To put quite simply the two factors to qualify for a small business loan are both cash flow and credit score. The hard part is getting good cash flow and a good credit score combined. By the way, a good cash flow starts at $$50k-100k monthly and a good credit score starts at 680 and some may argue with 650 depending on one’s cash flow and time in business. Joshua Triplett Owner and Principal Managing Partner of VIP Capital Funding will cover A-Z on how to get your business on the right track to prosper and succeed.
This article will go into depth as to why people can’t qualify for a good business loan and will give important tips that VIP Capital Funding has to offer leading to the financial solution that will help your business grow. In no order let’s start with credit score, most businesses go into debt which is good as all debt isn’t bad. If the business is younger than 2 years, they are drawing off personal credit cards. If the business is older than 2 years, they can qualify for a business credit card. This is where businesses make mistakes as they utilize their credit cards past 30% utilization and they aren’t making enough cash flow to support the monthly payment not counting the extraordinary interest rate that they placed on their credit cards thus leaving them in a bad spot financially.
A good business owner will utilize their credit score even up to the maximum as long as they know at the end of the month, they can keep their credit utilization below 30%. I personally recommend keeping your credit score below 10% if not paid off completely. This separates business owners with credit scores in the sub 550-600 to business owners with 680-720+ credit scores.
Fundamental and Conceptual
Next let’s talk about cash flow, I can’t go over every industry and occupation or this would turn into a 2000+ page book but what I can do is go over the fundamental and conceptual understanding that every business owner must know to create the cash flow they want to see. This all starts with basic economics supply and demand, from their marketing and advertising and then consulting and selling your product and service. This three-step process is pivotal to any small business with 99 employees or less. This is what VIP Capital Funding specializes in, the 14 million small businesses in the United States that qualify for small business funding, have 99 employees or less, and do under $10 million in revenue.
When it comes to cash flow and profit margins for experienced business owners, they know exactly what to invest per month to see a return between 20%-40% on average. Someone beginning as a first-time business owner will have to do some experimenting before they get it right. Because conceptual understanding of cash flow is the same, let’s use 4 different trades, for example, offices of physicians, roofing contractors, furniture stores, and liquor stores. To start things with offices of physicians and medical doctors. Congratulations, you went to undergrad school, completed med school, completed your residency, and now you are licensed with a lot of knowledge and a very rare skill set that is in high demand. But speaking from a business man’s point of view, you spent 12 years which you will never get back, time is more valuable than money in business, and you also underwent a lot of debt. Many Physicians or Doctors decide to open up their own practice for the freedom of being their own boss but they also must understand the conceptual and fundamental laws of business.
You’re going to have to hire staff, you’re going to have to pay for your leasing space, and you’re also going to need to execute your skillset in which customers are very satisfied. As you continue work in your practice depending on what area you live in, whether that be in a highly populated city or not, you’re still under the laws of business. You have a service that you are selling, and you have expenses for the service that you are selling, and along with that, you must market that with a good reputation from the good work that you do. Usually, most Physicians and Doctors have a mound of debt to pay off and at VIP Capital Funding we can help you run your practice with the injection of working capital that will keep your operation running smoothly. You may complain about the interest rate, but there is a cost to borrowing money and at the end of the day if it benefits you, take it. If it is going to help you get through a tough take it, I highly advise this.
Next, a good roofing contractor will have built his book of business with existing clients, he will have a good website, he will be established on google search engine, and will be backed with a team that will produce excellent work. First, the roofing contractor has to get the jobs lined up, his employees ready to work and be paid then we have equipment, material, and other miscellaneous expenses is included. After a good job is done the Roofing contractor is paid on average 30%-40% of the money he invested in. With a good job done, more clients accumulate and the roofing contractor gets set up with more jobs than he or she can handle. At this point, it would be smart to take a good debt business loan to make more money.
The business owner can use the extra capital to hire more people, take on more projects, and buy more material as he or she collects 30%-40% profit per month. This is how you scale your roofing contractor business from $50k per month to $500k per month, it is all about duplication. However not everyone’s ceiling is the same, some may just want to do it alone with less responsibility or just keep a tight crew of 5-10. Some people want to get to the $500k+ level per month so read the information above and that’ the process you have to go through, it’s not an overnight thing. There will always be delays, adversity, and setbacks in business that you have to go through. But if you want to be at the $500k+ level per month that is the process you have to go through and that is an important tip to know.
Moving on to the next trade furniture stores, if you want to be successful and get a good business loan here location will be very important. You need to be in a highly dense or metropolitan city. More people equal more demand equals more supply for your furniture and that ends up with more revenue. This is 2020 so digital marketing would be your best friend here. Hiring a good digital marketing team to advertise locally on Facebook would be great, and of course, setting yourself on Google is mandatory. When it comes to furniture from a customer’s point of view, I want good looking furniture at an affordable price along with the perks of installation and delivery.
The business model setup here is your employees or reps which need to be strong in selling, knowing the product, and having an attitude that will make your customer want to buy. Just from personal opinion, having good sales representatives on the floor can increase annual revenue by 10%-15%. Now that we have your advertising and representatives down, you’re left with your leasing space and furniture. This is why location is important and perks to the furniture being sold are equally important. As your business grows with more demand for your furniture, expanding into another good location would be a fantastic opportunity to reap more cash flow with this similar setup. Taking on a business loan from VIP Capital Funding would be a good place to start.
The last example would be a beer wine and liquor store. If allowable by digital marketing this will do good for your business, and next would be location. A location in the suburbs or dense city with many people around to buy your product. Apart from this, as a consumer with many people, different beverages to choose from, having a sales associate on the floor would be extremely useful (however there may be laws behind that). The most important part I believe for any beer wine and liquor store is the organization and quality of the interior of the building. I am talking well-shelved beverages. I know one of the most expensive parts of owning a liquor store is obtaining your liquor license but once you get a good 5-8 years under your belt expanding into a new area would be no problem with VIP Capital Funding as both your cash flow and credit score will be good. Also, you may have heard of liquor stores usually being a restricted industry VIP Capital Funding has aggressive lenders who will make sure to help your business grow.
With these three examples mentioned they all fall under good cash flow and good credit score because the business owner invests just enough to know the return they are getting, and every business owner has different ceilings that they want to invest in to reap a profit some even want to accelerate and shoot for the stars; this requires more capital in expansion which VIP Capital Funding will be happy to help with… Every business owner understands the fundamentals to succeed in business and understands the risks involved. If the demand isn’t there, the supply isn’t there. If you market to the audience you want to target but you’re not getting the returns because the demand isn’t there then you are hitting a bump in the road. In any business model, it is all about the customer, you have the supply based on the demand, you market to drawing in more customers and that is what business is all about value in exchange for value, at the end of the day we are all consumers that are sold to which makes the economy move in a good cycle.
If you are a struggling business owner and can’t qualify for a business loan you either need to read and study this article again or let me explain this to you again. In business, you are paid in direct correlation to the problems that you are able to solve. This first comes with a skill set. If your skills aren’t up to par then develop them first until they are at a professional grade. Once you build up your skillset you establish yourself as a business, the best choices to start with in my opinion is an LLC or a sole proprietorship. An LLC if you are caught in a legal hold up they can’t come after your personal belongings and if you are a sole proprietorship, everything is based on you. Now that you have a skill set, you need to go to the market. Establish yourself on Google and create a website to market to customers who demand your product or service.
Once you do that, you need to execute and do a good job, ask for a good review so the next client will know you did a good job with the previous client, and this will spark more business. Once you are confident in your skill set you can hire more people as the demand for your product or service increases. Earlier I talked about credit score and keeping the utilization down under 30%, continue to work hard to attack the market by continuing in making contributions to the economy with the product or service you have to offer.
You can choose to scale up or remain at a ceiling you are most comfortable with under your occupation and industry. Think of business as a recipe, you need to get the fundamentals right in your hiring process, your marketing process, and your product or service process. With these three things in mind, you can prosper with the right amount of capital allocated for each. With VIP Capital Funding we offer detailed consultations for your every need whether that be working capital, material purchases, staffing, and more.