Monday, July 16, 2018

What’s a Charge-Off, and How Does It Affect My Credit?

Regardless of the type of business you’re running, you’re going to have to spend money—and lots of it—even if you’re not sure the investment will pay off. (That’s why small business loans were created, after all.) Ultimately, there are certain expenses you just can’t avoid. But when your expenses vastly outweigh your income, you might find yourself in a spot of trouble with a charge-off, which is just one potential outcome of falling into untenable debt. So, what’s a charge-off, exactly?

If you’re falling seriously behind on your credit card or loan payments, there’s chance you’ll see “charge-off” the next time you check your credit report. Seems kind of scary, we know—any unexpected ding on your credit report can be alarming, and, truth be told, a charge-off should be.

But don’t worry too much. Although a charge-off will lower your credit score, it’s certainly not the end of the world. We’ll walk you through exactly what a charge-off is, what it means for your credit, and how you can lessen its impact on your credit score.

Important Definitions You Need to Answer What’s a Charge-Off?

There are some technicalities involved with a charge-off, which means that there’s some jargon involved. First, let’s clear up some of that jargon so we’re all on the same page about charge-offs—and then, of course, how to amend them.   

“Charged-Off” or “Written-Off”

A charge-off, or write-off, is when you’re so late on your credit card or loan payments—usually six months overdue—that your lender thinks they’re never going to receive that payment. Then, the lender removes the anticipated income from their ledger, and document the loss as bad debt. Technically, that bad debt is “charged-off” or “written-off.”

Regardless of the term a lender uses, that demerit is considered a final status indicator on your credit report that the account is no longer active—that the credit card is closed, for example—and that it closed because it was written off, and not for a less serious reason.

Basically, these two mean the same thing. Neither are great.


When your lender writes off your account, they might choose to sell it to a collections agency. If and when they do this, the notation on your credit report is “transferred from” your original lender. The new agency that receives your transferred account becomes the active entry on your report, rather than your original lender.

It’s worth noting that seeing “transferred” on your credit report is not always a bad thing. For example, if you’ve closed your account by choice, or if your lender has sold your account to another company while it’s in good standing, those actions might be indicated as “transferred” on your report. So, if you see that word on your credit report, don’t panic right away; it doesn’t automatically mean your lender charged off your account.

Now that you have some basics, let’s get down to the real question: What is a charge-off, and how does it impact your credit?


What You Need to Know About Charge-Offs and Your Credit

As you now know, a charge-off is not something you want on your credit report.

When your account becomes seriously delinquent, your lender may assume they’ll never get another payment from you, and charge off your account as a loss in their accounting books. Your account will be closed for future use.

Be aware, though, that a charge-off doesn’t exempt you from debt, because you’ll still need to pay your lender that delinquent amount. Often, your original lender will sell the written-off account to a third-party collections agency for a percentage of the account’s value. When this happens, you no longer deal directly with your original lender; all communication (and payments) will go through the agency.

The account will then show up as “transferred” on your credit report. And charge-offs stick around on your credit report for a long time. Seven years, to be exact.

How Charge-Offs Affect Your Credit—And Your Loan Approval Odds

Nate Causey, a loan specialist at Fundera, says:

If you have an unpaid charge-off on your report, then the collection agency negatively reports that a balance is present for every month that the balance remains unpaid.

So, for six months of unpaid accounts, you’ll see six negative reports, and each will harm your credit score. How much a charge-off lowers your credit score will vary with each credit reporting bureau (as a reminder, the three major bureaus are Experian, TransUnion, and Equifax), among other factors. But we can say that the higher your score is at the time of the charge-off, the bigger hit your score will take, so brace yourself for that.

The most obvious fallout of a charge-off, and the resulting damage to your credit score, is that you’re going to have trouble securing a small business loan or business credit card down the line. Lenders view your credit score as an indication of your likeliness to repay the loan; if you have a history of paying your debts on time, it’s likely you’ll continue to do so. When you have a long credit history and a high credit score, it indicates to future lenders that you’ll be able to repay their money as you agreed to.

If you have a lower credit score, though (one dinged by a charge-off, for instance), the lender views you as posing a higher risk. That doesn’t necessarily mean they won’t give you the loan, but they may increase your interest rate, making you pay more than someone who has a higher score. Obviously you’d rather have a loan with a lower interest rate. Along with other information on your loan application (like your business’s age and profitability), a high credit score is one way to ensure that you get the lowest rate possible.

Obviously, having your account charged-off or written-off can cause you some trouble, and the notation sticks with you for a while. Even paying off your debt in full won’t remove a charge-off from your credit report—though it will reflect more positively on you as a borrower, and make it slightly easier to apply for credit. And the further away from the date of delinquency you get, the less weight your charged-off account will carry.

So, if you’re planning on applying for another credit card or a different loan, consider waiting. Not only will that give you some time to get a handle on your current debt, it will also help your credit score recover a little bit.

But seven years is a long time, especially if you’re running a small business and need access to credit. So, if waiting isn’t an option for you, there are some other ways you can try to recover from a charge-off.


How to Recover From a Charge-Off

In an ideal world, everyone would stay on top of their debt payments at all times and charge-offs would be a non-issue. But, as you know, life (like credit scores) isn’t always ideal!

Charge-offs happen. And if you have a charged-off account on your credit report, there are a few things you can do to lessen its long-term impact.

1. Pay off the debt as soon as possible.

Once you pay off the debt of a closed account, the status in your credit report changes to “paid collection.” Again, the charge-off will still remain on your report for seven years, but the longer in the past the account was closed, the less of an impact it has on your score. Patience is key here.

Paid collections are still not necessarily a good thing to have on your report, but a paid debt reflects much more positively on you than an unpaid one. Potential lenders will also be more likely to approve you for other loans or credit cards if your charged off account is paid; if nothing else, it shows that you do ultimately pay your debts, even if it takes you some time.

2. Call the agency directly.

Fundera’s Causey recommends directly calling the agency that owns your debt, finding out how much you owe, and paying it right there over the phone. After you do this, he says, “the agency is required to stop reporting the monthly ‘unpaid’ charge-off, which by the next credit cycle (or two or three) should correct itself and up your score.”

By dealing directly with the agency yourself, you can be sure you have all the details about your debt, and be sure that your payment is processed. Even if your lender sold off your account to a collections agency, you should still call your original lender when you’re amending a charge-off.

After you’ve paid down your debt, there’s unfortunately not a whole lot else to do except wait. The charge off will be removed after that seven-year period, and if you pay off the debt, the notation on your credit report won’t carry quite as much weight.

In the meantime, there are a few additional things you can do to prevent a charge-off from happening again.

3. Keep paying down your debt.

This is just generally a good idea, all the time. There are lots of ways to improve your credit score, but the key is to pay all your debt in full, and on time, every time. Set up automatic payments, if you can, so you never miss a payment on your loan and credit card bills—and risk becoming so delinquent that you’re hit with a charge-off.

In terms of paying down your charge-off debt specifically: Even if you can’t pay off the charge-off debt in full, make it a priority to continue to pay down as much as possible every month.

4. Consolidate your payments.

If you have many credit cards or loans with balances on them, it can get overwhelming to keep track of everything. Consolidating your loans or closing some credit cards means fewer payments to keep track of, and pay on time.

If you are thinking about closing a credit card, though, remember that both the length of your credit history and your credit utilization ratio (how much available credit you’re using, compared to how much total credit you have available) make up percentages of your overall credit score.

So, closing your oldest card would minimize your credit history’s average age. Closing any of your cards would minimize the total amount of credit you have available—and if you maintain your spending habits, your credit utilization ratio would increase. Both of those factors might temporarily, negatively impact your credit score.

Ultimately, it’s up to you to decide whether it’s worth it to temporarily lower your credit score so that, in the long run, you can better keep track of your spending and payments.    

5. Limit your credit spending.

This is also a good tenet to live by in general: Only use the credit you can truly repay. If you don’t wrack up debt, you can’t be delinquent on it.

Of course, sometimes this doesn’t work. Sometimes you just have to spend money you don’t quite have, and that’s just part of running a business. But if you can limit the amount of times you have to do that, your entire financial situation will be easier to control.

The Bottom Line on Charge-Offs

All told, you should try to avoid a charge-off on your credit report: It does negatively impact your credit score, can make it more difficult to borrow credit in the future, and is generally just a headache for you.

That said, if you do have one of your accounts written off, don’t panic too much. If nothing else, it can be a useful wake-up call for managing your finances and staying organized. But it is possible to recover from, so you and your business can be back up and running in no time.

If you see a charge-off on your credit report, your best course of action is to call the credit agency and pay down that debt ASAP. Even though lenders don’t necessarily want their borrowers to have a charge-off in their history, paid debt always reflects better on you than chronically unpaid debt does.

In the meantime, be sure to follow the best credit practices so you don’t risk further harming your credit score: Only spend what you’re positive you can repay, consolidate your payments wherever possible to lessen your debt burden, and (say it with us!) always pay your debt in full and on time.  

The post What’s a Charge-Off, and How Does It Affect My Credit? appeared first on Fundera Ledger.

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Selling to Millennials Isn’t Hard: 5 Secrets From a Millennial

Millennials: Just the word alone is enough to stoke ire, confusion, condemnation, or fear in the hearts of even the most hardened marketers. Whether millennials are bringing down fast-casual chain eateries, redefining the very existence of shopping malls, or spending a supposed down payment’s worth of money on avocado toast, they seen to confound small business owners and entrepreneurs. But is selling to millennials all that hard?

Better question: Is selling to millennials really all that different than promoting your goods to any other generations, markets, or groups? Marketers can attribute much of the inherent difficulty they experience when selling to millennials to understanding who this group of consumers actually are.

Millennials are people born between 1981 and 1996 according to the Pew Research Center, which means that the oldest millennials are 37 years old and the youngest are 22. Broadly speaking, these groups have next to nothing in common—22-year-olds are on their way out of college and onto their first real job. Thirty-seven-year-olds are mostly established mid-career professionals with families and responsibilities that come with them.

In other words, the challenge of selling to millennials is that marketers are trying to sell to too broad an audience. Worst yet, that audience has been generalized and stereotyped to such a degree that the wide age gap between the oldest and youngest millennials makes it such that no attempt to create comprehensive categories for them can actually work.

That doesn’t mean it’s not possible to develop great selling strategies for millennials—it just means that you’re going to have to dig a bit deeper and think about your audience first, rather than a generalized generational snapshot of purchasing habits and behaviors. Take it from a millennial.


1. If You’re Selling to Millennials, Know Your Audience

The size of the millennial age gap means that your marketing strategy will depend more on the average age of your current customers. This is why it’s all the more important to know your market inside and out, rather than hunting down a new set of customers based on their demographics or spending power alone.

Look for certain traits within your brand’s core customers—as well as in what you’re selling. For example, if you own a high-end clothing boutique, odds are you won’t want to tailor your marketing messaging to twenty-somethings who can’t afford your goods. If you’re selling unique, quirky cell phone cases, you’re not going to get tons of orders from people who are closer to their 40s than their 20s.

To better understand your strategy for selling to millennials, consider creating customer profiles. Think about four or five archetypes of whom you believe your customer is: what they do for a living, what their income is, and what they look for when making purchasing decisions. This tactic isn’t just useful for selling to millennials—it’s just good business sense.

2. Fish Where the Fish Are

Once you have a stronger understanding of who your customer is within the broader millennial category, you can start to target them where they live. For most, this means finding your audience through digital and social media advertising. And as tempting as it may sound to create a one-size-fits all digital marketing strategy for millennials, there’s much more to it than that.

First, let’s talk about social media marketing. Those of us who aren’t active on social media may assume that the leading platforms—Facebook, Instagram, LinkedIn, Snapchat, and Twitter—are different iterations of the same basic idea. But in reality, each network attracts a different demographic: Facebook and LinkedIn’s core Millennial users tend to be older; Instagram is more popular across age groups; Snapchat skews younger and more social; and Twitter tends to be used across the generational spectrum.

If you’re looking to target Millennial moms, for example, you’d want to look at Facebook and Instagram before you started creating content for Snapchat. If mid-career professionals are your target, you’d want to look for them on LinkedIn and Twitter.

Second, it’s important to understand how your customers are coming to your company’s website or business listings on Google, Yelp, and other review sites. Most of these sites offer analytics and demographic information, which can help you figure out who’s seeking out your company. And you could do worse than setting up Google Analytics for your company’s webpage, which will open up a ton of user information about how (and who!) visits your site.

3. Develop Your Own Unique Voice (aka Don’t Try to Sound Hip)

Nothing seems more disingenuous (or is mocked faster) than brands that try to keep up with trends, slang, and the passing fads of younger consumers. And you most certainly don’t want to end up on a site devoted to mocking companies that do a terrible job of keeping up—or trying to hard to.

This isn’t to suggest that you shouldn’t create a voice for your company that’s unique and fun. Quite the opposite is true. You’ll want to establish an identity for your company that you use both online and in-store. Feel free to make it as casual or professional as you believe is the right fit for your business—but just make sure you don’t try to be something you’re not. It’ll be transparent.

4. Go Digital… but Only if it Fits Your Business

Every company can benefit from having a presence online. If you’re in retail, B2B, or B2C environments, you’ll likely stand to benefit the most from a digital-first approach. At worst, you can supplement your brick-and-mortar business by letting customers buy online. At best, you may even be able to broaden your customer base to other locales and states by listing products online and shipping your goods at competitive rates.

But not every business might benefit from a digital push. Companies that have to sell in person, such as industry supply stores and salons, may not stand to gain as much as others. In this scenario, make sure that you’re only pursuing a digital strategy that improves upon your customers’ experience with your brand. Don’t force would-be buyers to go online if it doesn’t suit them, or makes the buying experience worse.

5. Selling to Millennials Is Really About Keeping Things Simple

One thing that millennials (and anyone, really) appreciates is simplicity. Simple messaging, simple experiences, and minimal hassle. This generation spent half of its life in the pre-internet age, so it remembers what things were like before the advent of the web. And having experienced life before and after the joys of online shopping, banking, and bill pay, it’s hard to voluntarily spend money with companies that don’t make the purchasing process easy.

This means that your path to success when selling to millennials is all about making the experience as easy as possible. Create a few solid choices for buying products, invest in a good website, online customer service, and an easy-to-use ecommerce portal. Selling online means requiring as few steps as possible for the consumer, so you’ll do well by keeping things smooth and easy.

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Sunday, July 15, 2018

8 Unusual and Unexpected Ways to Increase Your Credit Score

We’re going to tell you something that you likely already know, and if you do, it’s worth saying again: Nearly all of America’s financial infrastructure is based on credit. Credit allows people to purchase or finance items that they can’t pay for in cash upfront. Credit is what allows you get a home loan, car loan, or business loan. So, in a credit-based economy, if your credit score isn’t strong, you’ll find it hard to qualify for financial products or will have to pay more.

If that sounds grim, there’s good news, too: Fortunately, you have a lot of control over your credit score. Each credit bureau uses their own algorithm that determines your credit score , and even if you aren’t privy to exactly what goes into the equation, you still have a window into the component parts. Which means there are proven ways to increase your score and keep your score high.

Sure, we all know to pay our bills on time, not to max out our cards, and to prevent unnecessary hard credit pulls. But there are other techniques for maintaining and improving credit that you probably don’t know about. Learn some of the lesser known ways to boost your credit score—and in turn, your ability to qualify for the best financial products.

First: How Credit Scores Are Calculated

The three main consumer credit bureaus are TransUnion, Equifax, and Experian. Each bureau ranks personal credit scores on a scale from 300 to 850. Most lenders consider a score above 670 as good and a score above 740 as very good.

You might find that your TransUnion, Equifax, and Experian credit scores are slightly different. Each credit bureau relies on slightly different credit models. And creditors and lenders have a choice of which bureaus to report payments to. This means that your Equifax score might be different than your Experian score.

But your scores should be approximately the same across bureaus, and there’s a gold standard of what goes into your credit score:

  • 35% Payment history on loans, credit cards, and other debt
  • 30% Utilization (how much of your available credit you’re using)
  • 15% Length of credit history
  • 10% Credit activity (e.g. applications for new loans)
  • 10% Diversity of credit

As you can see, payment history is the main determinant of your credit score, so the obvious way to build credit and keep your credit high is by paying all your bills on time. But there are also less obvious factors at work.

Just remember to be patient. Credit doesn’t usually decline overnight, which means you can’t build credit back up overnight either. With all of these strategies, raising your credit can take a month or two, even more.


Surprising Ways to Increase Your Credit Score

1. Keep Your Old, Unused Credit Cards Open

The average American has three credit cards, and many have four or five or even more. Chances are, you’re probably not using all the cards in your wallet. But resist the temptation to call the credit card company and close an account, even if you’re not using the card.

Your level of credit utilization accounts for almost a third of your credit score. If you lower your total credit limit by closing a credit card account, you are effectively lowering your total available credit. For example, if you have a $5,000 credit limit and charge $1,000 of merchandise, that’s a 20% credit utilization. But if you have a $10,000 credit limit and charge that same $1,000, that’s only a 10% credit utilization. Lenders prefer that you have low credit utilization because this shows you’re not overly reliant on debt.

In order to keep cards open, you don’t have to use them religiously or even have them on you at all times. Using them even occasionally, like once a month, is more than enough. If you don’t use a card for several months, the issuer might close the account. In short, keep your cards open to keep your overall utilization lower.

2. Be a Good Tenant

Most people’s largest monthly expense is housing. In some instances, you can actually attribute your rent payments to your credit history.

If you have a private, small-time landlord, they might not have the ability or time to report your payments to the credit bureaus. However, if you’re in an apartment building owned by a management company, you might be in luck. Some apartments regularly report rent payments to the credit bureaus. A good reason to be nice to your landlord, even if you feel like you’re overpaying!

Obviously, you only want to ask your landlord to report your rent payments if you’re good about paying your rent on time, just like any other bill. If you tend to fall behind on rent payments, that can actually hurt your credit score.

3. Become an Authorized User on Someone Else’s Credit Card

Another unconventional way to build credit is by becoming an authorized user on someone else’s credit card. Friends or family members might allow you to become an authorized user on their card, but proceed with caution: By becoming an authorized user on someone else’s card, your credit scores become intertwined with theirs. Good and bad payment activity will reflect on both of your credit scores.

Think of being an authorized user as a lifeline for your credit. You can take advantage of someone else’s history of on-time payments to build up your own score and qualify for better products and services.

4. Return Your Library Books (Seriously)

Believe it or not, overdue library books might be bogging down your credit score. If you frequent the library and have forgotten to return a couple books over the years, this usually is no big deal. However, if your balance with the library runs too high, or if your book was in high demand, the library can report you to the credit bureaus for overdue items. If you’re a recent grad, you should also make sure that you’ve returned any overdue textbooks to your college library.

5. Don’t Forget About Store Credit Cards

Ever been to a store that offers you 20% off for signing up for a store credit card? Department stores are notorious for this. If you accept the offer, you should know that the store card is like any other credit card.

If you have even the smallest balance on one of these cards, you need to pay that off the same way you would with your bank credit card that you use for everything under the sun. Late payments can accrue interest and become delinquencies over time. As we mentioned earlier, your payment history is the most important metric in your credit score, so being on top of payment deadlines and balances is imperative.

6. Ask for a Credit Limit Increase…

We talked earlier about utilization and the role it plays in your credit score. The lower your utilization, the higher your score will be. If you increase your credit limit, then you have more wiggle room to keep your utilization on the lower side.

Asking for a credit line increase is easy. Many credit cards companies will allow you to request a credit line increase online. All you have to provide is your annual household income.  Some issuers even provide an instant decision with a soft credit pull, so there’s no immediate impact to your credit score.

7. …and for (Occasional) Late Payment Forgiveness

Nobody is perfect. We try our best, but sometimes, you might miss a payment deadline on your loan or credit card statement.

Remember that your credit card company or lender wants to retain a positive customer relationship with you. If you have a history of on-time payments, most issuers will agree to waive late penalties. Others might still charge the penalty, but they’ll agree not to report your lateness to the credit bureaus.

Late payment history can negatively impact your credit for years. So, try to resolve a late payment right away.

8. Check Your Credit Report for Errors

One in five American consumers has an error on their credit report. That’s more than twenty percent of Americans. Sometimes, spelling errors, name changes, or mistakes in your address can cause credit report errors.

Fortunately, every consumer can request a full credit report from the credit bureaus at least once a year, at no cost to them. And if you find a mistake on your report, you’re fully within your rights to dispute the error. The bureaus will review your claim and must remove inaccurate information within 30 days. Depending on the type of error, fixing mistakes can raise your credit by hundreds of points.

Cool and True: You Can Do More Than Pay Bills on Time to Improve Credit

Hopefully, some of these tips and tricks prove to be useful for you. First, make sure you take care of the easy and obvious ways to raise credit, like paying your bills and protecting your personal information. Then, if you incorporate some of the tips from the list above, your credit score could turn out to be even better.

To be extra proactive, check out entirely free Fundera’s credit monitoring feature. This will show you both your personal and business credit score, both of which affect your ability to qualify for financial products. Noticing dips and upticks in your score can help you address problems and capitalize on what’s working.

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Dress For Success: 8 Attire Tips from Famous Business People

No matter what you do for a living, it can be challenging to determine what “dressing for success” means in your specific office environment. There’s lots of information online about different types of work appropriate styles that you can incorporate into your wardrobe, but, getting down to it, lots of this info ends up feeling contradictory or plain useless.

What you wear matters, and it can impact before the work you do and how your colleagues perceive you. Every office place is unique, but keeping tried and true business fashion tips in mind can help you dress in a way that helps you do your best work and make the best impression possible. With a few simple best practices in mind, you can build a wardrobe that feels true to yourself and that helps you excel at your career.

We looked at stylish and successful business people across industries and outlined their iconic fashion choices. Breaking down the clothing choices of our favorite business leaders like Elon Musk, Oprah Winfrey, and more, we included actionable tips that can help you elevate your own wardrobe.

Check out the infographic below on eight style tips from business icons:

Sources: Business Insider | CNNMoney | Art of Style | The Wall Street Journal | The Atlantic

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Saturday, July 14, 2018

The 6 Best Indicators of Business Growth

Small businesses, like people, don’t necessarily grow all at once. Just as we use many measures to show a person’s growth—in height, weight, age, and accomplishments—we evaluate business growth using both external factors like customer demand and sales trends, in addition to financial records, and more qualitative inputs like employee headcount and company culture. There are a few different indicators of business growth, all of which provide an individual snapshot of one aspect of your business. Together, these business growth indicators provide a composite view of how your company is doing, and where it’s projected to go.

Determining how much your business is growing, either at an annual or quarterly rate, is crucial. For one thing, it’ll improve the accuracy of your financial projections, and inform your business budget. And a firm understanding of your growth to-date can help you set goals for future growth, and better allocate resources and spending to areas that need more attention.

Here, we’ll go over six of the best indicators for business growth: demand, profit, revenue, sales, market share, and personnel.

How to Accurately Estimate Growth

Before you can start measuring your business’ growth as a comprehensive whole, it’s important to determine how you’re measuring your growth. That’s where KPIs, or key performance indicators, come into play—they’re specific, measurable values that indicate how well, or poorly, your business is achieving its goals. By honing in on your business’s KPIs, you can more effectively track each quarter, and chart your progress using consistent metrics.

Your business’s KPIs are dependent upon your company’s specific goals, and you should set several KPIs for all aspects of your business—like sales, marketing, and finances. To give you a clearer picture of what we mean, though, here are some common KPI examples:

  • Monthly sign-ups
  • New accounts created
  • Deals finalized by your sales team
  • Leads generated  
  • New customers per month
  • Debt to equity ratio
  • Organic search traffic

Ultimately, your profits and losses alone can’t tell the whole story—keeping track of targets specific to your industry and business helps contextualize your growth.

And don’t base your growth projections on inference alone. If you or someone on your team has accounting experience, this is the perfect time to flex your analyst muscles. Depending on your purposes for evaluating your company’s growth, consulting a professional might be a worthwhile investment. That’s especially true if you’re presenting this information to lenders or potential investors.


6 Reliable Indicators of Business Growth

Tracking KPIs on a monthly and quarterly basis will help you identify where you’re growing, and any areas that need work, in addition to creating a consistent reporting structure. There are many quantifiable indicators of growth worth evaluating, even though they don’t correlate directly to profit and revenue, like social media engagement, website traffic, and search rankings. The most relevant indicators of growth will vary depending on what kind of business you own, so take the time to assess which factors are the most crucial to your success.

Once you establish your growth priorities and KPIs, you’ll be able to apply these general principles to your business and its growth.

1. Demand

The foundational law of “supply and demand” is foundational for a reason: Your growth potential depends in large part on how much demand there is for your business—whether that’s a service, product, or experience. Assessing your business’s demand is crucial if you’re thinking about expanding your business, or making a hiring plan.

Here are three key indicators of business growth for demand:

1. Your customer base is loyal—and growing. If you focus on serving your clientele, you know what your customers expect, and can anticipate what they’ll want next. As a result, you’ve cultivated a dedicated, diverse customer base that is loyal to your business, and vocal about their support.

Not quite there yet with your customers? One way to boost customer engagement is to include clients or customers in your business strategy planning. Try creating opportunities for customers to leave comments and feedback. If you have a brick-and-mortar storefront, you can provide feedback opportunities with written comment cards. Create an online survey—you can even just use Google Forms—and add the links to a user survey to your website, and email signature for salespeople and customer service representatives. You can also record sales and service calls, and provide a voluntary short survey at the end of calls.

2. Inventory is turning over rapidly. If you literally can’t keep your shelves stocked, it might be time to expand your business—one of the most demonstrable ways to measure your growth is by looking at turnover rate for inventory.

3. The team is busy. Not selling goods or holding inventory? For demand growth indicators in the service industry, look at how full your bookings are, how busy your salespeople and account managers are, and how much people are working overtime.

4. You’re attracting outside attention. Whether it’s an investor showing interest, or an enthusiastic customer base begging you to expand your business, listen to the feedback you get from clients, friends, and advisors as an indicator of your popularity.

2. Profit and Losses

“Profit” is your net income after essential expenses, like payroll, equipment, and inventory; and “losses” are the costs that exceed revenue. Obviously, a healthy business needs to have more profits than losses—a business with less of the former and more of the latter runs the risk of untenable debt and, potentially, bankruptcy. To determine your business’s profits and losses, you’ll need to collect a few crucial financial records, including income statements, a cash flow statement, and a balance sheet.

Then, check your margins. Your profit margin is the percent of revenue left over after costs and expenses. The calculation is relatively straightforward, once you collect your income and expenses data. To some extent, the best way to determine a good profit margin for your business is dependent on industry, so your profit margin value is relative to the average for businesses in your location and sector.

3. Revenue

When you’re looking for indicators of business growth, calculating your annual revenue growth rate is a good next step once you’ve analyzed your profit and losses. If you’ve been in business for fewer than three years, or are a venture-backed company that hasn’t become profitable yet, cash might be tight or business might vary month to month. Revenue can help indicate growth, even if your profits aren’t increasing right now.

That said, if your revenue is high or steadily increasing, yet profits are stagnant, you can use this opportunity to analyze where you can lower operating costs or losses to bridge the gap.

If your revenue indicates healthy year-over-year growth, but profits aren’t budging, zero in on your expenditure to see if there are any costs you can eliminate to free up more cash to put back in your business.

4. Sales

Revenue and profit usually get all the attention for indicators of business growth, but if you’re tracking success, it’s essential to also evaluate the sales that are driving your revenue.

Your sales team is the frontline of your business, and you have insights into the trends and changes from month to month that will impact revenue. So, it’s worth aligning your company’s KPIs with sales goals. Especially for small business owners hoping to increase sales, it’s important to consistently report on sales performance.

When a sales team has more leads than they can call,  or are working exclusively on inbound leads, there’s a good chance the wider market is expanding—and with it, the potential for your business. And if your team is closing more deals than your product and account managers can handle, that might indicate growth potential for your business specifically. Just beware of churn due to over-selling.

With few exceptions, successful revenue models rely on sales—whether it’s subscriptions, services, or products—so booming sale can indicate it’s time to expand in order to accommodate new customers or accounts.  

5. Workforce and Network Health

From headcount, to hiring patterns, to vendor relations, your employees and partners determine a large part of your success as a manager and owner. Yes, creating jobs can drain cash, especially if you’re in the early stages of your company. But a growing team indicates that your business demand is high enough to justify adding roles.

It’s a good sign if you’re hiring because you have to. An uptick in hiring is a great indicator of growth, particularly for small businesses, because there is typically limited cash on hand, which restricts hiring flexibility. And often before you start to see major profit increases, you’ll have to start hiring out of necessity—as in, account managers are maxed out, salespeople have more leads than they can keep track of, or you’re filling multiple roles yourself.

Also, excluding issues of productivity or mismatched roles, sometimes the best way to boost your business’s growth is to invest in a much-needed hire. Talk to your team about their bandwidth and needs. Their input can help you identify which aspects of your business are the most in need of extra hands.

People want to work for you. An engaged, active workforce will drive productivity and create a great culture. Dedicated employees who get your mission and share your values can help take you to the next level of success.

6. Market Share

Depending on your industry and geographical location, your portion of the local market could be an additional key indicator of how much your company has grown, and how much growth potential there is in the existing market.

Observe peer companies of a similar size, or better yet, direct competitors. If it’s relevant, check your competitors’ recent updates, keeping an eye out for new locations, products, or partner integrations—try checking a company’s blog if you need somewhere to start.

A healthy competitive market will actually help your business grow, so you want to see activity in the space outside of your own business. In the case of small businesses, this indicates demand in the market for the good or service you provide.

Next, try to figure out how big the potential market is, and whether or not that base of potential customers is growing. For many industries, you can find independent reports from analytics companies like Gartner, as well as free market research guides and resources. If you have more business than you can accommodate, too many sales leads to handle, and competitors in your space, there is a good chance the market for your business is strong—and growing.


Looking at Indicators of Business Growth: The Big Picture

A comprehensive assessment of your business, from day-to-day operations to annual revenue, should indicate to you how much your business is growing over time, and help you identify patterns in demand and spending. Demand, profit and revenue, and headcount might indicate growth from a numerical perspective, but true growth is largely a self-fulfilling prophecy. If demand indicates that your customer base is growing, for instance, act accordingly: Put your effort behind cultivating and expanding that following, and making necessary expansions and hires to support that base.

And whatever your financial statements are telling you, try to capitalize on what’s going well, be it quality products or services, a great sales team, or simply an excellent operation—while working on areas that could use improvement. Because one of the most powerful uses of growth analysis is to identify what’s holding you back. Unsuccessful services or products, inefficient spending, or making the wrong hires can be hard to identify in the moment. These factors are all easier to pinpoint when taken into consideration with financial data and your company KPIs.

In short, if you see indicators of business growth, act quickly capitalize on that growth. Look into small business financing to seize opportunities if they present yourself. At the same time, be sure to remove inhibiting factors, like bad hires and unnecessary spending, from its path. Once you’ve done your homework, and developed an idea of how your business is changing and growing, you can draw from countless free tools to help grow your small business.

Keep in mind, growth is also a risk. It’s tempting to see all growth as good growth—and you should celebrate these wins—but, above all, it’s important to stay focused on delivering quality and operating efficiently.

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How to Find Local Business Loans

Decades ago all across America, small business owners in looking to find local business loans would perform the same, familiar ritual. Plumbers, real estate developers, restaurant owners, and more would all get dressed up to go to a local community bank, heave manila folders bursting with financial paperwork, and hope a loan officer would approve their request for business financing.

Now, with wider access to capital through a new, digitized path to small business financing, many business owners never speak to local bankers—or look for local business loans at all. But if you’re wondering how to find local small business loans, the truth is that although these opportunities do exist, they are few and far between.

That said, there are still plenty of financing options available to small business owners. We’ll look at the most promising local business loans as well as non-local financing options that might be a great fit to help you finance your business.

How to Find Local Business Loans from Your Community Bank

Bank loans are undoubtedly the best small business loan product available for any borrower. They carry the lowest interest rates and the best repayment terms on the market, so business owners that are qualified for local business loans from a traditional bank are almost always best served by this option.

The catch? Actually qualifying for these local business loans is difficult. Since most local community banks don’t have ample funds to loan out, they end up needing to keep qualification standards for their borrowers incredibly stringent.

If you’re intent on pursuing a local business loan from your brick-and mortar-community bank, your best choice is to consult with local banks directly about their application process and standards. Before you take this path, however, it’s important to acknowledge the headwinds you’ll face. Each local bank will have their own requirements, but you should expect them to look for candidates with excellent credit scores, very strong revenue and consistent positive cash flow, plus a solid history of time in business.

Local Business Loan Alternative: SBA Community Advantage Loans

Given the challenges many borrowers face trying to both find and qualify for local business loans from banks, you might want to expand your search slightly—or at least consider a few other angles in. But you’re not out of luck.

The US Small Business Administration (SBA) has stepped in to recognize this challenge within local community lending and provide an alternative that makes local business loans more accessible to main street entrepreneurs.

Created in 2011 with a commitment to providing financing for underserved communities, the SBA’s Community Advantage Loan Program, a division of the widely popular 7(a) loan program, allows local, community-based lenders to offer financing to local borrowers by backing those loans with a federal guarantee.

What Are SBA Community Advantage Loans?

The SBA Community Advantage loan is a small business term loan of $50,000 to $250,000 with affordable interest rates—usually between 7% and 9%—and payback timelines stretching up to 10 years.

With a percentage of the loan guaranteed by the federal government, approved community-based lenders can marginally relax the high standards set by traditional banks. This lowered risk allows them to take into account a wider array of factors as they consider which loan applications to approve. As a result, the same bank that may reject your direct application for a local business loan might be able to approve your funding request if it were submitted as an SBA loan application.

How to Qualify for an SBA Loan Community Advantage Loan

Before applying for an SBA 7(a) or Community Advantage loan, you must first confirm that you meet the requirements of the program.

To qualify, you must operate a for-profit small business—meaning you have fewer than 500 employees and less than $15 million in assets. Both new startups and established small businesses are welcome to apply, however, note that certain industries are ineligible for the program (like gambling or religious organizations, for instance) due to government restrictions.

Like other local small business loans, both the SBA and your local lender will evaluate applications on the basis of commonly held lending standards, such as your credit score, your business’s annual revenue, and other debts that your business currently has outstanding. You’ll also need to present a picture of your experience in your industry, as well as a business plan. And, although there’s no formal credit score requirement, many business owners who qualify for SBA loans have strong credit profiles.

Pros and Cons of Financing Through SBA Loans

Although the community advantage program is a welcome alternative for entrepreneurs seeking local business loans, this isn’t the best funding option for every business. Let’s take a look at the benefits and the drawbacks of applying for an SBA loan:

The Pros:

  • Low interest rates: SBA community advantage loans are among the most affordable financing available.
  • Long repayment terms: Timelines stretch as long as a decade, making monthly repayments smaller and easier to manage.
  • Easier access to funding: SBA loans are still difficult to qualify for, but standards are more manageable than you’ll find with traditional bank loans.

The Cons:

  • Complex application process:  Expect to be filling out a lot of forms, gathering extensive paperwork, and navigating some federal red tape to obtain approval for an SBA community advantage loan.
  • Extended approval timeline: Because loans must be approved by both your local intermediary lender and the SBA, and there’s lots of documentation involved, the SBA loan approval timeline can stretch out over weeks or even months before you have cash in hand.
  • May tie up other access to credit: In some cases, taking on this long-term loan right now could hold you back from accessing other forms of small business financing in the future.

Given these pros and cons, only you can decide whether pursuing the SBA loan application process is the right choice for your business. As you weigh your options, be sure to take into account both the short-term and the long-term needs of your small business.

How to Apply for an SBA Loan

If you determine that an SBA community advantage loan—or any other SBA loan option—is the right choice for your business, you’ll start the process by identifying an SBA-approved community advantage lender in your area. You can find SBA intermediary lenders through the administration’s LenderMatch portal, or by consulting with a financing counselor at your district or regional SBA office.

Once you’ve identified an appropriate SBA intermediary lender to work with in your area, you’ll want to consult with that lender directly for further application steps, as exact requirements can vary among lenders.

That said, you can expect to include these documents with your application:

  • Driver’s license
  • Voided business check
  • Business bank statements
  • Personal tax returns
  • Business tax returns
  • Balance sheet
  • Profit & loss statement
  • Personal financial statement
  • Business plan with two-year financial projections
  • Existing business debt schedule
  • Proof of equity investment into your business

Compared to other forms of financing, SBA loans have a time-consuming and difficult application process—so it’s not a great option for those who need quick access to funds. If you decide to pursue this option, make sure you set aside adequate time in your business planning to accurately complete the application, be available for any follow-up requests, and await the funding your business needs.


Alternatives to Local Small Business Loans

We’ve established that the traditional model of local small business borrowing is, for the most part, a thing of the past. For most borrowers, obtaining local small business loans is almost universally a time consuming process. And, for some, altogether a non-option.

Fortunately, as traditional banks have moved away from small business lending, a new marketplace of online lenders have stepped up to fill the gap in small business financing. Consider these non-local business loan products as potential alternatives to the local business loan you had in mind.

Option 1: Term Loans from Online Lenders

Business owners seeking the stability of a traditional bank loan with simpler qualification standards will likely be most attracted to term loan products from online alternative lenders.

Just as with a traditional bank loan, these are medium-to-long term loans offered as a lump sum of cash upfront, then repaid over a period of 1 to 5 years through fixed monthly payments. Your interest rate will depend on your qualifications, including your creditworthiness and business financials. The rates won’t be as favorable as you might find with local business loans from brick-and-mortar banks, but qualification standards aren’t as rigorous—but many business owners find the trade off worth it in order to gain access to capital.

Also unlike with local business loans from banks or SBA loans, you can complete an application and have funds in hand in as few as a couple of business days.

Option 2: Business Lines of Credit

Although the traditional term loan model tends to be the most familiar to borrowers, it’s not the only way—or, in many cases, the best way—to obtain business funding.

Particularly if your business doesn’t need access to a large sum of funds all at once, a business line of credit, which gives borrowers access to a maximum amount of capital from which they can draw funds as needed, may be a better option.

The business line of credit works similarly to a business credit card cash advance in that your lender will authorize a set amount of funds—aka maximum credit line—that you can draw funds from as expenses arise within your business. You only pay interest on the funds in use at any given time, and once you repay what you’ve withdrawn, the funds can be used again and again as needed. The funds can be used for virtually any business purpose, and as long as you make repayments on time and don’t exceed your credit limit, you won’t incur increased interest rates.

These are also a good option for business owners who are looking for faster access to capital and less stringent qualification requirements than local business loans.

Though interest rates on business lines of credit tend to be slightly higher than equivalent term loan rates for most borrowers, keep in mind that because you only pay interest on funds when they are actually in use, many borrowers find that they can pay less in total interest on a business line of credit even with a slightly higher interest rate.

Option 3: Business Credit Cards with 0% Introductory APR

Business credit cards seem like a far cry from local business loans, sure. But in many cases, entrepreneurs who need a smaller sum of funds to get started can find just what they need in the right card.

Many borrowers are surprised to learn of business credit card options that offer as much as 12 or even 15 months of 0% APR. That means that, during this period, you can spend on this card interest-free—it’s like a free-money loan, essentially.

The downside, of course, is that these introductory offers do have an end date, upon which interest rates return to variable APRs based on the market Prime Rate and your creditworthiness. (Translation: They can be high—higher than a business loan.)  Before choosing a business credit card for your financing needs, you should have a plan in place ensuring that you can fully pay off your balance before the cost of borrowing becomes unaffordable.

Browse for Local Business Loans—but Look at the Other Great Options, Too

What you should take away from this is that you do still have options to find local business loans, although the era of getting preferential treatment through personal relationships with community bankers may be mostly a thing of the past. Bottom line is getting a bank loan is hard—and you need to have strong credentials. But if you have them, you should apply—and there’s a chance you’ll be able to snag a local business loan, which could be a boon for your business.

If that doesn’t sound quite like you, don’t fret: There’s still reason to be optimistic about your options for business financing. Although process may not match what you’ve previously imagined, your options for small business funding through non-traditional lenders is actually much better than what was available even a decade ago.

Do your research, and stay open minded about alternative financing options for your business. With these steps, you’ll be well positioned to find the business loan you need for your next stage of entrepreneurship.

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