Get Out of the Catch 22: Use Business Credit for Real Estate Investing

Do you find yourself in a Catch 22 concerning your real estate endeavors?

You want private money to close on real estate investing deals, but you need to close on real estate investing deals to attract private money. People who are just getting started in real estate investing have a hard time attracting private money, simply because private money lenders don’t want to invest in newbies because the loan is secured by a note and a deed of trust.

From a private moneylender’s perspective, they don’t want to lend out money for someone to experiment with it, and that’s understandable.

Once you have several properties in your portfolio, you’ll be setting yourself up in a position to attract people who will want to work with you. Especially once they become aware of your good track record and start seeing you as successful.

Until then, what are you to do for funding? Well, an alternative option is Business Credit Cards. The way these cards work is with a personal guarantee. You have to understand that lenders typically look at how new you are to the business. It doesn’t matter to them whether or not you incorporated yesterday or five years ago. The basis for funding is to have full documentation to include tax returns, P&L Statement, and an 80 Paydex score. So if you don’t have those documents, you have nothing to prove how successful your business has been, or currently is.

Think about it: why would a bank give a person funding under these circumstances? Lenders took a lot of time earning their money and want to put into the right hands, hands they deem responsible. So, they qualify you, but they also make exceptions by looking at your personal credit file of how you managed your personal finances, which is proven by your FICO score.

Lenders think that more than likely the way you handle your personal finances will be the same way you will handle your business finances. They typically develop the belief that if you are prudent in governing your personal financial obligations, you’ll be prudent in governing your business financial obligations.

You are then considered a safe bet because you honor your commitments. Now if you don’t have a high FICO score in the 700s, and have a multitude of inquiries, don’t fret. You should still apply, because for one there aren’t any upfront fees and you will receive a funding estimate within 48 hours with only a soft pull on your personal credit. That way if there are any discrepancies, you can work them out and get funded within a short time period later.

Business Credit Cards do not affect your debt to credit ration either, because they do not show up on your personal credit file unless you default, but the inquiries do and those can be worked out as well. Payment history is the only concern of Business Credit Card lenders. It’s irrelevant to them if you max out the cards.

Avoid wasting valuable time in a catch 22 situation seeking out private lenders. Apply for business credit today and get your funding estimate within two days of application. Once approved and awarded, convert that credit to cash, get a mortgage, close the deal and repeat the cycle over and over again to build up your real estate portfolio. Then if you decide to seek out private lenders, you’ll have the successful track record they’re looking for.

Images: Pexels

Entrepreneurship: Practical Ways to Handle Financial Matters Like a Pro

As a first time entrepreneur, you may be wondering how to handle the financial matters of your business. You’re not alone; all entrepreneurs have dealt with issues of funding, debt, savings, spending, and paying yourself.

Starting a business without testing the market for your product or service, is taking financial risk especially if you decide to fund your business with other people’s money. If you lose the business, the debt still has to be re-paid. Instead of investing a large amount of cash why not consider using business credit cards.

Funding and Debt:

The main factor to getting approved for business credit cards is based on your credit history. Once approved, there are several things you should do:

  1. Establish strong payment histories to build business credit.
  2. Keep balances as low as possible by not carrying more than 30 percent of credit limits on any of the cards to boost credit scores.
  3. Pay balances in full and on time every month.
  4. Make purchases related to the business, and only for what’s needed to keep the business running.

Spending:

We all have different spending habits, but it’s best to develop a spending plan early on. This plan will keep you abreast of your budget and let you how much is afforded to pay down debts each month.

Savings:

There are also business savings accounts. Most people think of savings accounts for personal use, but they can be a great addition to your business:

  1. Business savings accounts help prepare for the unexpected if allocated to handle emergencies.
  2. Business savings accounts are liquid assets that can be moved into business checking accounts to pay vendors, contractors and anyone else owed without interfering with the daily budget.
  3. Business owners are responsible for taxes, and with the daily operations this task may be overlooked. However, if ten percent is saved from every business transaction, this money can be used to pay taxes without interfering with the budget.

Paying Yourself:

Finally, there’s the issue of how to pay you. If you are a sole proprietor without employees and not much overhead, you pay yourself what you earn in sales minus your costs, savings and taxes. To pay yourself from an LLC, you can withdraw money from the company accounts or give yourself a salary.

Starting a business may be easy, but the hurdle is knowing when and where to spend money. It’s very important to only spend where necessary. Although it’s been determined to make small purchases starting out, this is not a reason to cut corners with what your company needs. Handling the financial matters of entrepreneurship can be daunting, but if you establish a plan for funding, debt, savings, spending, and paying yourself upfront you’ll be that much closer to reaching money-mastery level.