How to Check Your Small Business Credit Report and Why it Matters — Gerri Detweiler

How to Check Your Small Business Credit Report and Why it Matters — Gerri Detweiler

Episode Summary

Helping people find reliable answers to their credit and financing questions has been the theme of Gerri Detweiler’s work for the past 20+ years. Today she serves as the education director for Nav, where she helps business owners navigate the confusing world of small business credit. Gerri gave us her take on the latest stimulus bill and tips on how business owners can improve their business credit.

Episode Notes

There are several ways the newly passed stimulus bill will help small business owners. Most of the provisions are an extension or expansion of what was in the previous stimulus bill. The new part of this bill is the restaurant revitalization fund and grant program. What I’m excited about is, restaurants no longer have to choose between PPP or a grant, they can apply with confidence to both and the funds will balance out.

Except for the targeted EIDL grants, the newest round of PPP loans is available to any small businesses regardless if they applied in the past or not. Additionally, they’ve changed the calculation for self-employed people, so more people are now eligible to receive funds. The biggest group not eligible for funds are start-up businesses that launched during the COVID pandemic.

For the PPP loan, a business can receive up to $10 million but that is limited to 2 and a half times your average monthly payroll. If you are self-employed the maximum you can apply for is $20,833, which is capped based on up to $100,000 in owner compensation. In addition, the new bill has business grants available that are based on revenue lost due to COVID.

Small business credit and financing can be confusing for business owners due to all the different options available and lack of clarity on the terms. Unlike consumer loans, business loan providers don’t have to provide you with a free credit report or tell you the APR. Oftentimes we see lenders using fancy words to describe the terms that make the loan sound affordable when it is quite expensive. As the education director at Nav, my goal is to try and help business owners understand these nuances so they can make better decisions.

The biggest credit mistake we see small businesses make is they are often not aware their business has a credit report and thus they don’t check it. Related to that the other mistake we’ve seen a lot of small businesses make is that they don’t keep their business finances organized and separated from their personal finances. When it comes to organizing your finances, business owners have to embrace that this is part of running a business. If financial management isn’t your strength you can partner with a bookkeeper or financial coach, or even take a class to educate yourself. No matter what you choose, you need to learn to embrace this side of your business and find the solution that works best for you.

Cybercrime prevention is all about protecting your business from being hacked and potentially exposing your customer’s sensitive information. If you keep a record of any sensitive customer information, you should have someone advising you on how to protect it, and some insurance to cover your business if something did happen.

Business identity theft is on the rise but it can go unnoticed because business owners aren’t used to monitoring their business credit reports. At Nav, we offer free business credit report monitoring which can help alert you to any issues. Business tax fraud is also on the rise and the IRS offers a free pin you can use to help secure your tax filings.

Resources Shared:

Episode Transcription

Gerri Detweiler: And I was a business owner for 10 years, and I hated doing my books and keeping up with all that, but I had to make peace with it because it’s just part of what you have to do to be successful as a business owner, but it can also help you when it comes to getting financing or taking advantage of opportunities. I do think in 2021, we’re going to see a lot of opportunities later in the year for small businesses.

Speaker 2: The following is brought to you by Thryv, the end-to-end client experience platform that helps you get the job, manage the job, and get credit.

Gordon Henry: Hello, I’m Gordon Henry, and this is Winning On Main Street. We’ve been focusing in 2021 on actionable tactics and tips that you as a small business can use. Not things you can think about things you can listen to, but things you can use. This week we have a fantastic guest, a savvy expert in areas like money and finance and debt. Her name is Gerri Detweiler, and she’s in Sarasota, Florida. Welcome, Gerri.

Gerri Detweiler: Thank you, Gordon. Glad to be here.

Gordon Henry: Gerri is the education director at a firm called Nav, which is an online marketplace matching small business owners to financing. She’s the author of five books on credit and financing. You can also find her at gerridetweiler.com, that’s G-E-R-R-I, Detweiler, D-E-T-W-E-I-L-E-R dot com. Gerri, let’s get started. We’re here in March of 2021. A lot going on. We hopefully have light at the end of the tunnel with this pandemic with all the vaccines coming online. They’ve just passed a new stimulus bill. Tell us a little bit about the stimulus bill and specifically how it’s going to help small businesses and how small businesses can take advantage.

Gerri Detweiler: Yeah, so there are several ways that the stimulus bill will help small business owners. Most of them are an extension or an expansion of what we’ve had in the previous stimulus legislation. We have more funding for PPP. We have more funding for the EIDL advances or grants. We have an extension of the employee retention credit, pandemic unemployment, et cetera. The new part is really this restaurant revitalization fund or grant program for restaurants. What I’m excited about is that Congress recognized that it takes the time for the SBA to get these things up and going, and so they’re allowing restaurants who are interested in these new restaurant grants to also apply for PPP.

Previously, we have the Shuttered Venue Operators Grant, which is for live theater venues, museums, aquariums, places like that. That came out the legislation that passed at the end of December, and we still don’t have the money available to businesses. They were told, “Choose this or PPP.” Well, now they can apply with confidence, apply for PPP, and then apply for the grant and just subject the amount out if they get PPP as well. I think it’s going to be a really crucial assistance for many small businesses, and I’m pretty excited that we have this round to hopefully get us through to that place where we’re getting back to normal.

Gordon Henry: Yeah. Absolutely. If I’m restaurant and I haven’t taken advantage of this before, can I come in for the first time on this? Do I have to have done it before?

Gerri Detweiler: The great news is with the exception of the targeted EIDL grants, you can apply for the first time. If you missed out on PPP, you can apply. In fact, they’ve recently, literally just in the last week, they’ve changed the calculation for self-employed people who want to apply for PPP, so we’re finding that many people who said, “Hey, I couldn’t get PPP before, now I can,” they’re rushing to meet the current deadline of March 31st for PPP.

Now, I anticipate Congress is going to extend that. There’s just so many applications pending right now that I think they will extend it, but I’m saying don’t wait, get your application in. The only people I would say are shut out largely from a lot of this aid is startup businesses. If you started up your business after the pandemic hit, you’re not going to find a lot there, although the Employee Retention Credit, a tax credit is going to be available to startups, so there are some things that may be helpful to you.

Gordon Henry: Okay. How much money are most of the businesses who are applying able to apply for? What’s the range that somebody can apply for?

Gerri Detweiler: Well, it depends on the program that you are applying for, but with PPP, the first draw is up to a total of 10 million, but for most businesses, it’s much less than that because you’re planning on two and a half times your average monthly payroll, or if you’re self-employed, your maximum amount for most self-employed people is going to be $20,833. Very specific number, but that’s based on your capping out at $100,000 in annual compensation.

It depends on the business and how much payroll you have, how much you will get. In the second round of PPP, there is more money for certain businesses like restaurants, and then we have these grants, which are going to be based on the revenue loss of the business and could be significant, particularly for some restaurants because if I recalling correctly, it caps out at $10 million, so that’s a pretty good chunk of change.

Gordon Henry: Yeah, for sure. Last question on this. To apply, if somebody who hasn’t applied yet, doesn’t know where to, where do they go to apply? Is it sba.gov? What’s the place?

Gerri Detweiler: If you’re applying for an EIDL or an Economic Injury Disaster Loan, loan or grant, you have to go through the SBA, the sba.gov website, but everything else, they pretty… Well, that’s not true. The Shuttered Venue Operators Grant and the Restaurant Revitalization grants, those will go through the SBA as well, so sba.gov, but for PPP, you’re going to actually apply through a lender, and at Nav, we’ve been matching borrowers to lenders at nav.com.

Gordon Henry: What’s your role in this nav.com? Do you help businesses navigate their way through PPP, EIDL, that type of thing? You find them alternate sources? What’s your role?

Gerri Detweiler: Yes. I have spent many, many hours reading and parsing the legislation and answering questions about these programs, but my goal overall at Nav is to help business owners be more credit-worthy and find financing. That’s what I try to teach them is say, “Hey, there’s a… “ Small business credit and financing is so confusing. There’s so many more options than there are on the consumer side, but there’s so little regulation. They don’t have to give you a free business credit report. They don’t have to tell you what the APR is most cases on financing. They can use all kinds of other terminology that can make it seem very affordable when it’s actually very expensive. As a education director, my goal is to try to help business owners navigate this and explain it in a way that hopefully will help them make better choices and find what they need for their business.

Gordon Henry: Okay, great. Let’s shift gears a little bit. Businesses have credit scores too, just like consumers, and they get into trouble with things like credit monitoring. Tell us what are some of the biggest credit mistakes that small businesses typically make?

Gerri Detweiler: Well, my experience is that most business owners have no idea these business credit bureaus are out there. There’s no requirement that anyone… You get your permission before they check your business credit. They don’t have to tell you if they turn you down based on it. There’s no free business credit reports required by law, so most business owners just don’t have a clue. What happens is then something happens where they discover that, “Oh… “ In fact, I just talked to a business owner this week that said she got turned down for some commercial financing due to something on her business credit. She can’t figure out what it is and what’s going wrong.

That’s probably the biggest mistake is not checking. Related to that, I would say that the other mistake that we’ve seen a lot in 2020 is just that so many businesses, especially smaller businesses, operate just… they wing it. They don’t really have a system for keeping their bookkeeping up to date. They might be mixing their business and personal finances using a single bank account for both.

Hey, I get it. I know I’m in finance, but I don’t consider myself a numbers person. I was a business owner for 10 years, and I hated doing my books and keeping up with all that, but I had to make peace with it because it’s just part of what you have to do to be successful as a business owner, but it can also help you when it comes to getting financing or taking advantage of opportunities. I do think in 2021 we’re going to see a lot of opportunities later in the year for small business.

Gordon Henry: Right, so separate your bank accounts. That’s, I guess you’re saying, a key thing. You have a business bank account and the personal bank account. Then in terms of the accounting, I mean, a lot of small business owners use things like QuickBooks. What do you recommend from a keeping-the-books perspective?

Gerri Detweiler: Use any of those QuickBooks, Xero, FreshBooks. I don’t care what you use. Just keep it up to date. We saw this with this latest round of PPP where business owners could choose to base it on their 2020 or 2019 business information, but a lot of them were saying, “Well, I haven’t even talked to my accountant about 2020.” They couldn’t even figure out how much they could qualify for based on 2020 information because they weren’t keeping up with the book.

You can certainly outsource it to a bookkeeper if you want, but I do believe strongly based on our experience this year that business owners should make sure someone is keeping the books up to date on a monthly basis, and you, as a business owner, you want to look into that at least once a month so at least you have a pulse on what’s going on financially in your business, and then when that opportunity comes up, then you’re ready for it.

Gordon Henry: Right. You’ve written about simple ways to organize your small business finances and top 10 reasons you can’t get your finances in order. What are some of the simple tips to help small businesses get their finances in order?

Gerri Detweiler: Well, I think first is just to just embrace the idea that this is just part of your doing your business because a lot of business owners are great at what they do. They’re not so… They didn’t get into business to do accounting. That wasn’t what they chose to do. But if you find a way to set up a system… and again, that could be partnering with a bookkeeper, it could be working with a financial coach, it could be taking a class on QuickBooks yourself, but finding a way to embrace that side of it and keep up to date with it. Don’t let it fall behind.

I can tell you, Gordon, that I fell into this trap when I was a small business owner. I’d be catching up on my bookkeeping, and then I’d look at, literally, I could look at a deposit, say, “I don’t remember which client that was from.” Well, that’s not good. You need to know. You want a system that, on a regular basis, you’re able to stay up to date on what’s going on financially, and then that just makes everything else fall into place a lot easier.

Gordon Henry: Let’s talk a little bit about the financing side because you’re an expert on that as well, I think, and businesses need money, especially early-stage ones. What are some of the things you recommend in terms of the best ways to raise money? We talked at the beginning about the government loans. Obviously, a lot of businesses taking advantage of that now. What about outside the government? Should they go for debt? Should they go for equity? What are the kinds of things you tell people look for?

Gerri Detweiler: Yeah. There are a lot of decisions to be made when it comes to getting financing, and so many choices now compared to when I had my business a decade ago, so it can feel overwhelming at times, but I think the key to keep in mind is that the better prepared you are and the earlier you look for financing, the more choices you’re going to have. I’ll give you a quick example. I was on a webinar with accountants, and one of them reached out to me afterward and she said, “I have this business on the side selling Pandora jewelry on eBay. A local jeweler’s going out of business, and I could acquire all this inventory. The price is good. I know I can sell it, but I need… “ and it was a lot of money. It was several hundred thousand dollars. “I need X amount of money ASAP to buy it, or he’s going to sell it to somebody else.”

That’s the kind of situation where if you’re prepared ahead of time and you have an idea of what’s out there, what’s out there for your business, if you’ve maybe looked at financing options, you have a line of credit, for example, then you can jump on that opportunity; otherwise, you might miss out on the opportunity, and so what I’ve often said to business owners, you want to look for financing before you need it because whether it’s a crisis, and we don’t want crisis this year, or an opportunity, you want to be prepared to be able to take advantage of that.

That’s one of the things we do at Nav is just help businesses get ready. See what’s out there right now for your business, and then if there’s a weakness there, like your credit score, business or personal, or your revenues, then work on that so that you’re better qualified for a better financing in the future.

Gordon Henry: Right. Are there many businesses, smaller businesses that still finance their businesses using their credit cards? Is that still a common thing?

Gerri Detweiler: Very popular. Yes. Very, very popular.

Gordon Henry: But you shouldn’t do that, right?

Gerri Detweiler: Not necessarily. There’s times when it makes sense. A couple things to keep in mind. One is that the good news is that some of the small business credit cards don’t report to your personal credit, so if you do need to carry some debt for a while, it’s not going to sync your personal credit score, so that’s good. The other thing to keep in mind is that most of these business credit cards are available to startups, so you start a business, and as long as you have decent personal credit, you can probably get the credit card, and that could be a financing where startups have more limited options.

The downside that you have to watch out for is that they aren’t covered by the same consumer protection laws as consumer credit cards, and so if you’re a day late, or really, an hour late with your business credit card payment, your interest rate could skyrocket. That can’t happen on your consumer credit card. You do want to make sure that you have systems in place to at least make that minimum payment on time so you don’t end up with a higher interest rate, but it’s a very, very popular type of financing, and I’m not opposed to it as long as it’s used responsibly.

Gordon Henry: Any recommendations for particular credit cards or-

Gerri Detweiler: Yeah. Yeah. Well, at Nav, we work with all the major business credit card issuers, matching borrowers to them. I can give out a short link. If you go to nav.com/reports with an S on the end, that will give you a list of all the major credit card issuers and how they report personal credit. If you’re looking for one that isn’t going to affect your personal credit, that might be a decision factor for you.

There’s also this new category of cards that are tied to more expense management, so Brex, Divvy, Ramp, these are all cards that are trying to help you make all your purchases on their card and get rid of expense reports. It’s kind of an intriguing submarket of the business credit card world, and they’re offering a lot of incentives for people to get started with those cards, so that may be another option that you might want to look out for, especially if you have employees and you’re sick of dealing with expense management and permissions and all that stuff.

Gordon Henry: We’re going to get into the discussion around crime, cyber crime, identity theft, those kinds of issues, which often we think about from a consumer perspective, but they’re really important regarding small businesses. Gerri, I think recently I’ve heard there was a big hack or issue involving a company called SolarWinds that was in the news, and now just this week, we heard about something involving Microsoft Exchange that’s I think going to hit or touch millions of people and probably businesses as well. If you’re a small business owner, this whole issue of cyber crime sounds very scary. What should you do?

Gerri Detweiler: Yeah, so cyber crime, certainly protecting your business against hacks that could expose customer data and potentially puts you out of business… I mean, let’s be real many small businesses would not be prepared for that scenario… is certainly something that businesses need to address. If you have any kind of customer information at all, you need someone who’s advising you and probably some insurance to help protect your business in the event of a data breach or a hack, but the other side of that is that small businesses are also at risk of identity theft.

We’ve had warnings come out recently from the National Cybersecurity Council, from the Internal Revenue Service, Krebs on Security, which is one of the leading security blogs have all warned that business identity theft is on the rise, and it’s a growing problem, so your business could find that someone else, a crook, actually opens up accounts in the name of your business, purchases things, and never pays for them. The problem on the business side is that most businesses aren’t checking or monitoring their business credit so they have no idea that their address has been changed or there’s a new account or something like that, and so they don’t catch it right away.

On the consumer side, hopefully, you’re monitoring your personal credit. I was a recent victim of identity theft for the second time, and I caught it because there was a suspicious inquiry that popped up right away. But on the business side, if you’re not checking, you won’t know. This is something where even if you’re listening and you’re thinking, “I’m not going to finance my business. I’m going to bootstrap. I am debt-averse,” which many business owners are, at least I would encourage you to check and monitor your business credit so that if you see something unusual happening, you can act quickly and try and shut it down before it becomes a big headache. Remember, on the business side, there are so few regulations that if your account ends up with a debt collector, they can call your friends, your relatives, everybody, and talk about how you’re a deadbeat, and that’s not something your business wants to have to go through.

Gordon Henry: What’s the tool, what’s the software, what’s the subscription that the small business should use to protect themself? I hear a lot about VPNs that… You hear one company, ExpressVPN, advertises a lot for small businesses. What should they use to protect themself?

Gerri Detweiler: Typically, it’s a suite of things that you’ll use. The VPN is going to be used to try to protect your business against someone picking up information that’s being transmitted. Then of course, anti-virus software, anti-malware software, educating your employees so that they’re not accidentally giving out sensitive information, which is a common, common source of a breach. Then probably, again, for most businesses, you want some sort of data breach or cybersecurity insurance policy, and then they can give you some pointers on what you need to do so that you’re protected and able to collect if that should happen.

The other thing I would recommend, shameless plug here, but at Nav, we will help you monitor your business credit for free, and we’re the only place you can do that. You can check and monitor your business credit reports with Dun & Bradstreet, Equifax, and Experian for free at Nav, and if there’s something suspicious, hopefully, get it locked down quickly. The final tip I’d say is that on the side of the IRS, a business tax fraud is on the rise as well, so you could have someone who files a return in the name of your business and gets money from your business, and you haven’t filed your tax return.

Gordon Henry: Oh, my god.

Gerri Detweiler: I would have been at high risk for this 10 years ago because I was always on extension, my business, but you can actually contact the IRS now, and they have pin numbers that you could use to help lock down your file. This is new. Usually, it used to be only if you were a victim of fraud, but you can do it proactively, so I would recommend having a pin number with the IRS as well to help protect your business.

Gordon Henry: You were talking to me at the break about using business credit to protect yourself against other businesses. Sounds like you’ve had some experience with that issue yourself in the past. Can you explain?

Gerri Detweiler: Yeah, I did. I got into a joint venture with another business that looked very successful. The deal was I would create the product, they would market it, and then we would share the revenues. Well, then the money was going into their account, not mine. They collected all the revenues, and I never saw a penny. It was at least 40 grand that I know of, probably more. An attorney basically told me it wasn’t worth pursuing.

Long story short is for any business, you need to think about and check into the financial health of the companies you do business with. Whether you’re providing a good or service, if you provide anything upfront without getting paid upfront in full, you’re basically a lender. It could be your time. In my case, it was my time, but it was a lot of time, and it was valuable time.

It could be other things, the product that you sell. Then if you’re dealing B2B, you might want to check business credit. You could also check business credit on key suppliers so that if they went out of business and your business will be at risk, if they’re having trouble and they go out of business, maybe that puts your supply chain at risk. There’s a number of ways that you can check business credit in order to help protect your business from others.

Finally, I’ll just add one more comment there. If you have a business partner and you think you’re going to do any kind of financing together, you guys need to talk about credit because any bank is going to require a personal credit check on all the owners, usually 20% or greater ownership. Sometimes it’s 25%. If their credit is bad, it could get you knocked out of the consideration for that financing. It’s not an easy discussion to have, but if you have a business partner, you also need to share your personal credit scores with each other and discuss any problems with your credit.

Gordon Henry: Great tips. Well, we’re just about out of time. This has been super interesting. I did want to ask you a couple of questions more about your own personal interests. We always like to hear people such as yourself [inaudible 00:22:55] small business [inaudible 00:22:56] we’re doing so much, what do you do in your free time? One question for you is are there any books or podcasts that you might recommend to our listeners who want to get smarter either about business about finance or just about life in general?

Gerri Detweiler: I am such a podcast junkie. My list is so long. I’m trying to think of one podcast. You should see my list. I walk every morning and every evening, and that’s what I do is listen to podcast.

Gordon Henry: Throw a couple of names at us.

Gerri Detweiler: Yeah. I have a very long list. Well, I’m also interested in travel and downsizing. That’s something that I’ve done recently. Gosh, I’m feeling really bad at names right now. I did listen… I’m big fan of some of the common like Freakonomics, but I also listen to some other podcasts about travel. I’m going to be traveling in an RV this summer and try to work remotely, so I’ve been listening to RV Entrepreneur Podcast. There’s one by name.

Gordon Henry: That’s cool.

Gerri Detweiler: Yeah. Yeah. I don’t know. My interests are very eclectic. Living in Norway is a new one I’m listening to because my daughter’s going to grad school in Norway. I’m all over the place.

Gordon Henry: Very good. In terms of books, I mean, you’ve written five of them yourself. What’s your most recent book?

Gerri Detweiler: My most recent book is Finance Your Own Business, which I wrote with small business attorney and Rich Dad Advisor Garrett Sutton.

Gordon Henry: Then in terms of your own success… you run a business, you’re obviously very well-versed in this topic, you talk to small businesses all the time… what are your own personal traits or habits, your personal regime that you observed that you think has contributed to your success? Do you get up super early in the morning or you work in the afternoon? What’s your daily rituals?

Gerri Detweiler: I am not a morning person, but I’m trying to adapt to it, just like with the finance thing, adapt to it and make it work. I am doing a daily short yoga practice, a walk every morning after the coffee. That does help me get settled for the day. The other thing that I’ve recently started doing that is helping is to write first thing in the morning so that at least I know that I have gotten some of my writing out of the way, and that definitely sets my day up for more success. It’s very difficult once the day starts going to have that block of time where I can really focus and concentrate.

Gordon Henry: Yeah. Yeah. I understand that. Once the phone starts ringing and the emails start coming in, it’s hard to stay focused on what it is you set out to do.

Gerri Detweiler: Yes.

Gordon Henry: Yeah. I understand. Well, Gerri, you have been an awesome guest. Thank you so much for joining us today.

Gerri Detweiler: My pleasure. Thank you.

Gordon Henry: If you enjoyed this podcast, please subscribe, tell a friend or a colleague to subscribe, and leave us a five-star review. We would really appreciate it. Until next time, make it a great week.

Originally published at https://simplecast.com.