Ep. 22-Gerri Detweiler: Everything You Need To Know About Credit & Debt Especially If You Own a B...

This is the You Winning Life podcast, your number one source for mastering a positive existence. Each episode, we'll be interviewing exceptional people, giving you empowering insights and guiding you to extraordinary outcomes. Learn from specialists in the worlds of integrative and natural wellness, spirituality, psychology, and entrepreneurship so you too can be winning life. Now here's your host, licensed marriage and family therapist, certified neuro-emotional technique practitioner, practitioner and certified entrepreneur coach, Jason Wasser.

Hey everybody, welcome back to the You Winning Life podcast. I'm Jason Wasser, licensed marriage and family therapist, certified neuro-emotional technique practitioner, and certified entrepreneur coach. I have a really awesome guest today who has 20 years of experience guiding individuals through the confusing world of credit and has earned a reputation as a reliable and independent source of personal and small business credit. She serves as the education director for NAV, which is the only site to give business owners free access to credit reports from all 3 major commercial credit bureaus and tools to build financially healthy companies. At NAV, she develops educational programs and content for entrepreneurs and works on advocacy-related issues. She's a prolific writer. She contributes regularly to columns all over the internet, including Forbes. She's been featured in Today's Veterinary Magazine, Business, Landscape Business, Home Business Magazine, and much more. Her articles have been featured on numerous national news sites and is the author or co-author of 5 books, including her newest title, Finance Your Business: Get on the Financial Fast Track. I really would like to welcome Jeri Detweil to the show.

Oh, thank you so much, Jason Wasser. I'm glad to be here.

Thanks for hanging out. Before we get into all this incredible wisdom that you're going to drop on everybody listening, let's talk a little bit about how you decided that working in the credit and business world was your purpose and your passion.

Well, it truly was a complete accident. So I fell into a job in Washington, D.C., and there I worked for an advocacy organization. And the issues I got to work on were pretty interesting. It was things like giving consumers free credit reports. This was before that was a federal law. It was telling the consumer what their credit card might cost before they actually got it in the mail. So at that point, you would get— you'd apply for a credit card, you'd get it, and then you'd find out what the interest rate is. I got to work on some really interesting things and I discovered it was my passion. I thought I wanted to be a doctor. I chickened out on going to medical school, but I love to help people. This allows me to do that. Then a few years ago, I shifted over to primarily focusing on small business. That was through my book and also through joining NAB. I myself was self-employed for a decade in between that advocacy organization and the work I've done more recently. I've been there and I've felt that struggle. Stress of where, you know, the invoice isn't getting paid on time, or you're so busy trying to do the work that you're not generating work, or you're worried about your health insurance premiums going way up and how are we gonna handle this financially. So I really feel very, very passionately that entrepreneurs need to find the resources to support them because while it can be exciting, fun, and liberating. It can also be very stressful and overwhelming at times.

Well, you kind of just tapped into that whole topic about the E-Myth that they talk about in that book, which is the idea of the entrepreneur, the manager, and the technician, and what role are we supposed to play when we get overwhelmed trying to create a business. In fact, I just had a conversation with a client of mine about how not to be Superman, that he thinks that while being a practitioner of what he does, he also should be an expert in the business, in taxes, in marketing, in social media and branding, and he's overburdened with everything, right? And the financial side of running a business— people don't get how challenging it can be, but also how simple it can be if you bring in the right persons or the right consult— consultants to help support you through this process. So let's talk a little bit off the bat about what it is that you're doing right now and the work that is helping other people make their life a lot easier when it comes to their business.

Sure. So when I joined NAV 4 years ago, one of the things that really intrigued me was this was like a time warp for me because in the small business arena, there's no federal laws that say that they have to show you your business credit reports. And in fact, most business owners I talk to when I say, do you know what's in your business credit? They have no idea what I'm talking about. They might've heard of Dun Bradstreet, but they don't realize that Equifax and Experian also have business credit reports and that companies can make decisions based on that information. And then to take it one step further, financing your business, and we know this from so much research from the Fed and other organizations, finding financing is very overwhelming for small business owners. They spend a lot of time and a lot of time they end— times they end up with financing that's best marketed to them, not financing that's best for their business and is going to help them grow strategically. So NAV is solving for that issue. But as I'm out there talking to small business owners, I'm hearing about all these other things too that they're dealing with and the overwhelm that they're feeling. So, I really enjoy being able to at least focus on that one area so that they feel less stress about the financial side and hopefully that allows them to focus on other ways, other things they need to do to grow their business.

So, then let's talk about the developmental stages of when a business owner or a small business or a new business needs credit. So, someone right off the bat, they're working for another company. Or they're not working for themselves, but they're working internally in a company, they're not going to need a business line of credit or any of that type of business credit. At what point does a professional, is it when they first open up their business and they just get that LLC and they file with their state, right, as a business, as a company, is that when the best time is to start with all of this?

Well, first let's remember that about 96% of small businesses never form a business entity. They operate as sole proprietors, and I don't recommend that. I do recommend that you have a formal business structure, whether it's LLC, S-Corp, C-Corp, you can talk to an accountant or even talk to a mentor like from your Small Business Development Center or SCORE to help you determine the right structure for your business. And that's because until you create that, you'll never really be able to separate your business and personal finances, right? Because as a sole proprietor, everything is you and you're always going to borrow in your personal name. You're always going to have personal guarantees. Another thing I would recommend thinking about for anyone who's listening who has the aspiration to start a business is that once The other thing you may want to do is go ahead and get that groundwork laid earlier rather than later. So, I met a small business owner who, while he was working full-time, set up his LLC and he started just doing some very small things to get his business going. And when he ended up getting laid off during the recession, he already had a 2-year history. And for banks, that's kind of magic, right? 2 years in business means you've beaten the odds for many small businesses. So, you can always start that. Even if you're already in business, you've been in business 10 years as a sole proprietor, then the time to start is now. In other words, my advice is the sooner you start those foundational steps, the better, because that will help your business be more legitimate in the eyes of suppliers, partners. You may not realize, Jason Wasser, but as a business owner, anyone can check your business credit. So you can have a company that you want to contract for that can check your business credit Or you as a contractor may have someone check your business credit. Quick example, NAV's co-founder Levi King, he once wrote a check out to a marketing company and it was like about 5 grand and literally within 2 weeks that company had filed for bankruptcy. So he just basically flushed that money down the toilet and didn't get anything for it. And he said, "If I had known at the time to check business credit, I probably would have seen some red flags on their credit report and that might have..." influence my decision. So there's a lot of reasons to set those foundations as soon as you can. And if you haven't done that already, to start playing catch-up so that you can make your business as legit and as strong as you can.

One of the things I hear from a lot of the clients that I work with is when they're starting maybe a side business, maybe they're a teacher or they're doing something where they have their 9-to-5 and they're maybe even doing tutoring or workshops, is that they're like, I don't make enough profit to start up my own business because I already have a lot of expenses. And my challenge to them is, yeah, but if you do create a separate business entity, that is something that you can use to verify, like you were saying, to, you know, after a certain amount of time, you're going to have to build up a reputation within that credit score. So how would we debunk that myth that you don't need to be making profit right off the bat and your expenses can be exponential at the beginning and it's still worthwhile to, one, to set up an LLC and two, to develop this for a line of credit?

Well, my co-author Garrett Sutton on my book, Finance Your Own Business, he's a small business attorney. He's on Robert Kiyosaki's Rich Dad team. So, he's out there talking to small business owners all the time. And he said, "It's not just about how much money you make, but it's how much you can lose." And so, when you don't set up a formal legal structure, you could be at risk if something goes wrong and you could end up risking your personal assets. And that's true even if you're a tutor and you're driving to a tutoring job or from a tutoring job and you get in a car accident. And your car insurance says, "Hey, this was a business trip, not a consumer trip. You're not covered." Or it could be that a parent alleges something and you don't have that liability protection. You're in an industry, of course, where it's very regulated and you have to really be careful. Yes, it's difficult to make that investment at the beginning, but if you really want to invest in your future as a small business owner, Try to find a way to do it. And there are so many low-cost options out there now where you can get affordable advice. You can get free advice on setting up your business structure and licenses from your Small Business Development Center or SCORE office, which are services provided for free through the Small Business Administration. So, there's plenty of options out there for you to get what you need without spending a ton of money.

And in the story a few minutes ago, you shared that he paid with a check and paid this company with a check. So what would be the benefits of a company using their checking to pay for something versus using their credit? And this kind of maybe proves the whole point that if you had a credit card, because I recently had a similar story where I hired someone for marketing. They never gave me a copy of the contract. And all of a sudden, month 2, I got billed, or at the end of the first batch, I got billed for another big batch of services.. And I couldn't do anything to fight it because they weren't responding to me and all these things. So I eventually just called my credit card, explained to them the scenario, and they canceled payment on, on that. How salient is that for that story of what you shared for people out there to have the benefit of creating a credit account, whether it is, even if you do use it from your personal account, but we can talk about commingling, paying for business with personal and vice versa. But is that a level of protection that is being offered by creating and setting up credit for yourself?

It absolutely is. Jason Wasser, that's a perfect example. A credit card, whether it's a business credit card or a consumer credit card, comes with very strong protections under federal law. It's the safest way to pay. That could be whether the card is compromised and money is taken out or whether you have to dispute a purchase like you experienced where the goods and services weren't delivered as agreed. You have a right under federal law to do that. Now, one tip for a business owner is I would say consider using a small business credit card. Many, we know from Fed research, many business owners use their personal credit cards. I definitely agree with you that commingling is not a good idea. So if you're gonna use a personal credit card, at least use a separate personal credit card so you can see when you go back, you know, when it's tax time, you could see, okay, that purchase at Walmart, that was for an office purchase, not a personal purchase, right? So you wanna, Separate it, but a small business credit card gives you the advantage that some of these do not report to your personal credit as long as you make the payments on time. So you can keep that activity off your personal credit and protect your personal credit scores. In addition, all of the small business credit cards report to business credit agencies, so you can build business credit with a small business credit card. And here's the thing that many business owners don't know. You can get a small business credit card when your business is new, even if you're a sole proprietor. There are many issuers. For the most part, these issuers are going to make the decision based on your personal credit scores and income from all sources. So that could be your day job, or it could be your spouse has a job and they would kick in funds if needed to make sure the payment was made on time. You can list that on the application. So I think that's one tip, and I do have a list just at nav.com/reports. Reports that lists how the credit card issuers report to personal or to business credit. So you can check it out and figure out what's best for your use. But I love your idea of separating. I want to give one more real quick tip before I forget. Business debit cards are not covered by federal law in the case of fraudulent use. So your personal debit card is covered by the Electronic Funds Transfer Act. And if you notify them right away, the most you'll be out is $50. Business debit cards are not covered by that federal law, so there's no It's a requirement legally that the issuer make you whole. And I was in a workshop where there was a business owner. He said, he raised his hand and said, "Yeah." He said, "I was in the bank lobby. My debit card had been compromised, my business debit card. I was in the bank lobby, looking, had the app open on my phone, and I was watching the money drain out of my account while I was waiting to talk to someone." He said it was the most surreal and scary experience. So if you're using a business debit card, think about using a business credit card. You can pay in full, avoid interest, but think about that as a safer way to pay.

Yeah, I actually got rid of that business debit card. It's shredded up. I don't even use it anymore. And I treat my business credit card as my business debit card. And what I actually do is after any pay, any charge that I put on that card, I automatically take the money by the end of the week and transfer it from one account into the credit card account in advance. So that gets taken care of as if I was using it as a business debit card. So let's talk a little bit about the different types of money that's out there for business owners, right? We were just talking about credit cards. Talk about lines of credit and other types of financing that are available from the beginning and as each developmental stage goes on.

Sure, so when you're a startup, your options will be more limited because you won't have established a business credit history. And the 3 things that really lenders are looking at, they're looking at time in business. And once you get to the 2-year mark, it's sort of a magic number. It's not set in stone, but a lot of lenders, you're less risky once you have a business that's 2 years old. That's why you wanna start that process early. And then second of all, they'll look at your credit, and that could be personal credit, business credit, or both. A recent Federal Reserve study found that over half of business owners who applied for financing used both, either just business credit or both business and personal credit to get financing. So you wanna focus on both. And then, so we time business credit and revenues, and then look at the revenues coming into your business. So when you're young, you may not have a lot of revenues. You may not have business credit. You may be a young business. So some options at that stage would include things like getting a business credit card, and maybe you can get a low interest rate business credit card if you do need to carry a balance for a time. Time period. You might look at microloans. So these are loans that are available typically through nonprofit organizations in your community, like community development financial institutions, economic development groups. These are groups that are trying to spur jobs in your community. And so they can actually— some of them make their own loans and some of them participate in the Small Business Administration, SBA, microloan program. And those are loans that are more credit flexible, they're more flexible for startups, et cetera. So, microloans is an option for you. And then another one to think about is crowdfunding. And crowdfunding, a lot of us are familiar with, say, Kickstarter, but there are different forms of crowdfunding. There's also lender-based crowdfunding. I've interviewed a gentleman who started making sauerkraut out of his kitchen and his friends loved it. They ended up encouraging him to go to the farmer's market. He did. People loved his sauerkraut. He went to a platform called Kiva, K-I-V-A.org, and Kiva makes they take 0% loans to small businesses, but the way it works is you get a few backers, friends and family, $20, $25 a pop, and then they open up to their platform and people can contribute to the loan, and then you do have to pay it back, but you don't pay interest. So that's an interesting and intriguing opportunity, and with crowdfunding, one thing to think about is that it's also an opportunity to test your marketing. I know someone who has very successful businesses who says, "I don't crowdfund for the money. I do it because I can test my marketing. If the campaign fails, then I know I need to tweak it and go back to the drawing board." So there are some opportunities out there for young businesses.

Incredible. So let's talk a little bit more. I know that people talked about taking in advance these, right? You're saying like these microloans. Where would it be the best place to invest that type of money off the bat for someone who is, starting off, right? Is it towards marketing? Is it towards branding? Is it towards their website? Where have you seen in your experience that the people who have invested— and obviously every size, every size and every situation is different— but overall, where have you seen that the best investments of taking these loans out have been best used?

Well, the number one thing you need is a product-market fit. So you need to get something out there to get reactions from your customer your base or your target base. You can find out if people are willing to pay money for whatever it is you have, whether it's a product or a service. To do that, it depends on the type of business you have, but you're investing in— it could be a demo, a prototype of your product that you want to get out there and test. I interviewed a couple who created a really cool lid for mason jars that you can use to to pour syrup or dressing or whatever it is. And they just went to a local fair where they took a clipboard and several samples and asked people to try it and give them feedback. I think a lot of business owners or a lot of would-be entrepreneurs are afraid someone's gonna rip off their idea. And I wouldn't worry about it. I mean, it's all in the execution, right? Everyone has good ideas. No, it's about actually doing something with it. If they have a service-based business and they want to try to acquire a few clients and get feedback on what they're offering, the pricing, the service they're providing, What's appealing about it? What's not working for them? So it depends on your business, but the ultimate goal is to spend that money to bring in dollars. So whatever's going to bring in dollars the fastest, that's where you want to put it. And I think you're bringing up something that's so important because a lot of times you figure, oh, the beautiful website, the beautiful business cards, that's going to do it. But if no one wants what you have to sell, you're not going to stay in business very long.

Let's go into the psychology of this whole process because you just said they have to have a product or a service to sell. I know that many people struggle with the belief that they have either in themselves, if they're the service, right, that's being offered, or in the product itself. How much does that play into their ability to become a successful business, and if they do take some credit out that it becomes really difficult to pay off in the end.

Yeah, I think that's important because when I was self-employed, I know that one thing I really didn't like was prospecting. I just didn't enjoy it. It wasn't something that I wanted to spend a lot of time on, and so that was kind of always a challenge for me. In retrospect, I think developing those skills, in my case, developing those skills would have been positive. For me also, what I've learned I learned about myself is that I like to have accountability. So, you know, I have a coach, I have friends who meet me at the gym. I have someone who I can report back to. I love deadlines. I like people to give me a deadline. And so you have to know yourself enough to know where your weaknesses are and figure out how to fill that gap. So maybe it is a networking or accountability or mastermind group or a coach who's going to help you stay stick to those things that you know you need to do so they actually get done.

So speaking of masterminds and accountability, one of the things that I love and how I work with my clients is a way to help them find themselves, to hold themselves, and to help people around them to hold them accountable to certain things. How do they find, from your experience, how have you found the right people for your own accountability groups, for your own masterminds? Because right now there's so much, everybody and their mother is a coach, everybody and their mother is an expert, everybody in their right, it's everything now is being pushed through social media of things that they have or done that really haven't been proven platforms. So what has been your experience and what is your advice for people out there that are listening to find the appropriate people that can help them and that they should invest their time, effort, and money into?

That's such a great question. I mean, I think one thing is to look at what's behind the curtain look at the results that the group or the person or the community you want to be involved with has achieved. And I think it's important to find a group that's very committed and open to success and people who aren't just trying to get for them. You know, you need people who are a combination of givers and getters because the givers are going to share their honest feedback with you and hopefully it's in a safe way. Now, here's what I would not say for your accountability group. It should not be a really close friend. I don't think it should be a family member. I don't think it should be your spouse or partner because they have their own vested interest in how things turn out for you. And if there's one thing I have seen go wrong so many years over the years, it's been bad business partners or couples that end up in trouble. Not to say couples can't go into business together, but that shouldn't be your sole source of support. Support and advice because it's just too fraught with too many emotions. So you want someone who objectively can give you some advice and help. And again, if you don't know where to start at the very beginning, sba.gov, they have a link to tools in your local community. You can start there with the classes and the mentorship that those organizations offer for free. And then as you start to grow your business, look at, you know, look for the partner who's gonna help you you be successful.

One of my favorite stories that I remember hearing recently was I got to hang out with Dr. Ivan Misner, who is the founder of BNI, the world's largest networking group. And you just talked about giving, and their motto is "givers gain," right? And I remember him telling the story how this guy just went into a networking group and all he did was just try to find a way to just wedge himself into the story about what that person does, about what that person does. And all he just kept saying over and over again was, "Bring value, bring value." And if we can realize that in our connections with other people, if we are able to bring the value, obviously in a circumstance where you're going to a class like an SBA class or stuff like that, you want to get the value as much as possible. But I can imagine that people are going to show up there trying to network with somebody under the guise of trying to learn something. So I want to have our consumers of this podcast be very, very clear with that. When you are in the role of trying to get something, know what your role is that you need to take away from that, and don't jump roles into also trying to, you know, sell yourself in that moment, because it's going to come across that way. So we talked about financing for younger businesses. We How does a person determine what financing is going to be best for what they need to do?

That's a great question. The two questions that really confound a lot of small business owners when it comes to financing is, "How much do I need?" It sounds like an easy question, but sometimes business owners— I've talked to bankers who said they don't ask for enough. I can project and see where things are going and they're going to run out of money. Then the second thing is, "What am I going to use it for?" We touched on using it for trying So, you're trying to leverage it for that. I think that as you start to look at the financing options out there, there are some great options with lower costs out there, but they're the ones where you're going to have to put in a little bit more effort. So, my rule of thumb is the easier it is to get the money, the more expensive it likely is. And so, if you're just going to take the offer that comes in your inbox from whatever you do, I'll get— well, let me give an example. PayPal and Amazon both have offers. Have financing programs and they will analyze if you're an Amazon merchant or if you accept PayPal in your business, they'll offer you financing. When you go to investigate the cost, it isn't disclosed as an APR. It's disclosed as a fee. It isn't always clear. Sometimes the APR, what we're used to in the consumer world, right, because that's how we shop for car loans and mortgages and everything else, it could be 30%. But if you don't know that, then you may take it not realizing, "Hey, I've got a credit card that would let me finance that at 15%." That would be cheaper, even though it doesn't sound like super cheap money, it'd be a lot cheaper than that. So, one thing we do at NAB is we do offer free calculators. You don't have to have a NAB account. You don't have to give us any personal information. You just go to nab.com/calculator, and there are calculators there that will translate the cost of your small business financing to an APR. APR. Business owners are shocked when they learn that lenders do not have to disclose an interest rate. They don't have to disclose an APR. There was a story in Forbes about a woman who was gonna buy the hair salon she was working in. She got a term sheet from a lender. It said 15% specified percentage. So she's thinking, okay, 15% interest rate, that's not bad. You wanna guess what the APR was, Jason?

I'm assuming 30, 40%.

It was over 4,000% APR. Yeah, the jaw drops. Over 4,000% APR. So that's not the typical thing, but you can have financing that could end up being very high double digits that you don't understand. Look, if you can make money with a high interest rate loan, go for it. I mean, if you know what your numbers are, you know what your margins are, there are times when that may be essential. Your refrigerator in your restaurant front breaks on Friday and you've got to keep that food going, you may need to get some fast, high-cost financing. I get it. But if you're thinking proactively, looking, spending a little more effort looking for lower-cost financing could pay off big time for your business.

Is there a number that people should stay away from? Like I know you said there's kind of a variable of how much time you think you're going to need the money for versus a percentage. Is that something that your website will explain, or is that something that you just philosophically will share with people that you're working with and say, listen, if it's for 15 days, 30 days, and you know you're gonna pay it back and there's this exorbitant APR or fee, then it's okay to do this. But if you know that within this timeframe you're not gonna have that amount of money, or it's gonna be a longer 3-month, 5-month, 10-month, year payment plan, absolutely completely don't do that.

Yeah, if you're gonna go for longer-term financing, and by longer-term I'm thinking a term of over 2 to 3 years, then I would seriously investigate traditional bank loans as well as Small Business Administration or SBA guaranteed loans. So the confusion around SBA loans is that people think the SBA makes the loans. They don't. They just guarantee them. So you go to different financial institutions to get these loans. The costs are very attractive. The terms are usually very attractive, no weird, crazy surprises. So that's definitely an option to consider, but the tip I'll give there is is just because one lender can't help you doesn't mean another. So banks often will lend into certain industries. They may have lent into X number of industries in your area, so they're tapped out for that year. It doesn't mean that you're not a good applicant. So throwing a little bit wider net can often be helpful, but that's certainly the best cost you'll get for longer-term financing. Financing.

And what about credit unions? Where do they play in with all of this?

Credit unions can be a great source of small business financing, and often the terms are quite attractive. So, when you look at big banks versus credit unions and community banks, a lot of times the community banks and credit unions are a little bit more flexible on the credit score requirements. We look at Fed data, we see that it's a little bit easier to get approved if you're in like a medium risk credit tier. I will say though, all bank and traditional financing is going to look at a credit score, including a personal credit score. So, if you're having some credit challenges, that's another thing to start working on early on so that you can get credit score in a range that is acceptable to the individual lender.

And I know one of the other organizations out there like USAA is an incredible resource for those who have either served in the military or have a lineage of military family. And I'm not sure what the requirements are, how far out in your family. Is it a cousin or it has to be a direct descendant like one of your parents or even a sibling? But I've heard incredible, incredible things from my clients who have served or have a family member that served that they've got for car loans and for business stuff and people don't know to take out of it. Are there things out there that the average person, such as like maybe even tapping into a credit union, that people don't know? Exist to tap into?

The business owners I talk to really, they think of small business financing as a bank loan. Yes, that's one form, but there's many, many options out there. It's really finding what's best for you. Let me give you a quick example. When I was consulting, I had some clients that were big-name financial institutions. They're ones that expect me to pay my credit card every 30 days, but they would take It would take literally sometimes several months to pay me for the work that I had done for them. There is another option out there called invoice factoring or invoice receivable financing where you can get money advanced on the invoices that are owed to your business. Then in some cases, the lender even takes the risk that if that company doesn't pay that you're not on the hook. In other cases, it's recourse and you are on the hook. Those options often are more interested in the creditworthiness of the client that owes you money than in your creditworthiness. If you have a great client with good business credit, that's low risk to them and they may be happy to extend you financing even if your credit scores aren't super strong. So do you mind if I give out another quick resource? Please.

Yeah.

Okay.

At SCORE, which is the nonprofit mentoring organization offered through the SBA, score.org, so it's score.org. Www.nav.org/nav. On that page, you'll see I have a free e-guide on financing options, what it takes to qualify, what the different ones are, and also a full webinar on financing options. So, if you're looking at understanding that universe out there and picking out what's right for you, that free e-guide might be helpful to you.

That's incredible because I know we're getting hit up with all the emails and all the things that we subscribe to, right? So, I know for people in my field, if they're using Square or any type of payment processor, now these companies are offering, "Well, we'll give you a loan." and we'll take it out of a percentage of what you're making. So you won't even notice that it's going anywhere and it's going towards your thing. So on their marketing side, that's brilliant. But on the other side of the coin, you're not getting your full income that you might need access to right away and then figuring out what terms you want to have. So I definitely would caution people to look into every single option. And this is why this episode is such powerful information because most people, including myself, haven't heard of half of these. Things that are out there. So for you, for the last thing you just shared, a company that may be ordering goods that might take 30, 60, 90 days to be delivered, meanwhile they're only getting a deposit from their client on the other end, they're having to lay out the full fee. So that last— how would you, how would you describe against the—

well, there's invoice receivable financing, there's also something called purchase order financing, where you can get the goods that you need to produce your product upfront without paying for them. And then let me give you a real popular type of credit that most business owners aren't aware of. It's called trade credit or supplier credit. And that's where you need something in your business and you can get it now and then pay for it later. So as easy example with Levi's experience, his first business was sign manufacturing and he had no credit history. He'd grown up that credit is bad. He avoided it. And he would have to pay He'd get a deposit from a client for a sign, but he'd have to pay for the cement and the steel and the plastic, and then he'd have to try to get it installed, so he had labor costs. One of his suppliers said to him, "You can just fill out a credit application with us and you can pay us in 30 days." He said that was life-changing for him. He was in his early 20s, didn't know about it. That gave him the cash flow so that he could install the sign, then bill for it and get paid and pay for things out of cash flow. As opposed to paying upfront. So, there are a variety of companies that will offer these vendor terms very easily, and you can get things, whether it's office snacks or janitorial supplies or shipping supplies, many of them report to business credit. So, in addition to getting some cash flow benefits, you can also build business credit. And one of the beautiful things about supplier credit is there's usually no interest charged. So they're just trying to cement the relationship with you. You might give up a discount if you paid, say, upfront. You might get a 2% discount if you paid in full right away. But they typically don't charge interest and they're trying to make sure that you always come back to them so when you need your next order that they're the preferred vendor.

Are you there? Sorry.

Yeah, I'm here.

We lost you for a second. That's okay. Yeah, so let's go back to that last segment. For some reason, the internet just completely shut down. That was really— I mean, it did— mine didn't, but it just went— it said it went unstable. So let's go back for a second just to the part of those that they just want to build the relationship with you from that second.

So these vendors will often extend credit because they want to build the relationship, when they want you to go back to them the next time you need those supplies.

So there are companies out there that are trustworthy. There are companies out there that aren't predatory. And I think this is something that we need to know, that it's not just go out, take the massive loan, and then have to worry about about the 30%, 40%, 50% that you're going to be paying on it, but there are companies out there that are looking out for the best interest because— why is that, actually? I'm kind of stumped that— not that it's predatory, but why would a company like these— what's the benefit for them? Right?

Well, they're going to make money, so they're in it to make money.

Yeah.

But they're in it to make money over the long term as opposed to a very short-term. So the predatory lenders, they tend to want just a short-term, make as much money as they can. They know the default rates are going to be high, but they know they can make enough money off the client before they default that it will be worthwhile. The companies that want to build these long-term relationships, they want you to come back time and time again, and they're going to make money whether it's off the interest or off the goods and services that they sell you in that relationship. So yes, there's going to be people taking a cut along the way. If you do invoice receivables financing, for example, they're going to take a fee out of that. You're going to pay for that. But if it allows you to leverage that money to make more money, then it can be worth it. I'll give you a quick story. I was at a webinar with accountants and one of them reached out to me afterwards. She said, "Well, on the side," she said, "I sell Pandora jewelry." She said, "There's a jeweler in town who's going to liquidate. He's closing his business. And I know what I can sell all this business, all this jewelry for," she said, "but I need to get financing fast." And it was a substantial amount of financing. So she was looking at it as an opportunity. She knew what her cost where she knew that she could move this jewelry, but she needed financing fast. So she'd probably pay a higher cost because of the timeframe involved, but she is an accountant, so she knew her numbers and knew she could still make money off of it, and I think that's the key.

So what happens if a business takes out this loan or they use your credit card and they keep a balance on their credit card after the fiscal year? What are the ramifications for that, and what are the pros to that?

Well, first, if you have separated your business and personal purchases, then there's a very good chance the interest that you're paying is tax deductible. So, of course, talk to your accounting professional. That's not me. But in often case, as long as you've completely separated it strictly for business, there's some tax deductible advantages there. And then you're carrying a balance, so that could impact your credit scores. Again, if it's showing up on your personal credit and you have a high balance on that credit card, that could really bring down your personal credit score. So that's something to be aware of. On the business side, it's not quite as detrimental to carry a balance on a credit card as it is on the personal side when it comes to your credit scores. So you have a little more flexibility there, but the goal, of course, would be to pay it off as quickly as possible. And that would mean figuring out, you know, where can I find the funding and where can I make some additional money to get that debt paid down? If you are struggling with debt in your business, and we know that some business owners certainly are. There are organizations out there that can help you negotiate and restructure debt so that you can get out of debt. Great resource that I'll give out, nonprofit, National Foundation for Credit Counseling, NFCC.org. They have a whole business coaching side that focuses on the financial aspect of your business, and that would be a good place to to explore some options for dealing with that debt.

And when using those resources and restructuring that, will that affect the business's credit score or any other detrimental things?

It can. I mean, certainly if you just pay less, it will. But if you restructure the payments with your creditor and they accept those new terms, then it may be showing you paid on time. So if you can restructure from, you know, 18% interest rate to a 12% interest rate, and as long as you keep up with those payments, you'll be fine. Or if you negotiate lower payments but a longer repayment period, as long as they update their systems when they report to the credit bureaus, you'll be fine on the business credit side.

And my guess is that goes back to the, what is people finding out? They should actually find out what their percentage is and how likely are they to be able to negotiate those few points here and there if they have shown that even if they do carry a balance, but they are making above their minimum payments or even their minimum payments?

It really depends on the relationship, right? So it depends. Suppliers are going to be much more forgiving because they want to continue your business. If you've been a good customer and you've really spent a lot of money with them, that's— that says something. A bank is going to have less flexibility, but even banks have to have departments that deal with loans that are starting to default. What I would encourage a business owner who's been struggling with debt to do is to reach out sooner for help rather than later, just because the sooner you do, the more options you you have.

Awesome. So, you brought a ton of incredible resources for us today, and I know that you have written a couple books. Would you mind listing off some of the titles and what they tackle in each of those books so our listeners out there can benefit from what you have shared with us?

Yeah. Well, my two recent and relevant books, Finance Your Own Business: Get on the Financing Fast Track, and that is the book, as I mentioned, I wrote with small business attorney Garrett Sutton. We dive into credit and financing for business owners. And then I have another book, The Free Cash Flow Formula. A Kindle ebook called Debt Collection Answers, and that's specifically for someone who's dealing with debt collectors. And you can get that on Amazon, just look for Debt Collection Answers, and you can download that for free. And hopefully that will give you some ideas on how to deal with collection agencies if that's something you're struggling with.

Awesome. And who would be the best type of person to be reaching out directly to you and to your company?

Well, NAV wants to help any small business owner that wants to be financially successful. So whether you're in the startup phase or you're well established, we have many businesses that come to us that have been around for 10+ years and they discover, hey, I didn't know this business credit thing existed and I need financing and I don't know where to find the best financing. So they can sign up for a free NAV account, doesn't require a credit card, nav.com. If you go to nav.com/podcast, you can download our business credit building checklist, that's free. And you can also, if you use the coupon code podcast, you can try out a month of our paid or premium service for free as well. So, many of our customers use a free account, but then we also have additional benefits like trade line reporting where we actually help you build your business credit with a paid NAV account.

Awesome. So, I got one more question before we wrap everything up, and I call this my on one foot question. So, if you were to meet someone and you had 2 minutes with them and you know that you would never ever speak to them again, what wisdom would you share with them in that time?

I think my most, my best advice is there's so many opportunities to do so many things in life, right? And I know I struggle with this, the overwhelm that comes from that. And so, when people talk about financial challenges, I say, "Just because you can't do everything doesn't mean you can't do anything." Take that one step in a positive direction because I think the one step in the positive direction can have it can roll over to other positive steps that eventually you suddenly discover, hey, you know, I made it up that staircase and I didn't think I was going to be able to make it past the first stair. So yeah, just because you can't do everything doesn't mean you can't do anything.

Well, I love the metaphor that— or the imagery that comes with that is that if you have a candle, you think you only have one light, but that one candle can light an infinite amount of other candles from that. So you can start with this one little idea and that can become the brainchild, for lack of a better for all these other things that can come with you and for you as life continues. So I wanted to thank you for spending some time with us. There was so much really good meaty and juicy information that you shared with us, and I'm sure there's obviously hours and hours more, which is why I want to make sure people come and visit your website and check out all the amazing resources out there, and that everybody who might be interested more about finding about credit can check out your books online as well. And I wanted to thank you again for hanging out with us today. Today.

Oh, thank you, Jason. It truly was a pleasure, and thanks for all you do. I know you help a lot of people.

Thank you so much.

Thanks for listening to the You Winning Life Podcast. If you are ready to minimize your personal and professional struggles and maximize your potential, we would love it if you subscribed so you don't miss an episode. You can follow us on Instagram and Facebook at Jason Wasser LMFT 🎗️.