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    4 Replies Latest reply on Aug 18, 2008 9:23 AM by Milleisen

    Great business, not-so-great personal credit-- help?

    partner1 Newbie
      I started a business 18 months ago with one other partner. So far, we have seen our sales double in the last 6 months. The problem is-- we self-funded our start up and as a result both of our credit scores have plummeted. We are now in the position where we are almost covering our monthly expenses, but we have to make up the difference out of our personal accounts. We are still paying off some of the start up cost but expect to be able to turn a profit in about 8 months.

      Our problem is-- cash flow. We have been turned down by everyone due to our personal credit scores. We have been to the SBA with no luck and we do not want an angel investor or other investor because we do not want to give up control of our business and have to report to anyone. We are doing a great job on our own, minus the cash flow issue.

      If anyone has any advice (other than borrowing money from relatives) please give it. Thanks so much.
        • Re: Great business, not-so-great personal credit-- help?
          Milleisen Scout

          While a credit score can dip if you use a large percentage of your available credit, it sounds like cash flow is the problem. Undercapitalization is a major issues that hurts many small businesses trying to cross over from red to black, so you are not alone.

          Depending on how much cash you need to keep you going, perhaps you can try to squeeze money out by altering your cash conversion cycle. The easiest ways to squeeze cash out of your business is to either get paid by clients faster, pay vendors slower, or some combination of both. You can offer discounts to clients for paying an invoice within 10 days (commonly referred to as 2/10, net 30, meaning you offer a 2% discount if they pay within 10 days, or the entire balance is worth 30), or simply change your terms. If you offer 90 day terms, change to 60. If you offer 60, change to 30. On the flip side, if you are a major customer of a vendor, try to lean on them. If you constitute a large % of their revenue, they will have to be flexible or risk losing you. If you can push out 30 day terms to 45 or 60, that should create some cash.

          Doing this is a bit of a one trick pony, but hopefully it can unlock some cash for you.

          This is along the "ask a friend" lines, but have you considered a home equity loan? If your business is growing, core levels of working capital (a/r/, inventory, A/p) should technically be financed with long term debt (not an annual revolver).
          • Re: Great business, not-so-great personal credit-- help?
            LUCKIEST Guide
            Great business, Welcome

            I am a SCORE Counselor and can help. SCORE can help. SCORE is FREE.

            Were are you located?? How can I get in touch with you??

            You can email me at

            • Re: Great business, not-so-great personal credit-- help?
              RoswellGA Newbie

              Good evening, I'm interested in your posting because my company is a small business lender, and we have a couple of options available for well-managed, growing small businesses. We focus more on the business credit/sales rather than personal credit.

              The first product is a cash advance against future credit card sales. This is our most popular product due to low-documentation requirements and quick funding. We simply take a fixed % of future Visa/MasterCard receipts. You do not need to change credit card processors. This product is good if you have more than 20% of your revenue coming in from credit cards. If you are interested in the cash advance product, we will need to see the last 4 months of credit card processing statements and last 4 months of business banking statements. We can get you approved in 48 hours and funded within 10 business days.

              The second product is a business loan. Repayment is made via a once-a-week fixed amount debit of your business operating account. We will need the last 12 months of bank statements for underwriting, in addition to a 2007 income statement and current balance sheet. There is more paperwork involved for the loan and funding will take about 15 business days.

              Please let me know the following to see if we have a good fit:
              1. Product/service business provides
              2. Average monthly sales

              Our company is a direct lender and we have funded over 500 small businesses in the past year!

              I look forward to helping your business grow.
              • Re: Great business, not-so-great personal credit-- help?
                Milleisen Scout

                I tried to post an asnwer to your question but it never showed up. Let's try it again....

                If you have significant payables and recievables, maybe you can think about finding ways to collect A/R faster by either offering discounts, or by simply changing your terms. For payables, if you have a vendor that really needs your business, perhaps you can try to get better terms. Changing your cash conversion cycle is a one trick pony, but depending on how much cash you are looking for, it may help.

                This is along the "ask a friend for money", but what about a home equity loan? It's important to remember that as your business grows, you'll need to finance your core levels of A/R, A/P, and inventory with long term debt and not an annually renewable line of credit that may require a cleanup period.