Monday, October 23, 2017

State of Small Business Lending: 2017 Spotlight on Women Entrepreneurs

In November of last year, we released our first annual report on the State of Small Business Lending: Spotlight on Women Entrepreneurs. After reading stats like women entrepreneurs receive only 16% of all traditional small business loans, we wanted to know: do these same stats also ring true in online business lending?

To find out, we dove into our own internal data to look at the gender breakdown of a Fundera customer sample. The numbers spoke for themselves.

Our 2016 report, which can be revisited here, found that women entrepreneurs who applied for financing through Fundera were applying less, getting approved less often, receiving smaller loan amounts, and paying more for financing than their male counterparts.

These results were obviously disheartening, but we’ve always been confident that the online lending landscape could help fix this historically unequal market.

In celebration of October’s National Women in Small Business Month, we’ve updated our State of Small Business Lending: Spotlight on Women Entrepreneurs to see what, if any, changes have occurred within the last year.

In our 2017 report, you’ll find some things have remained lamentably the same as last year. But, we’re excited to say that in some of the most important areas, there have been positive and significant shifts since 2016.

While our industry still has a long way to go, we’re seeing some movement in the right direction. We’re hopeful that the rise of alternative lending can help make small business financing a more equitable space.

Let’s explore what has and hasn’t changed since 2016 in our State of Small Business Lending Report: Spotlight on Women Entrepreneurs.

Main Takeaways

  • Women are now being approved for larger loan amounts than their male counterparts in certain product categories.

    For four of the product categories Fundera offers, women qualify for larger loans than their male counterparts.Though our previous report found women entrepreneurs were offered smaller loans than men across every product category, this year women were offered a greater average loan size than their male counterparts in the credit line builder, short-term lines of credit, medium-term lines of credit, and SBA loan product categories.
  • Women are receiving offers with lower APR than men in certain product categories.

    On average, women qualify for lower APR than their male counterparts within three of the product categories that Fundera offers. 
    Specifically, we saw women receive lower APR than men across three different product categories: medium-term lines of credit, invoice financing, and credit line builders.
  • Women business owners still apply for business financing less frequently than male business owners do, and when they do apply for financing, women still ask for less than their male counterparts.

    A startlingly low 28% of applicants at Fundera are women. However, since our last report, this number has gone up from 25%. Additionally, our last report showed that female entrepreneurs ask for roughly $35,000 less in business financing than men. Since then, the number has decreased only slightly to less than $33,000.

Small Business Lending & Women Entrepreneurs

An Amex OPEN report revealed that in 2016 alone, there were 11.3 million women-owned businesses, and those businesses generated $1.6 trillion in revenues.

The same report showed that across the nation, women are starting small businesses at a rate that’s five times the national average. While the overall small business startup rate since the recession measured up to a mere 9%, women-owned startups rounded in at a 45% growth rate.

This growth rate amounts to about 1,000 new women-owned businesses every day.

But, of course, “the picture is not all rosy.” We’ve got a lot of ground to make up.

In 2016, women-owned businesses provided nearly 9 million jobs, but they only employed 8% of the private sector workforce. They generated $1.6 trillion in revenues, but they only produced 4% of the country’s entire revenue.

Women-owned businesses now comprise 38% of U.S. companies, and this proportion continues to grow as women-founded startups form at an increasing rate.

Counterintuitively, while this growth rate steadily increases, the proportion of the nation’s total revenue from women-owned businesses hasn’t budged in 20 years.

But why? Among other factors, unequal access to funding likely lies at the center of the issue. We say it a thousand times over here at Fundera, and it bears repeating: it takes money to make money.

How can you hire more employees without an influx of capital from a loan or a venture capital firm? How can you scale your revenue without some helping hands that require a salary?

Women are starting small businesses at a constantly increasing rate, but they’re still facing barriers to growth because of the barely-budging gender gap in business financing.

While we saw many significant shifts in the past year, there’s still a lot of room to grow. Here’s where we saw the most heartening (and disheartening) shifts in women’s access to financing over the course of the past year.

In Some Product Categories, Women Receive Larger Loan Amounts

Many of the products we help connect customers to are now, on average, offering women larger loans than they offer their male counterparts.

Our data from the past year shows that SBA loans, credit line builders, short-term lines of credit, and medium-term lines of credit have all funded women entrepreneurs with larger-value loans than they’ve funded men with.

Over the past year, SBA loans for women had an average size of $200,000 and out-measured the average SBA loan for men—$142,929—by more than $50,000. Meanwhile, credit line builders for women had an average size of $51,303 and out-measured the average size of credit line builders for men—$44,440—by about $7,000.

Additionally, the average short-term line of credit for women of $12,720 out-measured the average short-term line of credit for men—$11,963.07—by about $1,000. And finally, the average medium-term line of credit lent to women of $39,000 far out-measured the average medium-term line of credit lent to men—$10,000.00—by almost $30,000.

This means that half of the small business financing products we match customers with are, on average, funding women-owned businesses with larger loans.


In Some Product Categories, Women Receive Lower APR

When we look at our new data broken down by loan type, we see some good news regarding the APR women entrepreneurs receive.

Credit line builders, invoice financing, and medium-term lines of credit have all lent money at lower average APRs to women than to men over the past year.

While the average APR for a credit line builder for men was 19.67%, it was 19.25% for women. Similarly, while the average APR for invoice financing for was 2.24% per week outstanding, it was 1.14% per week outstanding for women. Finally, while the average APR for a medium-term line of credit for men was 66%, women secured medium-term lines of credit with an average APR of 22% .


Women Still Aren’t Applying for Funding as Often as Men

In 2016, only 25% of the applicants on the Fundera marketplace were women. Since then, the number has increased only slightly to 28%. That means the remaining 72% of our applicants are men. This disparity remains despite the fact that 38% of the country’s businesses are owned by women and despite Fundera’s competitive organic rankings for search terms such as “small business loans for women” and “business grants for women.”

Even the demographics of the visitors to match the proportion of women-owned businesses in the country: 40% of visitors are women and 60% are men. What’s causing a larger proportion of these men to apply over the women?

While it seems that online lending is making slow but steady progress in evening out a market that has long been skewed by gender bias, it’s clear there’s more work left to do.


Women Still Ask for Less Money

Back in 2016, we found women asked for $89,000 in debt financing on average, while men asked for an average of $124,500.

Recent data shows that both numbers have dropped, but the margin of difference has remained pretty much the same. Since our last report, women have asked for an average of $77,000 and men have asked for an average of $109,600. This means that though the margin of difference has shrunk to about $33,000 from $35,000, women are still asking for significantly less than men.

While our data can only tell us so much about this particular gap in applications for business financing, several themes remain constant. Women are four times less likely than their male counterparts to ask for a raise and four times less likely to negotiate their starting salary.

Given that working women are still making 78 cents for every dollar working men make, it’s no surprise that gender gaps exist in the realm of finance beyond individual salaries.


Overall, Women Still Receive Smaller Loans

Though specific loan types might be stepping up their game when it comes to closing the gap between loan value for women and men entrepreneurs, the average loan size across all loan types is still of higher value for male borrowers.

Overall, women receive an average loan size of $38,942 while men receive an average loan size of $43,916. That’s an average difference of nearly $5,000.

Despite the bigger loan values for women that we’ve seen since last June in four product categories, larger loan sizes for men in other products outweigh these numbers.

The gender gap between average loan amounts for men and women is particularly troubling in the medium-term loan category. These loans have relatively long terms and tend to show lower APR, making them a great quality option for many borrowers—but still, men receive an average medium term loan offer of $102,700, while women cash in much lower at an average of $84,600. Additionally, invoice financing was, on average, about $6,100 for men and $3,900 for women.

It’s true—we don’t see such drastic gaps in product categories where women qualify for less than men. However, the fact that women are so consistently underfunded in most of our product categories makes up for the giant margins we see in women receiving larger SBA loans.


Overall, APR Is Still Higher for Women

Despite promising strides within specific loan types, overall APR is still significantly higher for women borrowers. While men on average pay a 34.66% APR on funding they’ve secured, women pay a whopping average of 38.04%.

Though the difference may seem small in terms of percentage points, a difference of that magnitude could look like thousands of dollars in financing cost. For instance, if you calculate the cost of a loan at the average overall loan size for all loans funded, $42,658, at the average overall payment term, 17 months, with the two average APRs, the difference in cost is startling.

Without even taking into account origination fees or payment schedule, this average loan at the average APR for men would end up costing the borrower around $11,900.

On the other hand, the same average loan at the average APR for women would end up costing the borrower closer to $13,200.

That’s an average of $1,300 more that women are spending due to higher APRs.


Women Entrepreneurs Are Still Less Qualified by Traditional Lending Standards

As we found in our prior report, women-owned businesses are still lagging behind men in several metrics that affect loan eligibility. In particular, two of the most important numbers that lenders consider—personal credit score and the business’s annual revenue—show a widening gender gap.

Since last June, the average credit scores for both men and women have risen. However, with this growth came a wider gap between the two averages, as well. Since our last batch of data, the average credit score for women applicants rose from 621 to 629, and the average credit score for male applicants rose from 630 to 642. This means that the gender credit score gap grew from 9 points to 13 points.

Though this might seem like a negligible difference, these numbers show that financial health is improving, but it’s doing so unevenly. That being said, while personal credit history can affect whether a business owner can find the funding they need, the difference in men and women’s average personal credit scores doesn’t place them in different credit score tiers of eligibility.

That is, as shown below, many lenders consider credit scores in clumps called tiers of eligibility. Because both gender averages fall within the same tier of eligibility, these numbers aren’t enough to explain away the less desirable loan terms women are offered.


Additionally, as we noted in 2016, women-owned businesses are making less in annual revenue than male-owned businesses. The gender disparity in annual revenue has grown by 4% in the past year—women-owned business now make 34% less than their male counterparts, compared to last year’s difference of 30%.

We’ve seen the discrepancy first-hand on our platform: in the past year, women-owned businesses that applied for funding through Fundera earned an average of $135,000 in annual revenue while their male counterparts earned an average of $232,074.

2017-spotlight-women-entrepreneursWhat Can We Do Moving Forward?

Despite multiple remarkably positives strides in business lending to women entrepreneurs, it’s clear that there is still work to be done.

We’re faced with a serious question: are women-owned businesses less qualified, in a traditional sense, because of barriers they face in accessing funding?

The small business lending industry has been stuck in a cycle that disadvantages women entrepreneurs, but our new data shows bits of promising news that can help address the “chicken-or-egg” problem for women small business owners.

So, what can we do moving forward?

Just as we’re encouraging working women to negotiate salaries and ask for raises, we must also encourage women business owners to apply for business financing. To really empower women entrepreneurs in the financing process, it’s important to offer full transparency into what funding can do for their businesses’ long-term growth and to provide access to tools and education to ensure their success.

We hope to see more women business owners apply for funding and use that extra cash to take advantage of opportunities to grow their businesses. Together, we can shift the small business lending industry into a positive cycle that works for women-owned businesses and not against them.

A Note on Our Data

Although we’ve helped over 100,000 small business owners understand their financing options since last June, our data for this report is comprised of only a percentage of our customers—those who were asked to self-report their gender identifications. As a result, this report covers over 9,750 small business applicants from June 2016 to September 2017. Of those applicants, roughly 7,000 were men and about 2,750 were women.

While this data only comprises a small portion of our total customer base, it is significant enough to glean insights about the larger trends that Fundera sees, and it reflects trends in the online small business lending industry as a whole.

Access a PDF version of the report here and contact us with any questions, comments, or concerns at We look forward to changing the industry with you.

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How to Eliminate Small Business Debt in 7 Simple Steps

There’s no worse feeling than being crushed by debt of any kind. You can’t run or hide from it, but you can take steps to get it under control. If you find yourself struggling with small business debt, start with these steps to help eliminate what you owe and get your business back in good financial standing.

1. Assess and rework your budget.

Before tackling business debt, you need to have a solid understanding of your current financial situation. Assess how your business budget is operating. Is it covering all the bases or operating in excess?

A good business budget helps to identify income sources; fixed daily, monthly, and annual costs; and accounts for all variable expenses such as rent, or other unforeseen costs.

Seek professional advice from your accountant to figure your budget. You can also contact nonprofit associations like the SCORE Association for free business counseling, mentoring, and online workshops on business budgeting. And you can automate the budgeting process using accounting software like QuickBooks to track money flowing in and out of your business.

Ultimately, assessing and reworking your budget should be the first step in forming an action plan for reaching your debt-elimination goals.

2. Reduce expenses.

Once you take stock of your budget, take a look at your operating costs. Do you have any excess expenditures you can do without? Decide which services and operations are absolutely necessary for the daily operation of your business, and cut the rest.

Ask yourself the hard questions. Do you pay for subscriptions you rarely use? Are there professional memberships you can temporarily suspend? Could you potentially negotiate reduced prices and flat rates with certain vendors?

Use your financial statements to help pinpoint expenses contributing to your debt. Cutting costs is a sure-fire way to increase cash flow and reduce surmounting debt load.

3. Temporarily pay with cash (if you can).

Transition the way you pay for business expenses until you get your debt load under control. If you continue to use a business credit line or business credit card to make purchases, you’ll continue to worry about how you’re going to pay it off later. This method will force you to only buy what you can afford to pay for in cash. Paying with cash or cash equivalents such as checks helps to eliminate procuring new business debt and prevents you from letting existing debt increase.

This option might not be suitable for everyone—if you plan to restructure your debt (see below) you want to have as much cash on hand to look good to lenders. Carefully consider this method before making it a pillar of your debt elimination goals.

4. Communicate with creditors and lenders.

You can do a couple of things here to help decrease your debt load or debt interest over time.

  • Investigate the opportunity to lower interest rates. It’s possible to get some of your interest rates lowered. For credit card debt, this is primarily done by transferring existing balances to credit cards with a lower interest rate. For bank loans, you should call your loan manager and discuss options. If you’ve made regular payments and your business is in good financial standing, an argument can be made to lower your rates. However, chances are the interest rates for your bank loans are not the highest rates you pay. Try to work on lowering the highest interest rates first.
  • Consolidate your loans. It’s possible to do this. Consolidating your loans into one payment lets you reduce monthly costs without harming your credit. The best-case scenario is consolidating several shorter-term loans into one long-term package. This will greatly ease your repayment load and help keep you from going under.
  • Apply for a hardship plan. Find out if you qualify for a “hardship plan” that includes a lower interest rate and payment extension. Creditors typically require a hardship letter that explains your current financial situation and provides proof that you require assistance to meet your debt obligations. This includes tax returns, financial statements, and more.

5. Create a “target debt” or “stack” repayment plan.

If you can’t consolidate all your loans or you still have staggered interest rates with various lenders, establish a target debt and use the “stack method” to pay it all back.

Whether its credit card debt or bank loans, the interest rate on each can greatly inhibit your ability to effectively pay down the principle loan amount. This is why you should aim to pay down high interest rate loans first—the debt with the highest interest rate that you’ll be focusing on first is called your “target debt.” When calculated over time, paying down this “target debt” saves you and your organization more money in the long run.

To start, make a list of all of your minimum monthly payments, and make sure they are covered. Then, look at your highest interest debt balance and determine how much above the minimum payment you can pay each month. This additional amount is sometimes called “stack repayment.” Whether it’s $100 or $1,000, the stack payment amount should be applied on top of your minimum payment toward the highest interest loan each pay period until that balance is paid off.

Once the first loan is paid off, apply that amount to the debt with the next-highest interest. Once that second debt is paid off, take that compound amount to attack the next debt, and so on.

Of course, this method takes discipline and close monitoring, but eventually you will start to see your debt load decline.

6. Increase your income. 

Simply put, the more cash you can generate, the faster you can reduce your small business debt. These are just some suggestions that may help you increase monthly income to your business:

  • Diversify. Can you add an additional product or service to your current offering? Are you reaching all potential customers through targeted marketing? Are there an untapped niche audiences you haven’t considered?
  • Raise your prices. But just enough to maintain the same amount of sales. Be sure to communicate to existing customers before you raise prices, and ask if they’d like to order anything before the change is in effect. This could result in a much needed bump in revenue anyway.
  • …Or lower them. Offer mark-downs on merchandise and discounts on services, especially for loyal and repeat clients in an effort to boost sales. Just make sure not to slash the prices too much that you won’t make up lost cost with increased sales.
  • Get what you’re owed. Ramp up accounts receivables by following up on late payments from customers. You can even present your clients with discounts or rewards for paying fees upfront.
  • Upsell. Is there a way to sell more to your existing customers? Can you offer any incentives or bundle your existing products or services in a way that would entice people to buy more from you? A quick email with a flash sale, a limited offer, or subscriber-only deals could do wonders to increase your monthly revenue.
  • Optimize inventory. If you have inventory that isn’t selling, see if you can adjust your purchasing habits or look for suppliers that will offer rights of return for unsold goods. This will free up both physical space and room for more inventory that might actually sell and increase revenue.
  • Sell your surplus. Look at the things you don’t use—or don’t use to their full advantage—and sell them to people who might. Can you sell unused furniture or equipment on Craigslist? Is there another business that could buy a portion of your company you no longer are passionate about? Note that you should never sell anything you’ve put up for collateral on existing debt. That’s straight-up fraud and could have serious legal ramifications.
  • Get scrappy. What else can you do to make quick buck? Can you lease out a portion of your office to another business? Could you save on rent by working remotely? Get creative by generating additional revenue from your existing assets.

7. Hire a debt-restructuring firm.

If your efforts to climb out of business debt on your own aren’t working, you might want to enlist the help of a professional debt-restructuring firm. Debt-restructurers negotiate with creditors and collection agencies on your behalf to formally extend, renew, or change existing credit agreements. The process generally involves a written contract between you and the debt-restructuring company as well as the setup of automatic withdrawals from your bank account to settle outstanding debts.

These firms do charge a fee, but it’s usually a less-expensive alternative to filing for bankruptcy and will better rehabilitate your credit in the long run. If you decide to hire a professional debt-restructuring company, be honest with them on what you can afford to pay each month so that they can come up with a settlement that works for both you and your creditors.

If all else fails, you still have options. For businesses that can’t manage their debt, it might be time to think about selling the business, liquidating all assets, or filing for bankruptcy. But hopefully it doesn’t have to come to that, and hopefully, you’ll have pulled yourself out of a sticky debt situation using these seven simple steps before that happens.

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Sunday, October 22, 2017

10 Minutes with a Financing Adviser Could Save Time and Money

This post is by Carlos Sanchez. Carlos is a BlueVine account executive. When he’s not advising business owners on their cash flow needs, he enjoys playing and watching soccer and spending time with friends and family.

When you’re looking for business financing, you want to do it right. Comparing lenders, financing types, and terms can be a time-consuming task. But understanding your options, rather than jumping on the first opportunity that comes your way, can pay off.

Today, many business owners start their search online. After filling out a request for more information, or applying for pre-approval, the phone may begin to ring as finance advisers follow up on your application. If you used a broker or aggregator that forwarded your request to several lenders, you could start to get overwhelmed by the calls.

You’re busy, of course, but you may want to take advantage of the opportunity to speak with someone who’s knowledgeable about business financing. Even a quick conversation with a financing adviser could help you save money and time. Here’s why.

1. They want to help.

You may want to start the conversation by explaining what you’re looking for and why, and then asking, “Am I a good fit?” Advisers learn the ins and outs of the financial products they offer, and they can quickly determine if you’re qualified by asking you a few general questions.

If it looks like you might be a good fit, ask about the company’s background to get a sense of the types of businesses they help. If you’re not, you can end the call right there, or you could continue the conversation and ask for advice and guidance.

2. They can be a knowledgeable resource.

No matter how much time you spend on research, you may still have questions about small business financing. Advisers can give you a quick rundown of how a line of credit compares to invoice factoring, for example, or translate financial jargon into plain English. They are also knowledgeable about the space in general, and can help you compare the pros and cons of different types of financing.

3. They can recommend competitors.

Ideally, the first lender you speak with will be a good fit and you can secure the financing you need right away. But that’s not always the case.

In addition to learning about their products and services, advisers have to learn about the competition and what it offers. If you’re speaking to a representative from a company that puts customers first, the finance adviser will be able to recommend competitors that may be a better fit.

4. They can save you time.

Rather than applying on your own and scrambling to find documents as needed, ask the adviser what you can do to expedite the process. The adviser can tell you what the company expects, what documents you’ll need, and how to prepare.

Knowing what to do from the start can help you avoid surprises and save you time.

5. The conversation may increase your chances for approval.

Many lenders use automated underwriting software to review applications. But speaking to financing advisers could still give you a leg up.

Knowing what the company looks for lets you prepare a more complete application, which could increase your chances of securing a higher line of credit or lower interest rate. And you’ll have an internal advocate at the company, someone who you can work with to find success.

The post 10 Minutes with a Financing Adviser Could Save Time and Money appeared first on Fundera Ledger.

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Saturday, October 21, 2017

7 Small Business Owners Who Became Instagram Famous

In the landscape of modern marketing, social media isn’t really optional anymore. Even small businesses and startups need to put serious focus on how to best connect with their audience and spread brand awareness through these digital channels.

Instagram is one of the most popular social platforms available, and its influence and impact continue to grow rapidly. Research consistently shows that in a world of information overload, consumers easily become distracted. But visual communications are far more likely to catch their eye—posts that are visual in nature spawn 650% more engagement than text-only posts!

Wondering how you can make the most of visual social marketing opportunities to grow your business? Take some hints from these seven small businesses below that used Instagram to exponentially grow their brand’s reach and impact.

1. NailSnaps (11.8k followers)

Founded in 2014 by marketing and media industry vets Angel Anderson and Sarah Heering, this custom nail art company harnesses the power of digital media in more ways than one.

In addition to having a stellar Instagram account that features crisp, vivid imagery of their products, they source their designs from the user community and let customers create custom nail wraps using their own photos! It’s the ultimate in user-generated content and proves there is real power in giving people what they want.

2. 33 Acres Brewing (32.6k followers)

Craft beer is having a huge moment right now. Forming a clear brand identity is key to standing out from the crowd, and that’s exactly what Vancouver, Canada’s 33 Acres Brewing has done with their social media presence on Instagram.

Embracing a clean, minimalist approach, their visual marketing is not only arresting, but it also aligns perfectly with their brand’s focus on natural elements and simple, quality products.

3. Greats (110k followers)

The idea of sneakers as a status symbol is nothing new—but a company circumventing the usual third-party distribution channel is.

Greats was founded in 2012 with the goal of putting sharp, handmade Italian leather sneakers into the hands of consumers at a competitive cost. Their Instagram feed oozes Brooklyn cool with a deft balance between dynamic product imagery and snapshots of city life. It has earned them major accolades from both business and fashion publications alike.

4. Rock My Wedding (149k followers)

Wedding planning is a massive industry, and being on the startup end of it is daunting. But Charlotte O’Shea saw a need for unique and achievable wedding day inspiration for British brides, so she ran with it.

Rock My Wedding is now a major resource for UK brides and is in the process of expanding internationally. Their Instagram presence is playful and engaging, providing inspiration for a wide range of brides from bohemian to beach and beyond, drawing sponsors and partners from all corners of the industry and providing their followers with valuable, aesthetically impactful content.

5. Tentsile (181k followers)

Conscious consumerism is on the rise in today’s marketplace. Customers want to know their purchasing choices are supporting ethical companies, while still providing them with value. Tentsile has perfectly married those concepts in their unique treehouse-style tents.

Their Instagram feed is full of shots of their product in a variety of stunning nature scenes, creating an electric atmosphere of adventure. They also heavily promote their conservation efforts, promising that three trees are planted for each tent sold, thereby providing customers with feel-good currency on top of the satisfaction of owning a quality product.

6. Letterfolk (202k followers)

While it might seem like your Instagram account can only flourish if it exudes a highly polished air of perfection, there is power in being charming and simple.

Husband and wife team Johnny and Joanna are the creative minds behind Letterfolk, a small company that sells handcrafted letter boards. The basic felt boards have a vintage, DIY feel, and their Instagram feed reflects this by showcasing the myriad ways they can be used, whether it’s to hang your favorite quote on your bedroom wall or to commemorate your child’s first day of fifth grade.  

7. Biltwell Inc. (296k followers)

For quite some time in the world of custom motorcycles, the strongest currency was flash. Snazzy paint jobs and LED lighting were all the rage. Biltwell Inc. was founded with the goal of squashing that. They focus on creating quality motorcycle parts and accessories that prioritize function over form and aim to make the lifestyle accessibly affordable for anyone who wants to ride.

Their Instagram feed is a no-frills love letter to the open road, featuring both male and female bikers, weekend warriors, and professional racers. Their company manifesto and ethos permeate each image.


When approaching your social media marketing, remember that your strength lies not in your size, but in your message. As you can see, each of these brands have capitalized on stunning images that showcase both their products and professional vibe. A well-curated Instagram feed can serve to not only catch the eyes of potential new customers, but also reinforce your brand’s unique identity and establish a space in which viewers truly want to be a part of the world you’ve created.

The post 7 Small Business Owners Who Became Instagram Famous appeared first on Fundera Ledger.

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Credit Inquiries: What They Are (and How to Protect Your Score)

For consumers and small business owners alike, credit bureaus, credit reports, and credit scores can feel like one big, confusing puzzle.

What exactly goes into that all-important, 3-digit number known as your credit score?

Well, the short answer is this: A lot goes into it.

Some factors matter more than others, but every aspect of your credit score is worth knowing. That’s why we’re diving deep into credit inquiries.

What are credit inquiries, and why should you care about them? Well, here’s everything you need to know about credit inquiries and how they fit into your overall credit history.

What Goes into a Credit Score?

To get a full understanding of what credit inquiries really are—and how they affect your credit score—you need to first understand how they fit into the larger picture of your credit report.

Do you know what goes into your credit report? Unfortunately, a lot of borrowers are still in the dark about how their financial activities are reflected in their credit score or why they should even care about their personal or business credit score.

So, let’s take a few step back and break down what really makes up your credit score—and how credit inquiries fit into the larger puzzle of your credit report.

A Credit Report Explained

Your personal credit score is just a 3-digit number that sums up your financial history. But there’s a much larger story going on behind your credit score—and that’s your credit report.

Your credit report keeps track of the whole history of your financial life. Any debts you’ve owed, who you’ve owed, the track record of all your credit accounts—loans, lines of credit, credit cards, and so on.

Your credit report records all the ups and downs of your financial life, as told by the credit reporting bureaus: Equifax, Experian, and TransUnion. These 3 credit reporting bureaus gather your financial information, but do so differently and at different times.

What all 3 credit reporting bureaus have in common is the FICO algorithm. To keep things standardized, the 3 credit reporting bureaus use the FICO algorithm to calculate your credit score from the information on your credit report.

What Goes into the FICO Algorithm

The FICO algorithm weighs a few different pieces of credit data from your credit report to spit out that all-important 3-digit number. The end result is a prediction on FICO’s end—showing how likely you are to not pay back your debt within the next 18 months.  

The lower on the credit score scale you are, the more statistically likely you are to default on your debt. And on the brighter side of things, the higher your FICO score is, the less likely you are to default on a debt payment in the same time period.

Now, the FICO algorithm isn’t just random, of course. And while we don’t know exactly how the 3 credit reporting bureaus pull financial data and exactly how FICO comes up with your 3 different numbers, we do know the 5 major categories that have a heavy influence on your results.

When it comes to knowing the ins-and-outs of a credit score—and how to stay on top of yours—you need to know the 5 factors that the FICO algorithm deems the most important for determining your reliability as a borrower:

  1. Payment history: Payment history takes up 35% of your credit score. It’s the single most important part of your score, so it’s a factor worth paying attention to.

Payment history has the most obvious impact on your credit score. Put simply, this part of your credit score keeps track of whether you pay your creditors on time and in full. The more credit accounts you have on file with on-time payment history, the better your score will be. It’s as simple as that. If you always pay your credit accounts on time and in full, you’ll have a strong credit score. If you frequently miss payments, your score will suffer. The amount you’re delinquent and the duration the payment is delinquent for has a large impact on how much a late payment can affect your score.   

  1. Amounts owed: Amounts owed takes up the second most important slot in the FICO algorithm—coming in at 30% of your credit score. The amounts owed category reflects the total amount of credit you currently owe or have outstanding.

The most important part of nailing the amounts owed section on your credit report is understanding how credit utilization works. Your credit utilization ratio is important for your borrowing activity on your revolving credit lines, and shows the amount of currently outstanding debt relative to your total available credit limit. There is so much more that goes into a credit utilization ratio, but when it comes to keeping a great credit score, know this: Try to keep your credit utilization ratio above 0% but not more that 30% at any point in time.

  1. Length of credit history: Up next is length of credit history, taking up about 15% of your credit score. Length of credit history is a self-explanatory credit category. When did you get your first credit card, student loan, or auto loan?

The first time you open a credit account, naturally, FICO won’t have much credit history on you. But that builds over time as you open credit accounts and develop a payment history. This category really impacts new borrowers—when you open your first credit account, your credit score will likely be low just because of length of credit history. But as you build your credit history, your credit score will keep going up as time goes on.

  1. Credit mix: Your credit mix takes up 10% of your FICO score, and it reflects all the types of credit accounts you have in your credit report. Interestingly enough, the statistical likeliness that you pay on time can widely depend on the type of credit accounts you have open. For instance, borrowers are generally much more likely to pay auto loans and mortgage payments on time than they are on credit card debt.

So to give the most robust prediction on your risk and reliability to potential creditors, the FICO algorithm needs to take the different kinds of credit accounts you have open. In general, the more varied accounts you have open, the better you do in this category.

  1. New credit: New credit takes up 10% of your credit score. For the purpose of understanding credit inquiries and how they affect your credit score, this is the category you should watch carefully. And because credit inquiries are at the crux of the new credit category, let’s start our deep dive into just how credit inquiries affect the new credit category—and what that means for your credit score.

How Do Credit Inquiries Come into Play?

When you fill out an application for a new credit account and send it a creditor’s way, the lender will almost always run a check on your credit report with at least one, if not all, of the credit reporting bureaus.

That means when you apply for a student loan, an auto loan, a business credit card, a mortgage, a small business loan, and so on, lenders will run credit inquiries. A credit inquiry can be both soft or hard—we’ll get into the difference in a moment. But in general, credit inquiries reveal your credit score and help a lender decide if you’re a trustworthy borrower.

Back to the new credit category. The new credit category comes into play when you apply for a credit account, and one or multiple credit inquiries happen. Credit inquiries always come before a new account is opened, and they tell FICO that you’re probably going to be borrowing via some type of credit account in the near future. That flag will create a new account on your credit report. There won’t be any credit history associated with that account—you haven’t used it yet, after all. So both the credit inquiry and the opening of a new account will ding your credit score.

Just how much do credit inquiries hurt your score? We’ll get into those details in a bit. But first, let’s cover the different types of credit inquiries out there.

The Different Types of Credit Inquiries Out There

When you come across the term “credit inquiries,” the first question to pop in your head should be, “What kind of credit inquiry?”

Because not all credit inquiries are created equal. First off, different people can perform credit inquiries on your credit report or score. Small business lenders, credit card issuers, potential employers, even you yourself, can perform credit inquiries on your report.

And FICO will determine how to weigh the credit check depending on the type of credit inquiry, why it was done, and who actually did it.

When it comes down to it, the difference in credit inquiries is broken down into “hard credit pulls” and “soft credit pulls.”

Soft Credit Inquiries

Soft credit inquiries—as the name suggests—aren’t as big of a deal in the greater scheme of your credit reporting history.

A soft credit inquiry refers to all credit inquiries where your credit is not being reviewed by a potential lender. (Although a lender or creditor could do a soft credit inquiry to check to see if you prequalify for a certain financial product. This saves time and money and for the lender—weeding out potential borrowers who are unqualified.)

A soft credit inquiry could be run for any of the following reasons: you want to check your own credit score, a business that’s offering you goods and services wants to check in on your credit, a credit card issuer or lender wants to check your score out for pre-approval, an employer wants to look at your financial history before hiring you, and so on.

Does This Count as a Soft Credit Pull?

To give you the full picture of what counts as a soft credit pull, here’s what to expect:

  • Checking your own credit score? Almost always.
  • Background checks for employers? Almost always.
  • Pre-approval for loan and credit card offers? Almost always.
  • Renting a car? Sometimes.
  • Applying to rent an apartment? Sometimes.
  • Identity verification by a financial institution? Sometimes.

Think of soft credit inquiries as background checks. They are more informal looks into your credit report, and they can happen without your approval.

But what you need to know—and many don’t—is that soft credit inquiries do not affect your credit score.  

Hard Credit Inquiries

Hard credit inquiries, on the other hand, are one step up in the world of credit inquiries. Hard credit inquiries are considered serious inquiries made before you receive a business loan, a line of credit, a mortgage, or other major credit lines.

Most hard credit inquiries come from banks, credit card issuers, lenders, and other major financial institutions. And even if the lender ultimately turns you down, deciding not to extend you the credit, your credit report will still show a hard credit check.

Either way, really, hard credit inquiries are with you on your credit report for a period of time. Approval or non-approval, a hard credit inquiry will show for a maximum of 2 years. Just how it affects your credit score while it’s on your report requires some explanation—we’ll get to that below.

Does This Count as a Hard Credit Pull?

But first, when should you absolutely assume a hard credit inquiry will happen and your score will show it?

Well, here’s what to expect:

  • Applying for an auto loan? Almost always.
  • Applying for a small business loan? Almost always.
  • Applying for a student loan? Almost always.
  • Applying for a mortgage? Almost always.
  • Applying for a personal or business credit card? Almost always.
  • Applying to rent an apartment? Sometimes.
  • Renting a car? Sometimes.
  • Opening a checking, savings, or money market account? Sometimes.
  • Getting a cell phone contract? Sometimes.

The thing to know about hard credit inquiries is, most importantly, that they do impact your credit score. But you’ll know when a hard credit inquiry is happening—you need to give permission for it to happen.

Credit Inquires: What They Mean for Your Credit Report and Credit Score

Now that we’ve walked through exactly what a credit inquiry really is, it’s time to get into the heart of the matter—and what you, as the borrower, really care about: how credit inquiries affect your credit score.

As it turns out, the impact of credit inquiries on credit reports and score can’t just be summed up in a single sentence. A lot goes into to credit inquiries and how FICO understands them.

Why Do Credit Inquiries Affect Your Credit Score?

Why are credit inquiries something that the credit reporting bureaus, FICO, lenders, and therefore you care about? What’s the big deal?

Well, after years of collecting data on borrowers’ financial histories, FICO’s research shows that opening several new credit accounts within a short period of time indicates greater risk—especially if the borrower in question doesn’t have a long credit history.

For instance, a borrower with 6 hard credit inquiries on their credit report is up to 8 times more likely to declare bankruptcy than a borrower with no hard credit inquiries on their report.

When you think about it, this makes sense: If you’re applying for serious credit lines in a short period of time, FICO and lenders might think that you’re desperate for credit or you can’t qualify for the credit you need.

How Do Credit Inquiries Affect Your Credit Score?

Hard credit inquiries are a reality for everyone’s financial life. They’re necessary for obtaining a home, a car, or growing your small business. And if you’ve just had a handful of hard credit inquiries throughout the years to do these things, you don’t have to sweat it.

One or two hard credit inquiries won’t significantly damage your score—at a maximum your credit score could fall 5 points. But lots of hard credit inquiries in a short period of time can seriously ding your score.

Which bodes the question, “What if I’m a smart borrower and want to shop around for the best rates? Won’t that result in a lot of hard credit inquiries in a short period of time?”

This is a great question, and one that speaks to the intricacies of exactly how hard credit pulls affect your credit score.

What you need to know is that FICO doesn’t weigh all hard credit inquiries equally. It depends on the circumstances of the hard credit pull and what kind of credit history you have going in the first place.

So fortunately, if you’re being a savvy borrower and shopping around for the lowest rate on a business loan or auto loan, FICO will take that into account. If you apply for the same type of credit account from multiple lenders within 30 days, FICO treats those credit inquiries as just one hard credit inquiry. FICO calls this activity “rate shopping.”

This goes to show that credit inquiries and how they affect your credit score aren’t black and white. In general, the worse your credit report already is, or the younger your credit history is, the bigger impact hard credit inquiries will have. But if you’ve always practiced tip-top borrowing behavior and have a great credit history to show it, you don’t really have to worry about a hard credit inquiry.

Which begs another question: How long—if at all—do you have to worry about credit inquiries showing up on your report?

How Long Do Credit Inquiries Affect Your Credit Score?

Hard credit inquiries—unlike soft credit inquiries—do show up on your credit report, and potential lenders will be able to see them for some time.

At a maximum, a hard credit inquiry will stay on your credit report for 2 years. But they only impact your credit score for a maximum of 12 months. And usually, the impact lasts for just 6 months after the inquiry happened—if it brings your score down at all.

Best practice is to wait out a hard credit inquiry and take up good borrowing habits in the meantime. Payments history and amounts owed are much more important factors for your credit score in the long run, so focus on these categories and wait until your hard credit inquiry is off your report.

Can You Remove a Credit Inquiry?

As we mentioned before, a hard credit inquiry legally can only happen with your permission. But in the off-chance that your credit score is dinged for a hard credit check you didn’t authorize, you can dispute a hard credit inquiry on your report.

First, obtain a copy of your credit report and check to see which creditor performed an unauthorized credit report. You can call the creditor and actually ask why the inquiry was run. Just look for the creditor’s information in the inquiry section of your credit report.

You can also contact the credit bureau and get more detailed information from them. They should be able to help you get the hard credit inquiry off your report. And if not, go and file an official dispute by calling the bureau or mailing a letter.

Credit Inquiries: The Key Takeaways

When it comes down to it, what do you really need to know about credit inquiries and your credit score?

Well, the important takeaways are this:

  • Hard credit inquiries usually don’t have a huge impact on your credit score, so there’s no need to worry too much about them. Just avoid opening a bunch of credit accounts in a short period of time, and you should be golden.
  • Best practice is to keep your hard credit inquiries to one or two pulls a year if they’re totally necessary. And when you do pull your credit, take some time to seriously consider whether you need the credit and if you’re ready to use it appropriately.
  • Don’t sweat “rate shopping.” It’s important to get the lowest interest rate you can on a loan or mortgage, so remember that FICO won’t ding you for shopping around for your best option.

Credit inquiries are just a small fraction of a very important larger picture—your credit report. Remember that everything in your financial history adds up!

So while a few credit inquiries here and there won’t hurt you in the long run, keep track of what’s going on with your credit inquiries at all times. Monitoring your credit and keeping up with your credit accounts are key ways to win the credit score game.


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Friday, October 20, 2017

Attracting Restaurant Talent Through Brand Storytelling

It’s no secret that it takes a lot of time and work — OK, OK…blood, sweat and tears sometimes too! — to attract and hire the right people for your restaurant’s concept. And while it can be time-intensive to get started, it doesn’t have to be this way forever or break the bank once you... Read more

The post Attracting Restaurant Talent Through Brand Storytelling appeared first on Kabbage Small Business Blog.

from Kabbage Small Business Blog

How Small Businesses Analyze Behavior to Boost the Bottom Line

Over the past couple decades, ecommerce companies like Amazon have had so much success thanks to one distinct advantage over traditional brick-and-mortar stores (other than low prices)—the ability to analyze customer behavior using big data.

Big data in this context are the shopping patterns of buyers—such as what’s hot in search right now or what items are typically bought together.

While small businesses have long been able to understand basic trends (“We’re out of this item, so it must be selling well—we need more”), in the beginning they couldn’t compete with the online retail giants that can measure how long people dwelled on a certain page before moving on, or could see at which point in the online purchasing process the prospective buyer backed out.

The tides are beginning to turn, however: Though Amazon and other big box stores continue to dominate the retail world, small businesses can now use plenty of online analytics tools of their own to track their customers’ desires and actions, and see where their business is coming from, among other insights.

But the most exciting advances are coming from how small businesses can use in-store insights to boost their sales. Technology is rapidly improving in this space, and businesses will soon be able to build customer profiles, quickly find loyal customers with location-based technology, push context-specific advertising and deals, and much more.

Here are just some of the intriguing ways that small businesses can use behavior analytics, both online and offline, to improve their bottom line.

Google Analytics and Other Tools Help You Optimize Your Website

It’s 2017, so if you have a small business, you have a website to go along with it. And it’s in this space that most small businesses are able to utilize big data—by tracking the behaviors and trends of their online customers.

When it comes to analyzing your website’s performance, Google Analytics is perhaps the best-known and most popular platform. That’s probably because it works well and is free (and what’s better than free tools?).

You can certainly use it in conjunction with other tools to see a bigger picture of how customers are interacting with your site.

Bret Bonnet, co-owner/founder of Quality Logo Products in Chicago, tells Fundera that he uses Google Analytics and Inspectlet, a website heatmap and form analytics tool, to boost conversion rates.

“We’ve done a test in the past where we showed two different designs of the same page to a select online panel and asked them to complete specific tasks. During this test, we were able to monitor the heatmaps and actual recordings of user sessions to see where people were clicking and how they were interacting with our website,” Bonnet says. “We quickly learned where to place the most valuable information on the page and how to optimize our site flow to maximize usability.

“We’ve also run tests to see which call-to-action buttons work the best to create conversions and boost sales,” he adds. “We tested four text variations and three color variations on the button. What we found was that the most successful button was blue in color and had the CTA of ‘Start Your Order.’ It resulted in a 3% conversion rate, which we found to be extremely reasonable.” 

That’s the great thing about a website as opposed to a storefront: You can change your layout, signage, color scheme, and more with just a few clicks, and then measure whether that’s having an effect on your sales.

Move Away From Gut Feelings, and Identify Real Trends

As a small business owner, you probably feel you know your clientele like the back of your hand. But what if your observations and gut reactions are missing the larger trends that you could be capitalizing on?

Barbara Criswell of Aquarius Books, a new age book and gift shop in Kansas City, used to think that her customers were mostly returning regulars.

In reality, as the Womply blog details:

The best indicator of a potential customer was disposable income. She learned this by looking at the impact of new and repeat customers on her store’s revenue in Womply Customer Pulse.

“I didn’t realize how much of our business was coming from first-time customers,” she says. “That’s a significant and valuable piece of information. It totally changed how I viewed the people coming into the store ….

“I saw that some of the zip codes near our store were experiencing increased spending because the area is gentrifying, and new money is coming in,” she says. “I targeted some of my promotional mailings to people in those zip codes, and we saw increased sales.”

That’s a complete reversal of how Criswell saw her business, and how she went about marketing and advertising. As a result, according to Womply, Aquarius Books is coming off 17% growth over the previous year.

See How People Are Interacting With Your Physical Space

Here’s where it gets interesting: Businesses everywhere are beginning to marry ecommerce with brick-and-mortar, and one of the ways that’s happening is by tracking the behavior of people who enter physical spaces like storefronts.

Since Bain & Company predicts that 75% of retail sales will still take place in physical stores by 2025, emerging location technologies that can show business owners how customers (and their phones) move through their stores can serve a similar function to online tools like Google Analytics.

Jibestream, a platform that helps businesses and organizations put maps of their spaces in apps, is a prime example of a tool that companies can use to help bridge the gap between the digital world and the real world.

“Our platform is typically used in large venues, but those large venues could have a subset of small businesses, for example a mall,” says Chris Wiegand, CEO of Jibestream. “The mall may set up the infrastructure for this to be in place, to provide the opportunity to small businesses, tenants of the mall, to participate and create better experiences for their shoppers.”

Jibestream can offer businesses a variety of possible deployments. One concept is simply about analytics and seeing how to best optimize the space.

“If we think specifically about retail, it would be about the analytics: The path that a shopper would take throughout a venue, how long they dwell in a certain area, and just their general user behaviors and patterns,” says Wiegand. “Although it’s anonymized, you still gain a lot of insight into how people are spending time in a space. We don’t know who they are, but we can start to aggregate those trends and often make physical changes to stores and venues based on those analytics, moving product around, or moving signage.”

Identify and Engage Loyal Customers

Wiegand says that another possibility is using the platform to create a better, more personalized experience for the shopper directly.

“We’re able to provide the ability to deliver location-based messages based on real-time information,” he says. “It could be parking availability, or about a sale, or about something you [previously] selected in the preferred store or an item, and maybe you’re walking past it so they want to intrigue you to come and see that. Shoppers can opt in or out of that functionality.”  

If customers do start opting in to these various programs on their phone, businesses can offer increased value to them when they do enter the store.

“Operationally there are many different benefits. It could be you’re notified as an employee that a high-profile or loyal customer has walked in the door and they’re seeking assistance with a product, so being able to easily navigate to that person and know their first name if they’ve opted into that sort of program,” Wiegand says.

And if the employee knows what the customer has bought in the past, or what items are frequently bought with what they’re looking to purchase? Even better.

There are myriad possibilities for this kind of technology. IBM has developed “Presence Zones” that transform raw location data into contextually defined areas that can be useful for businesses. For more targeted interactions like the ones Wiegand describes, some companies use proximity-sensing Bluetooth location systems to connect with people who have downloaded the store’s app. Businesses can also send advertisements and promotions directly to a visiting customer’s phone.

The trick will be not to bombard people with information to the point that they’re turned off. Businesses will have to learn to balance their desire to interact with customers meaningfully with allowing them the freedom from pressure that window shopping traditionally encourages.

Improve Operational Efficiencies

Big data isn’t only about catering to customers. Businesses can also use data about their assets to increase operational efficiency.

“We have a big value proposition for asset tracking, which might be for a retail business, but also for tracking goods within a warehouse,” says Wiegand of Jibestream. “Our mapping platform is used in these industrial use cases, tracking products within a warehouse or forklifts: ‘Show me all the forklifts that have a battery life of less than half, and what’s the most efficient way to go and service them.’ We’re part of an ecosystem to bring a whole solution—there could be other data pieces that come into this.”

To do this, manufacturing or warehousing companies need to invest in making their assets “smart,” which means connecting them to the Internet of Things and then analyzing the resulting data. This will give businesses real-time visibility into the life and behavior of their machines, replacing, again, things like “gut instincts” and other guesswork.


Collecting and analyzing big data isn’t just for big companies anymore. From online platforms to in-store tools, small and mid-range businesses are increasingly able to invest and utilize the kind of tools that helped transform the e-commerce and brick-and-mortar giants of the last few years.

As the costs of investing in these types of hardware and software come down and the tools become more accessible, expect analyzing behavior—of customers, employees, and machines—to become a common practice among all kinds of businesses, of all sizes.  

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