If you are looking for help building your new business, the Rules of Thumb blog from MoneyThumb would like to make you aware of this great site, Ecwid, where they make it their business to help small business owners grow. The following is some advice from Ecwid on how to attract lenders even though your business may be brand new.

Financing a very young startup business can be a challenge. One of the things lenders consider when a business applies for a loan is its track record—usually the longer the track record, the better. Typically, traditional lenders like to see several years in business, so if your business is only one or two years old, it might be difficult to get a small business loan at the local bank or credit union. That doesn’t mean it can’t happen, but as a business owner, you’ll probably need a personal credit profile beyond reproach.

Most online lenders will work with a business with a year under its belt, but they’re not as likely to work with an early- or idea-stage startup. If the business is doing $100,000 in annual revenues and other business metrics are in place, an online lender could be a good choice for a small business loan.

The SBA can be an option for early-stage businesses, provided the owner has a good personal credit profile, and has collateral, and can demonstrate the ability to make the periodic payments. Plus, the SBA will likely want to see that the business owner has made an investment in the new business. In other words, they want to see some skin in the game.

No Revenue and No Cash Flow Make Borrowing Difficult

Even those lenders who are willing to work with younger businesses, including the SBA and many online lenders, will want evidence that the business has the ability to repay a loan. Unlike an investor who may be willing to wait for some kind of liquidity event that they anticipate will give them a substantial profit, lenders earn their profits through periodic payments. In other words, lenders aren’t really investing in your business; they’re making a business decision based on your ability to make loan payments.

This is true regardless of how old your business may be. Demonstrating the ability to make the periodic payments is a central part of qualifying for a loan.

Money Isn’t Always the Answer

A popular myth today is that all a business needs are money to be successful. Yes, it’s true, it often takes money to make money, but an influx of cash doesn’t guarantee business success. What’s more, there are many very well-capitalized businesses that still tend to struggle—as demonstrated by all the venture-backed companies that never meet their growth objectives despite the millions of dollars invested in them.

Nevertheless, there are ways for very young businesses to access capital. Crowdfunding is one example where a business’ credit profile, time in business, and annual revenue are less important than the idea or product the entrepreneur is pitching.

There are, however, other things a business owner can focus on in the first few years that could be time and energy well spent. While they might not guarantee a loan, they will likely create more options and improve the odds of success.

Tips for Improving Your Credit

Become familiar with your business credit profile. According to Levi King, CEO, and co-founder of  Nav, the biggest misconception business owners have about business credit is, they don’t realize they have a business credit profile.

What’s more, this might sound like an oversimplification, but according to a recent survey conducted by Nav, those business owners who regularly monitored their credit profiles were 41 percent more likely to be approved when applying for a small business loan.

It is human nature to make a difference in the places where you’re really paying attention. Basically, attention drives behavior said King. Spending the first year or two becoming familiar with your business credit and taking steps to build a strong profile can make a big difference a year or two down the road.

Take advantage of the trade credit relationship. Most vendors and suppliers offer payment terms, or trade credit, to their good customers. This might not be a small business loan, but building one or two new trade credit relationships can be a powerful way to build a strong business credit history.

Once you open the doors, start looking for places where you can establish business credit accounts rather than relying on your personal credit. New businesses might equal lower scores, but the average small business owner is creating 1-1/2 trade credit relationships each year and using small loans to build their credit profiles over the first few years, ultimately indicating to us that many of these businesses are great borrowers, said Peter Bolin, Experian Director of Consulting and Analytics.

Fortunately, this type of credit is relatively easy to get when compared to a traditional small business loan. And, if your vendors report your good credit behavior to the business credit bureaus (this is important enough to ask about), it will help you establish a business credit history and build a strong business credit profile.

Apply for a business credit card. One of the most important steps you can take to build a strong business credit profile is to stop using your personal credit for business expenses. In addition to establishing trade credit relationships, a business credit card could be a good first step to building your business credit profile. Using your personal credit doesn’t do anything to build your business credit profile. Make sure the card you apply for reports to the business credit bureaus because some don’t.

Apply for a business credit card and make sure you make those payments on time. This will dramatically increase the depth of your credit report so when you do need that $100,000 from the bank or another lender, you’ll be likely to get approved. Additionally, don’t use your personal credit for business expenses. Take the time to establish a strong business credit profile. Consider it an investment in the future of your business, says Bolin.

The age of your business can make a difference for young businesses trying to access business credit, particularly those under a year old, but there are things you can start doing today that will improve the odds as the business passes the one or two year mark.

Focusing on establishing a business credit profile and demonstrating that your business can manage credit is an important first step to accessing the capital you need to grow your business.

The post How to Make Your Brand New Business Attractive To Lenders appeared first on MoneyThumb.

This 12-page PDF that covers the results of a survey by Deloitte Insights is something we feel strongly that our lending readers will want to take the time to read.  The PDF is titled Funding Takes Center Stage for Non-Bank Online Lenders. Of 34 non-bank online lenders who were surveyed, a whopping 77% said that cost of funding was their top concern in running their business. The second concern was liquidity, the third top concern, inability to diversify.

The survey also found that the larger the size of the non-bank lender, the easier time they had with the cost of funding, which is not surprising. What is surprising is the fact that the number of private lending startups has decreased, implying the market as a whole is maturing and that online lending has become a fixture of the overall lending ecosystem.

As far as the trend of larger lenders having an easier time with the cost of funding, the survey offers good news for smaller online lenders in that the investment appetite for online lending continues to grow steadily overall.

In the wrap up of the survey, Deloitte Insights offers several savvy tips for smaller online lenders who are challenged by the cost of funding. These tips are listed below:

• Smaller, non-bank players in the online lending industry could fare well in a down cycle by pivoting to lending as a service, (LaaS.) Some smaller online lenders have done this and the middle banking market has been receptive.
• Non-bank lenders can partner with each other, with other types of fintech, and with banks to expand their relationship with customers and to develop products and services such as budget apps, wealth management services, and even deposits.
• Focus squarely on optimizing their capital structure by partnering and integrating with the broader financial ecosystem.

Of course, we'd be remiss if we didn't add what we feel is one more way that smaller online lenders can improve their overall business, and that is by using PDF Insights from MoneyThumb. you won't believe the time and headaches you will save by using this product to help you in your lending decisions!

MoneyThumb's enterprise-level PDF financial file converters allow private lenders to automatically convert bank, credit card, and brokerage statements into the needed formats to quickly determine an applicant's loan worthiness. Our conversion tool most used by private lenders is PDF Insights. This PDF financial file converter is specifically designed for lenders, and outputs captured data into a standard format for automated consumption into the lenders' bank system. PDF Insights utilizes IDR (intelligent document recognition) to identify bank/statement formats.

Unlike competitors, our solution doesn’t need to be told upfront which bank or format is being used, yet correctly processes over 99% U.S. statements. The output is delivered in a standardized format, even for statements from different banks. Our automated statement reconciliation feature compares transaction totals to summary information on the statement. If all information on the statement is consistent, PDF Insights will identify the statement as reconciled, meaning you don’t have to spend time manually reviewing statements to identify inconsistencies.

We would appreciate it if you would share this blog post with your lending peers on social media so that they too can read the survey from Deloitte Insights and learn more about MoneyThumb and our software designed specifically for lenders.

The post Survey Says: Cost of Funding Main Concern of Non-Traditional Lenders appeared first on MoneyThumb.

With the rise of online lenders, there is a renewed focus on reporting credit data, particularly in light of the rapid growth of this sector. According to Morgan Stanley research, online loan volumes in the U.S. have doubled every year since 2010. It is predicted this growth will nearly double by 2020.

As more consumers and small businesses approach online lenders, as a lender you have a growing responsibility to be good stewards of the credit ecosystem, doing your part to support the value of information available for the entire industry – and for your own benefit. After all, failure to report credit data could have an adverse impact on the financial landscape, affecting consumers, small businesses and online lenders themselves.

So why specifically should lenders report to credit bureaus?

1. Stay Ahead of Regulations

True data reporting is currently voluntary for marketplace lenders. But the Consumer Financial Protection Bureau’s (CFPB) recent activities reflect a growing focus by regulators to advocate for and protect consumers. Voluntary data reporting reflects the spirit of transparency and aligns with many regulatory priorities. By taking proactive steps and reporting data on their own, online lenders can stay one step ahead of regulators, hopefully alleviating the need for new regulations.

2. Gain a Competitive Advantage

Credit data reporting is about “doing the right thing” for consumers, but it can be good for business too. Online marketplace lenders can gain distinct advantages by reporting. For example, with access to more accurate consumer information, lenders are able to develop and offer more competitive products tailored to the unique needs of their customers. By expanding their offerings, online lenders can differentiate themselves and thereby grow market share.

Reporting also enables lenders to emphasize their commitment to consumers as part of their value proposition, demonstrating how they are helping to grow customer credit. Reporting rewards customers with good payment history, allowing them to take advantage of better loan rates and lower fees available to those with exemplary credit scores. This, in turn, can lead to higher customer satisfaction, loyalty and return business.

With access to more complete and comprehensive consumer credit data, online lenders gain a clearer picture of a consumer’s creditworthiness, enabling them to make more informed, and less risky, lending decisions. Reporting also encourages on-time payments. When customers know that lenders report, they are more likely to pay on-time and less likely to default on their debt.

3. Millennials Like Everything Online

 Millennials are the perfect match for online lenders. In fact, the latest research from Experian reveals that 47 percent of millennials expect to use alternative finance sources in the near future. And 57 percent reported they are willing to use alternative companies and services that innovate to meet their needs. Millennials are clearly more open to nontraditional banking, but at the same time have a greater expectation of transparency, making it all the more important for online lenders to report credit data.

4. Better Data Quality

Complying with Fair Credit Reporting Act (FCRA) data furnishing requirements might seem daunting for lenders, but there are tools and solutions available to help lenders proactively assess the accuracy of credit data and help identify systemic issues. As a lender, you can measure and monitor quality and completeness, dispute metrics, as well as industry and peer-benchmarking data.

5. Qualify More Applicants

With reporting, lenders can gain access to an invaluable wealth of information that goes well beyond the traditional credit score. Armed with robust analytics, online lenders are in a position to qualify more consumers and small businesses, which creates a significant opportunity to gain long-term customers by improving the overall customer experience.

As you can see, reporting to credit bureaus is a win-win for online lenders. Another big win is when online lenders use the PDF financial file converters from MoneyThumb. We have a version specifically designed for lenders, which makes gathering loan applicants data a breeze and saves time in making informed loan decisions.

The post How Online Lenders Benefit From Reporting to Credit Bureaus appeared first on MoneyThumb.

Just as with any small business owner, an online lender is always on the lookout for new customers. If your goal is to attract more small business borrowers, the first thing you should realize is how much small business has changed. For instance, here is what the lender Kabbage's co-founder and CEO, Rob Frohwein, has to say, “The business customer has definitely changed. When we first launched, we were lending to eBay business. Now, we lend to all small businesses: whether they sell products or services, whether they’re in retail or professional services. Our borrowers have gone from very small online sellers on marketplaces like eBay and Amazon to those with much larger businesses.”

The fact is, online business has grown substantially and will continue to do so. As a result, small business owners have become smarter and more sophisticated. Eyal Lifshitz, founder, and CEO of Blue Vine says this about the new breed of small business owners, “Over time, we’ve seen businesses begin to grasp the different types of financing like loans, inventory financing, merchant cash advance, and factoring. They understand that one type of financial product isn’t necessarily better than any other — it’s just that they’re more appropriate for specific types of situations or small businesses.”

One major change that has occurred in the last 5-10 years is that where once a small business owner would instantly think to only approach an offline bank for financing, now they are skipping that step and going straight online to search for financing. And getting an online loan has become easier than ever, and much quicker. One of the reasons is to the depth of information that can be gathered by lenders using data automation. Luke Voiles, a business leader at Intuit's QuickBooks Capital, puts it like this, "Banks needed two years of audited financial statements and tax returns to see a trended and validated view on small business. The data that digital lenders like us use is at the transaction level of detail that is much more real time. After a customer consents, we have QBO transaction data, payments transactions for cash we’ve moved for our customers — the highest validation you can get. What’s changed is the ability to triangulate and get to a trended view of a business from the data which is so much more granular.”

MoneyThumb loves being on the cutting edge of that trend toward data automation with our world-class PDF financial file converters. We were doing this long before it became cool. Now many lenders use our products to quickly convert the bank statements of potential borrowers, allowing them to make better and faster lending decisions. We have a version of our software specifically designed for lenders. Take a test drive today!

The post Good News for Online Lenders: How Small Businesses Have Changed appeared first on MoneyThumb.