a sole proprietor, a small business owner in an LLC or a corporation may also file personal bankruptcy with little effect on their business. The Debtor here has two options. She may file a Chapter 7 or a Chapter 13. Again, a Chapter 7 is a complete discharge of the unsecured debts. Something to keep in mind is that the creditors of an LLC or corporation will still be able to collect against that business entity, even though the individual’s personal guarantee will be discharged. Relief under Chapter 7 is appropriate when the individual’s income received from the business and all other sources falls below a certain amount set by the IRS. So, long as the business does not have substantial assets exceeding the state exemptions, a Chapter 7 is often the best route for a small business owner. It provides a fresh start for individuals so that they may focus on the success of their business.

A Chapter 13 is an individual reorganization and is appropriate when you may be behind on mortgage or car payments, have substantial assets – including assets of the business exceeding the exemptions, or when high income triggers a “substantial abuse” objection if filed under Chapter 7. Unlike a Chapter 11, the Debtor proposes a reorganization plan and the creditors must accept it without a vote. The plan will require future monthly income from the business, after personal expenses are met, to be paid into the plan. During the life of the plan, the Debtor is protected from her creditors and after the Chapter 13 plan is complete, many of the unsecured debts will be discharged. The debts of an LLC of corporation may not be included in the Chapter 13 plan, the 13 is solely an individual reorganization and will allow you to stay in business even if the business has assets and is not the source of the debt.

If overwhelmed with debts, a small business owner has options and will not be required to shut its doors. Bankruptcy can be a powerful tool to help you through these financial trying times and achieve a fresh start.

In August 2009, Jennifer was promoted to an associate attorney at Wagoner Maxcy Westbrook, P.C. She joined the firm in 2007 as a law clerk after her first year of law school. Jennifer has worked with hundreds of families in bankruptcy and finds it rewarding to ease the financial burdens of her clients. Jennifer received her Bachelor’s degree in history and music performance from Missouri State University in 2002. In May of 2009, she received her Juris Doctor from the University of Missouri – Kansas City School of Law. During law school, Jennifer was the Vice-President of the Art Law Society. She was also a member of the Student Bar Association, Delta Theta Phi legal fraternity and participated in the trial advocacy program. Jennifer interned for Legal Aid of Western Missouri, the Public Interest Litigation Clinic and was a Guardian ad Litem.

Know About Small Business Liability Insurance

Every business, whether it is big or small, wants to survive, sustain and make profits. But business of any type or size is unpredictable and may get into losses due to unwanted or unexpected circumstances like natural calamities, fire, theft or other riots. It is very difficult for small businesses to protect their occupation or business if they face adverse situations with their meager budgets. Many small businesses perish as they fail to cover these losses. So, it is very important for businesses to have a risk management system for their business to protect themselves against unforeseen losses.

Insurance, considered as a critical part of the risk management system is the only way for small businesses to protect themselves. Today, there are many types of insurance policies, of which Liability Insurance is considered to be the best one for small businesses as it provides compensation for the fines associated with liability cases.

It covers following risks:
Liability insurance protects a small business from loss or damage to the maximum extent. Business liability insurance options are very useful for businesses as they cover the business property, claims for injuries by employees and visitors, employee compensation and many more. Some of the common types of liability insurance for small businesses and their coverage are explained below in detail.

Business property insurance
Business Property Insurance, as the name itself indicates covers the business property of the small business. Its coverage includes the building or buildings in which you do business, carpeting, curtains, outdoor signs, property of others etc. If you choose a right business insurance property, it covers all the important equipment such as computers, machinery, supplies, stock etc.

Professional indemnity insurance
Professional Indemnity Insurance, also called as Professional Liability Insurance or Errors and Omissions’ liability insurance, is an extremely important consideration for small professional businesses that are in service industry. They are exposed to a wide range of claims that may include areas such as errors, omissions, professional neglect, falsehood, breach of confidentiality etc. This insurance protects businesses from the claims made by clients against the delivery of poor service. This type of insurance is generally purchased by professionals such as a doctors, lawyers, engineers, architects, brokers, financial advisers, accountants, consultants, building contractors, and attorneys etc. who run their own business.

Product insurance
Product insurance or Product Liability Insurance protects the business owners from the lawsuits filed against them for manufacturing or producing defective products. This type of insurance is very useful for small scale manufacturers or importers. This liability insurance protects small businesses in case a person is injured or died using a product manufactured or developed by the business.

Employment practices liability coverage
Employment Practices Liability Insurance covers small businesses against claims by employees or business associates when their legal rights are violated. This insurance policy protects employers against breach of employment contract, deprivation of career opportunity, discrimination, mismanagement of employee benefit plans, negligent evaluation, sexual harassment, wrongful discipline or termination etc.

Excess liability coverage
Excess Liability Insurance, also called as Umbrella Liability Insurance or Commercial umbrella insurance provides additional protection to any of several other policies that a small business might hold. It protects businesses when an accident or similar claim exceeds the amount of their existing liability coverage, which may include medical costs or other claim payments.

Workers’ compensation insurance
When an employee gets injured at the workplace, it is the employer who is responsible for the payment of medical bills. Sometimes these medical bills may run into thousands of dollars, which can be very burdensome for the small business owners to pay. The workers’ compensation insurance kicks in during these kinds of situations. The workers’ compensation policy provides wage replacement, medical, and rehabilitation benefits to the employees who get injured on the job.

Other insurance
Apart from the above mentioned insurance policies, there are many other insurance policies that help small businesses such as:
• Auto Insurance – to cover the company vehicles,
• Health Insurance – to protect employees when they are sick,
• Crime Insurance – to protect business against employee fraud,
• Key Employee Insurance – to protect small business against the loss of their key employee etc.

All businesses may not need the same type of insurance. In order to determine a perfect liability coverage for your business, you need to carefully consider all your needs and risks involved in your business. With a good insurance policy, small business owners can have peace of mind and focus on their business knowing that their business is well protected.