PP 595: Fix the Roof While the Sun is Shining: Get Better Financing with Gerri Detweiler
“Fix the roof while the sun is shining. Take care of these tasks while your business isn’t in a crisis. And then you’re going to have a lot more options and flexibility.” –Gerri Detweiler
Are you worried about your personal and business debts? Money is not everything, but it sure is something. In a world where families often neglect money talks, children are forced to discover it on their own as they reach adulthood. Today’s episode is a gift to listeners out there who are curious about how to get better financing. Financial security is not about how much money you have. It’s about how well you manage that money you have. Your wise decision now can be your security tomorrow.
02:53 The Credit Fun Run
04:06 Bootstrapping- A Trap? or a Boost?
07:15 Raising Finance Awareness in the Family
11:35 Be Credit Smart
20:51 Your Top 5 To Strengthen Your Business Integrity
24:56 How to Cancel Debt Income
30:21 Loving One of the Best Jobs in the World
36:51 Getting Better Financing
About Gerri Detweiler:
With the world having money problems, Gerri Detweiler spends more than 20 years answer people’s credit questions. Her passion has been to help them make better decisions and patch up their roofs “while the sun is shining.” And in this, she shines as a credit expert, author and speaker; shining a ray of light to all who are caught up in their financial struggles.
“I think, no matter how well you prepare, there’s… always going to be challenges as well.” –Gerri Detweiler
“There’s times when higher cost financing may make sense to take advantage of an opportunity. But unfortunately… that’s when they end up trapped.” –Gerri Detweiler
“Be prepared before something comes along. And it doesn’t have to be a crisis, it could be an opportunity.” –Gerri Detweiler
“The sooner you start, the sooner you see results.” –Gerri Detweiler
“We all have our own genius, and subject matter that we are super passionate about.” –Kim Sutton
“Fix the roof where the sun is shining. So take care of these tasks while your business isn’t in a crisis. And then you’re going to have a lot more options and flexibility.” –Gerri Detweiler
“Fix the roof where the sun is shining, so take care of these tasks while your business isn’t in a crisis, and then you’re going to have a lot more options and flexibility. If something good, or something not so good comes along, you’re going to be able to fall back on all that groundwork that you did ahead of time.”
Kim Sutton: Welcome back to another episode of Positive Productivity. This is your host, Kim Sutton, and I am so happy to have you here today, and I am thrilled to be introducing our guests. Gerri Detweiler. Gerri is a credit and small business expert, and I want to tell you that before we even jump into the chat that if you haven’t been listening to the podcast for a while, you wouldn’t know, but if you had been listening, you would know. I guess it’s a very long way of saying that my family and I, over the course of my multiple entrepreneurial journeys have had some financial struggles and I’ve never tried to hide that. It’s been a crazy roller coaster, and my credit score has definitely taken some wild rides. And if you keep on listening, yes, I will be sharing my credit score on this episode, which I know you might be thinking, oh my gosh, and let me tell you it is not good, but you’ll only know if you keep on listing. So with all that said, Gerri, welcome to the show, I am so happy to have you here.
Gerri Detweiler: Oh, I’m so happy to be here, Kim, thank you.
Kim Sutton: Listeners, I want you to know, I asked Gerri before we started recording: “I said, has any podcast host ever shared their credit score on an episode with you before?” And Gerri, your answer was?
Gerri Detweiler: No. That’s incredible, Kim, that’s incredible. What transparency.
Kim Sutton: Well, I just want everybody to know that it is a struggle. Maintaining some type of city income so that we can pay those bills that really do affect our credit because let me tell you, that’s something that we’ve become especially good at in our house is knowing what bills had to be paid so that they didn’t affect our credit score. Especially when we are trying to buy our house, and I would love to know if that is something that you’ve explored with your clients because buying a house as an entrepreneur is a beast. It’s like, straight out of Wizard of Oz, a horse of a different color. It’s one thing when you are employed by an employer, but as a total other thing when you are self employed. But before we jump into all of that, Gerri, would you mind sharing a little bit of your background, and sharing how you got to where you are today?
Gerri Detweiler: Sure. I’ve been involved in credit education for a long time now. After college I was in DC, I worked for a consumer group, and works on the legislation that gave consumers free credit reports, the legislation told us what our credit card interest rate might be before we apply. In the old days you would actually apply for a credit card, get it and then find out how much it costs. So, I had a really fun run. I wrote the first mass market book that talked about FICO scores back in the day, and so I’ve been answering a lot of credit questions over the years, heard a lot of stories, and scenarios, and challenges which I love, I absolutely love to answer credit questions. And about 10 years ago, I was introduced to Garrett Sutton. He’s my coauthor for my latest book, Finance Your Own Business. He’s a small business attorney, and he started sharing some of the challenges that his small business clients were having with credit especially around business credit and business financing. So we joined forces, wrote our book Finance Your Own Business. And in the course of writing that book, I interviewed the CEO of NAV and ended up working there full time. So I’m now with NAV, which is very similar to Credit Karma, but for small business. And there I get to help entrepreneurs solve the credit challenges and get better financing.
Kim Sutton: So I’ve been bootstrapping my business for the last seven years and while I’ve shared that on the podcast before, I don’t think I’ve ever shared that it was out of necessity, not because I wanted to, and maybe I’m looking at bootstrapping the wrong way, but the only money that was invested in my business was the money that was earned. There had been no credit cards because to be totally honest, I couldn’t get any. I racked up $100,000 in credit card debt in the business that I had a decade ago. And I’m sort of thankful for that because I wasn’t given the opportunity to do that again. I mean, I can’t even imagine the stress that I would have if I had done that again.
Gerri Detweiler: Yeah. And that talks to a lot of entrepreneurs who, either they been through something or they don’t, they’re really debt averse, you know, they were raised, or just for whatever. They have a belief system that says: “I’m not going to touch debt.” And bootstrapping is great, there’s nothing wrong with it. It’s just, at certain times it may result in either losing out on opportunities that might be available if financing were available, or could be more stressful, or it could result in cash crunches. So there’s a statistic CAM from FunBox that 81% of small business invoices, or 30 days or more past due, and there’s a lot of entrepreneurs who are working hard in their business, but they’re also having to work hard to collect payment from their creditors. And that creates cash flow crunches that can make it more difficult for them to take advantage of future opportunities. So I don’t think credit is necessarily good or bad. I think it’s a tool and it’s how you use it that ends up determining whether it works for you.
Kim Sutton: Oh my gosh, yes. I think the reason why I’m glad that I didn’t have it, and I just have to be totally straightforward here, or you know. Yeah, I guess straight forward would be the right word, in the moments when I was deepest in a chronic idea disorder and hopping from one idea to the next, I also had the side symptom of shiny object syndrome, and I always thought that, you know, this next tool, or this next course would help me make it bake. But in all actuality it was actually just finishing what I was working on that would help me get to the next level. And when you don’t finish anything, yeah, there’s nothing to sell so it wouldn’t have mattered how many courses I bought, or how many coaches I invested in. If I didn’t just finish one darn thing, then I wasn’t going to get anywhere and that was a struggle for the longest time this year, 2019 has probably been the first year that I’ve actually been focused on one thing. Okay, I’m focused on, like two. I’m not going on to anything else until I get these done because I’m tired of not having finished products out there, the world needs them. Were you raised in a house that talked about finances? Or that was debt conscious?
Gerri Detweiler: Sort of. You know, my father’s family was from a Mennonite background and they’re very focused on simplicity, and my father certainly likes, he’s the type who would, you know, rather save the money. We never had a car with air conditioning (laughs) till I was out of the house, at least my first car certainly was one of those. So we were raised really not to be too caught up in material things, but we all, you know, we all experienced our own journeys right. And I certainly, you know, as a young woman in DC wanted to have the right clothes and go to the right places. And I’ve had debt, and I’ve dealt with debt, and I’ve also had some debt that came about from business. So, we started investing in real estate in Florida and we didn’t make bad decisions. But then the 2008 downturn happened and everything just went south. And so we had a property that we had to rehab, literally rehab, I mean holes in the wall kind of situation after each channel three times. And that was very expensive and very painful. So I think no matter how well you prepare, there’s, as a small business owner there is always going to be challenges. Another story CAM, I had a business partner who I did all this work with, we had a joint project together, he never paid me. And when we parted ways, he owed me at least 40 grand for this project and I never saw a penny for it. And when I tell that story, I hear from entrepreneurs all the time, they say: “Oh yeah, I’ve had this client who didn’t pay, or that client who didn’t pay.” So there’s all kinds of challenges that come along with being self employed and being a small business owner that even if you’re trying do things right, you know, life doesn’t always cooperate.
Kim Sutton: Oh my gosh, I completely hear that. I’m just thinking about a recent event, but I’m going to spare us all those details. But yes, I’ve been there multiple times and I’ve actually, I’ve had to get attorneys involved to help get paid, and it’s not a pleasant place to be in. I was raised, well, my parents were divorced when I was young, and neither my mom nor my dad ever really talked about money. We weren’t taught about how to build good credit, or the fact that, you know, if we had a personal credit card and we paid it off, don’t close it, keep it open. I never knew about those things. I didn’t know, you know, what my minimum credit score should be and it was a rough lesson. And then I got divorced in 2010 after around the same time that I closed that first business that I accrued 100,000 of debt for. But in the meantime, while I was building that first business, I am also affected by the downturn in the economy. I was an interior designer and I was designing schools, and nobody wanted to pay for school renovations. If they couldn’t pay for their mortgage and it was the tax, you know, bond issues that would have paid for those school renovation. So you know, the bonds were not passed and I lost my job, but in an effort to build my business, I wrecked up all this debt. Fast forward four years, I’m remarried and my husband and I are trying to build the house, and I’m an entrepreneur, and my credit score sucks. And my husband really had no credit, so it was a little bit of an uphill battle to try to do that. I would love to know though, if you don’t mind me just sort of jumping all around. One thing that I have experienced is, well the cash crunch, like you were talking about, you know I travel quite a bit. I go to a hotel and they want a credit card–
Gerri Detweiler: Yes.
Kim Sutton: –or a debit card to put a hold on, and when we’re dealing with cash and we don’t have a huge surplus, it’s like, oh my gosh, I knew how much the hotel room was going to cost. I know what I need for, you know, food and all of that, but I wasn’t accounting for that hold. And those are those times that I would have wished that I had a credit card, so wouldn’t have hit me hard. But getting a credit card in the name of my business, and building credit in the name of my business has been very difficult. Do you have any tips for entrepreneurs in general, or entrepreneurs like me who have maybe had those struggles in the past about how we can build credit for our business the smart way?
Gerri Detweiler: Yeah, so building credit for your business is a different process than building credit personally, it’s not that difficult. But I want to touch first on the business credit card issue because the small business credit card issuers, all of them, all the major issuers make the decision on the owner’s personal credit, which could be good or bad. If you have good credit, that means you could get a small business credit card even though your business isn’t really making money yet. So, I know business owners who have gotten a small business credit card, you know, five days after they set up their business because they’re looking at the personal credit. Now in your case, the personal credit score isn’t strong enough to get that small business credit card. So it’s preventing you from being able to use that tool for your small business. And one of the things that I teach entrepreneurs, is the fact that many small business credit cards do help build business credit, because they do report to business credit agencies, and some of them don’t report to your personal credit. They check it to issue the card, but after that they don’t report to your personal credit, maybe unless you default. And so you can keep your activities, or the debt of your business off your personal credit, so they can be an advantage. And here’s what I’d say for you in your case, and that is that, or anybody like you, so it doesn’t have to be you, but anybody like you who is building a business and they don’t have strong personal credit, you can build business credit while you’re working on your personal credit. I think both are important, so I try to emphasize both. And the way you can do that is you can get accounts from vendors who will give you 30 days to pay. They don’t check personal credit, they don’t report to personal credit, but they do report to business credit and they will help you build business credit if you pay on time. So, examples are Newegg, Grainger, Quill, Summa Office Supplies. You can get your, you know, your Inkjet refill for your copy, or you could get shipping boxes, you could get trashcan liners, or cured cups for your office, and you’d buy them through their, you know, through their catalog and then you’d end up building business credit. I do have a list of those CAM at nab.com/vendors V-E-N-D-O-R-S, and that’s an easy way to get started building business credit, even if you’re still working on your personal credit. But again, the philosophy that if you work on both, you’re going to have more options and it’s just going to be easier and more flexible for you.
Kim Sutton: Thank you for that. Now this is the part when I’m going to share my credit score so that you listeners know what we’re talking about here. My credit score is 570, and just to give you an idea, when we bought our house, the credit score needed to be at least 620, when we bought our house, it was in my husband’s name because they didn’t even want to see my credit score as an entrepreneur for a variety of issues. And there could be a whole another podcast about that someday, but a lot of my personal credit struggles had been because, well, number one, I have a student loans and those were often the things that were last paid, which shouldn’t have happened. But then number two, I did try on multiple occasions to apply for business credit cards just for things like, when I’m traveling for the hotels, or for airfares, like I would love to get frequent flyer miles off a credit card, and I know that those, I think, Gerri, correct me please if I’m wrong, those do little dings on your credit score. It’s not a huge impact, it’s paying my bills late, that affects it more, but it’s been a fun struggle. But that’s exactly why I don’t have a business credit card right now. Now I want to jump just for a moment. I was interested in a coaching program a couple of years back, because I don’t have a credit card, you know, I couldn’t charge it, and then the cashflow wasn’t there, and the business owners suggested that I work with one of their financiers. When I talk to them, what came out was that they go, and they have all these different credit agencies who don’t even check your credit score, but they open up lines of credit in your name, and then they take all those funds, and they pay for whatever you wanted to buy, and it’s scared the heck out of me. And I never proceeded because I was thinking, you know, I’m trying to improve my credit. This does not sound like a great way to do that. Opening up 10 new credit lines and maxing them out to pay for this coaching plan is not going to get me to the next level. What is your thought about plans like that?
Gerri Detweiler: Well, I don’t know exactly what they were offering, but it sounds similar to the kinds of things, the reason why Garrett and I wrote Finance Your Own Business, and the reason I’m now at NAV which offers all these services at no cost to entrepreneurs is because there’s a lot of promises out there that make it sound like, if you pay enough money to us, we’re going to get you around the system. And honestly, most lines of credit, business lines of credit are either going to look at your personal credit score, or your business revenues, or both. It’s hard to get approved for online business loans if you don’t have either, or you know, good credit, or strong revenues. Now, if your business was showing strong wherever it is, then there absolutely would be lending options available to you that are not going to rely on your personal credit. I can tell you cause at NAV, we work with over a hundred different lending types across the country. I can tell you, the lot of them do a soft credit check, so they’ll do a soft personal credit check just to see if there’s anything that, you know, might be a red flag for them. The challenge is, those Revenue-Based Financing are usually more expensive. So there’s no requirement in small business lending. Unlike consumer lending, where when we go to look for a credit card, or an auto loan, or a mortgage, we look at the APR, right, and we shop based on the APR, the Annual Percentage Rate. No requirement in business credit, yet there’s California law that is in the works, but no requirements, they show you that. And so, it can be very confusing how much that financing often costs, and it’s not unusual. They see financing that costs 40%, 70%, 100%. There was a story in Forbes, Kim, about a hairdresser who was gonna buy the hair salon where she worked, the owner wanted to sell. She got a term sheet for financing that said 15% state, it’s percentage, you should have 15% that’s not too bad. It was run through a calculator and we offered these calculators free at NAV., you don’t need a NAV account, or you don’t need personal information, but we, it was run through one of these calculators, and her APR for that 15% specified percentage. You want to guess what it was?
Kim Sutton: 300%.
Gerri Detweiler: Over 4000% APR.
Kim Sutton: Oh my gosh.
Gerri Detweiler: Yeah. So you know, there’s times when higher costs financing may make sense to take advantage of an opportunity. But unfortunately, I think a lot of business owners, they don’t realize it’s higher cost financing. They don’t realize what they’re getting into, and maybe they don’t even really know specifically how that financing, what their margins is, and how it’s gonna help them make money. And so that’s when they end up trapped, right? It’s just like you, and I loved, I love, love, love your expression about what was it? Not finishing syndrome, what did you call it?
Kim Sutton: Chronic idea disorder.
Gerri Detweiler: Yes, chronic idea disorder. So there’s a lot of business owners will think that money will solve the problem, but you’re so clear about what the problem is, and now you’re focusing on the real problem, and money wouldn’t solve that problem, unless I suppose you hired someone to actually finish it for you (laughs), that maybe a would.
Kim Sutton: Which I will not deny that I have been doing.
Gerri Detweiler: Yeah, so you’re clear about the problem, you’re clear how the money’s going to help you accomplish that, and that doesn’t always happen. And so, sometimes business owners get trapped in really expensive financing, and then they go back to the well, and it’s just a vicious circle. So, I don’t want to be completely negative. There’s so many cool things happening among small business owners, but I do want them to understand these minefields so that they can avoid them as much as possible, and try to make smarter decisions.
Kim Sutton: What would be your top five tips for entrepreneurs in general? What should we be considering on a day to day basis? Or a year to year basis? When were trying to strengthen the financial integrity of our business.
Gerri Detweiler: Well, first of all, I would encourage you to have a mentor. So there’s just plenty of research around business owners who have mentors that they’re more successful, they’re become profitable more fast, more quickly. And so, I would definitely find a business mentor, so that you have someone to bounce these things off of. Owning a business is so isolating often, and so you often feel like, you’re there by yourself and maybe your spouse can be objective, but maybe you’re maybe not. Maybe, I mean their finances are intertwined with you too, friends may not understand what you’re doing, et cetera, so that’s first. The second thing I focus, you know, a lot on credit and financing. So the second thing I would say is, be prepared before something comes along. And it doesn’t have to be a crisis. It could be an opportunity for your business where you discover that, let’s say you discover Kim, that a particular marketing funnel is just working great for you. And if you could invest in some paid social media advertising, you could quadruple your profits. And I know business owners and bloggers who have done this right, but you don’t have a credit card to pay up front for those, and you may not see the return for 30, 60 days. So having access to credits so that you can invest in something that’s working, or an opportunity that comes along could be very valuable. So, even if you’re thinking, I’m just a bootstrapper, think about being prepared. JPMorgan Chase, has studied 600,000 small businesses, and they discovered that medium small business, out of the 600,000, he had 27 days of cash worth available. 27 days, that’s not much. It could be a natural disaster. It could be a physical problem that you go through where it sets you back and it’s something related to your location. You lose a lease, whatever it is, that’s not a lot. So you want to build that runway as long as you can, and financing can help you do that. And one way to do that is to start building business credit. And if you don’t have strong personal credit, you know, bit by bit chipping away at that. The sooner you start, the sooner you see results. Cause one thing with FICO scores is that, older information carries less weight. So every single month that goes by, those negative payments, as long as they aren’t continuing, they’re becoming older and they’re carrying less weight. So if you have positive on time payments now, those eventually help outweigh that. So there’s just a lot of little things you can do, and I can share a link for our business credit building checklist where you can go down the process. But business owners who are proactive about it often see good success, and they see it more quickly, and they don’t have to spend a ton of money on some of these programs that, you know, that make promises that may or may not materialize.
Kim Sutton: I love that. For any listeners who are wondering, I had looked into credit repair services, I had considered bankruptcy. But, the sort of funny thing about bankruptcy is, when you’re already struggling financially and you need 2,500 to file for bankruptcy, it’s sort of hard. So I couldn’t do it, and then, I’ve been working on slowly digging myself out of the hole. But one of the things that happened was that one of the credit cards that I had, you know, a decade ago, they ended up doing a charge off, and in 2016, that was counted as income. The IRS ended up, and it was reported to the IRS and that ended up being counted as income. And because 2016 was a relatively low financial or income year for us, we had gotten a refund.
Gerri Detweiler: Hmm.
Kim Sutton: When the IRS saw that, you know, $25,000 of additional income come in, they wanted a refund on their refund. So, it’s interesting how it all, though the older stuff will sometimes slight off, I’m not trying to say just don’t pay it, people, I’m not trying to say that. The older stuff exactly like Gerri says, doesn’t impact you as much, but it does come back and bite you in the butt, if you don’t take care of it.
Gerri Detweiler: It can, it can. And Kim, did you try at all to get that 1099-C income? Not to pay taxes on it? Did you try to dispute that?
Kim Sutton: I have to say I didn’t even know that that was an option.
Gerri Detweiler: Oh it is, yes. So, we’ll have to follow up on this, but for anyone who gets a 1099-C, which is the IRS form that reports cancellation of indebtedness income, there is a form you can fill out Form 982 I believe, I wrote a lot about this, about five years ago when everybody was getting hit with these forms. Form 982, and basically you fill it out, and if at the time that that debt was forgiven, you were basically the IRS definition of insolvent, which doesn’t mean what we think isn’t solid, it means you owed more than your assets were worth at that time. Then you can fill out this form and get the IRS to waive that as income. So Kim, you’re going up on a three year mark, I’m not a tax expert, but I would like you to go back and look at this cause you may be able to get that refund back. I will give you some resources for this, but if anyone else is listening and this has happened to them, you may be able to avoid paying taxes on that, canceled debt income.
Kim Sutton: Oh my gosh. Yeah, I can tell you, we owe it a lot more than we had in our possession. But yeah, that would be so fascinating. When we were just starting our journey to buy a house, I was listening a lot to Dave Ramsey, and the reason why I bring this up is for any listeners who are working on repairing your credit, one of the things that Dave Ramsey talks a lot about is having zero debt and no credit cards, but he’s basically talking about not having a zero credit score but having no credit score, right. So what are your thoughts about that? Because to me that sounds really dangerous. I mean, don’t we need something? Or what is your opinion?
Gerri Detweiler: I think Dave Ramsey has done a lot of good for a lot of people–
Kim Sutton: Agreed.
Gerri Detweiler: –and I know people who have followed his approach. I have profile a couple who have no credit score, but when you’re self employed I think it can create additional challenges for you. And again, there’s nothing wrong with bootstrapping a business, but there are going to be opportunities that come along that may be capital intensive. And I’ll just give you a quick story. I sent a webinars for accountants, and one of the participants reached out to me afterwards. She said: “On the side, I sell Pandora jewelry, and a local jeweler is going out of business, he’s liquidating and I need several hundred thousand dollars.” I don’t remember exactly how much, but it’s a lot of money. “I need the cash to buy that inventory. I know how much I can make off of it.” But she needed access to capital quickly to be able to take advantage of that opportunity. And it can be very hard to scale many types of business without access to capital. And many lenders will check business credit scores, or personal credit scores, or both. So, as an entrepreneur, I would encourage you, doesn’t mean you have to carry debt, doesn’t mean you have to pay interest, but I would encourage you to have a good credit score because it’s going to open up so many more opportunities for you to get affordable financing and to leverage, you know, other people’s money to grow your business. So, I have a little bit different take than Dave on that. I think, you can be responsible with credit. I love my rewards. I do so much with my travel miles on my credit card, and I don’t want to give that up, but at least at this point in my life, and there have been points in my life where I had credit card debt, but at least at this point I’m paying in full each month. So, I’m not paying a price for those rewards that I’m earning.
Kim Sutton: I can see that, for sure. And just knowing what business expenses I pay on a monthly basis, I mean everything from Infusionsoft to Tailwind, to everything in between. I mean there’s probably $2,500 to $3,000 in business expenses every month, that would add up really fast just for the rewards. Are there positive assets besides, you know, a bank account with money in it and a steady stream of income. What are, if there are any goals that we should be working towards as far as assets go for our business that will help us with our score.
Gerri Detweiler: And so when it comes to your credit scores for your business, you know, having accounts that show up on your business credit is key, and we have, right now, so NAV is similar to Credit Karma for small business. So people see their free business and personal credit scores in our platform, and then we match them to financing. And we have over a million small business owners who have access to their scores through the NAV platform. And it’s not unusual at all, for us to see business owners who have been in business maybe 10 years, they’re paying bills, they’re paying everything on time, and they don’t have accounts that report to business credit. So, it’s not quite like personal credit where have you get a mortgage, you get a car loan, you get an auto loan, you can assume it’s gonna show up on all three credit reports. With business credit, they might report to Dun & Bradstreet, and not to Experian, or they might report to Equifax, but not the other two, or they might not report it at all. And so it is a process where you have to be more proactive generally than with personal credit. But on the other hand, and this is my observation, but although I think we have some research at this at NAV, I see people having success more quickly building business credit. And my theory there is that, because most business owners are doing anything, they don’t even know business credit exists, then those who are proactive, you know, we’ll see results more quickly and they’ll start seeing their credit get established, and seeing their business credit scores go up and that, you know, opens the opportunities. So, it’s a little bit of work, but I think over time the payoff is well worth the investment of the time to do that.
Kim Sutton: Thank you so much. What are you most passionate about in the work that you do?
Gerri Detweiler: I love helping people, I just love helping people. I’ve answered over 10,000 credit questions online. I take emails, and someone just texted me a credit question after a workshop, and I love helping people. So I really love being at NAV, because this is the first time I was there when consumers first got access to their personal credit reports. And so, I used to do workshops where I’d say: “Anyone know what their FICO score?” And people will give you this deer in the headlights look like: “FICO? What are you talking about? I’ve never heard of this.” So, I saw that evolve to where consumers became much more empowered and proactive, and understood what was going on. So now I get to do that on the business side, and working with small business owners is so much fun. They’re so passionate, they’re so excited about what they’re doing. They’re willing to put in the work because they want to be successful. So, I think I have one of the best jobs in the world right now.
Kim Sutton: I love hearing you say that, because it just goes to show, and I say this with all respect, we all have our own genius and subject matter that we are super passionate about because for me, credit scores have just been a major thrown in my side and I, maybe someday when I don’t have a 570 score, I’ll be more passionate about helping people with it when I know how to get out of it myself. But I love hearing you’re passionate about it. So thank you very much. Now can you tell us more about what NAV does? And how you support business owners over there?
Gerri Detweiler: Sure. So we are the first site to show business owners free business credit data. Until NAV came along business, honestly, we had to pay 70, 90, 120 bucks to see their own business credit reports. There’s no federal law that covers business credit. Anyone can check it. There’s no requirement. They tell you if they did check it, there’s no requirement. They give you a free report once a year if you’re turned down for credit. So it’s often a mystery. And our cofounder, Levi King, he’s had five serial businesses, first was manufacturing as I mentioned in Idaho. And he learned the hard way how credit works, so what it could do for him as well. So, he started from absolutely nothing to, I think it was about a half a million dollars in credit lines available by the time he was 30, and he is very passionate himself about this education process, he had his last business before Napa, it was a super broker helping get business owners loans. And he was really frustrated because so many people would apply and get turned down, and he would know that they were either going to go out and get crappy financing, or go out and get no financing, but either way it wasn’t going to be good for their business. So he said: “What if we were educating them, and helping them learn what I learned so that they could get better financing.” And didn’t know it at the time, but I was on a similar track cause I had written the book Finance Your Own Business with Garrett Sutton. I ended up interviewing Levi King for my book, not knowing that I would end up here, and it all converged to where my mission was very much mission aligned with what NAV is doing. So now, and they’re full time. So you come to NAV, you put in the name of your business. If you don’t have business credit, we have a tool to walk you through building business credit, well show you your personal credit scores, and this is all free, and then we’ll invite you to link your bank account is read only, but that gives us your revenue information. So then we have the key elements of what lenders are looking for. We know your time in business, your personal and business credit scores and your revenues. And with that, we can show you financing offers with our match factor to help you understand which ones are a fit. And again, we work with over a hundred different lenders across the country. We don’t sell your information to lenders, we use the platform to show you what’s available to you, so you can find the best financing that fits your situation right now. And then also tools to build stronger credit, so you can get better financing in the future.
Kim Sutton: I love how you just brought up blinking your bank account because you actually just inspired a huge question. So when I’ve had declines for business credit, and often it was because of lack of evidence of income earned, because the money wasn’t going into my bank account. My invoices are paid through PayPal, they wanted to see it in the bank account.
Gerri Detweiler: Right.
Kim Sutton: And that was a huge Aha to me. And actually we’re switching our whole accounting system for a variety of reasons. But we’re switching from, I’ll just tell you where we’re switching to. We’re going to QuickBooks because we can invoice it and that will be directly deposited into a bank account instead of into PayPal. I mean we’ve had consistent 20 to $30,000 a month, but because they were all going into PayPal , it didn’t really help much.
Gerri Detweiler: That’s such a good point. And you know what PayPal has done very smartly on their end is they’re now extending financing based on your PayPal receivables, but it’s not unusual. It’s hard to find their cost structure. They advertise it as fees, and they don’t really translate into an APR. So again, that’s where the calculators come in, nab.com/calculator I think it’s singular, you’ll see all these calculators. If you translate it to an APR, a lot of times you’re looking at like 30% APR. And what I say to the business owners, if you have a business credit card at 18%, and you have another lender offering you financing it 30%, maybe 18% is the way it sounds high, but maybe it’s the best option for you right now. So you brought up things. One is that, the revenues are so important to demonstrate to lenders. That’s a big part of much of small business lending and it impacts you like getting a mortgage, et cetera. And then secondly, that if you’re beholden to this one source like that, you’re not going to get the other competing offers, because they don’t know what’s going on in your business, right. So, I love the approach that you’re taking and the direction that you’re going to get that money into your own business bank accounts, so you can demonstrate your credit worthiness of your business.
Kim Sutton: Oh my gosh. We have actually used the working capital loans, that PayPal offers, but I never thought about what the APR was. So just to give you an example, yes, it is a fee that they put on top of the total value of the loan. So, like one of our working capital loans was 10,500, and then there was a $1,100 fee that went on top, and it took about eight months to pay off. And what we agreed to was that every payment that came in, we would pay 30% of it back to PayPal.
Gerri Detweiler: Yep.
Kim Sutton: That’s how you pay off your loan with them. So they automatically take it out of your account every time you get a payment in.
Gerri Detweiler: Correct.
Kim Sutton: But that makes me wonder what the APR actually.
Gerri Detweiler: Yeah, we’ll have to run if you’re one of the calculators to see what it, I don’t know, don’t be discouraged because it, hey, it may be the best option for you right now.
Kim Sutton: It was the only option.
Gerri Detweiler: There’s a chance it will makes sense, right? It’s the only option and sometimes that makes sense. But I do want business owners to know so they can figure out, okay, what’s best for my business? And you’re moving in the right direction Kim, because about 20% of small business owners don’t have a business bank account. And I’m not saying you don’t have one, but in your case you weren’t having all the revenue come through it. And interestingly, the statistics are higher for female owned businesses that they don’t use a separate business bank account. And that’s to me just a minimum step that you want to have a separate bank account to keep track of your business revenues because if not, it’s harder tax time. And also it just makes it more difficult to really assess the financial health of your business, because you really don’t have that clear picture. Maybe you do a tax time, maybe you don’t. Maybe you just give it all to your accountant, but you really want that clear picture of what’s going on in your business.
Kim Sutton: If I can be totally transparent for a moment. Part of the reason why I was resistant to actually using my bank account, and I have had one for several years was because of a situation I got myself into. I had opened up a business bank account when I first started the business in 2012, and I asked the banker to turn off the overdraft. Is that what it is?
Gerri Detweiler: Hmm.
Kim Sutton: Like when you tried to use your debit card but the funds aren’t there yet it hadn’t been shut off, and we were still very much in a growth phase. But you know, when I set up the, let’s just use Infusionsoft for an example, the $200 monthly recurring charge on my business debit, or on my debit account for my checking account and the funds aren’t there, all of a sudden I got hit with a $35 overdraft fee, and then five more charges try to go through, because I’m trying to send everything there because that’s where I wanted the funds to be. But all of a sudden I have $225 in overdraft fees and nobody to show for it, I was like, oh my gosh. So I was resistant, but then I found, and I just want to put this out there, I have a great local credit union. I just need to say that the bankers are less corporate and more friendly to me. They were there to serve me and not to serve the company that they were working for. And they said: “Oh yeah, well we can shut that off here. Let me show you. I’m going to do it right now.” Ting, done, and I still don’t have charges going through there. Yes, I’m getting my cash back bonuses through PayPal, but that’s what I would eventually like to do, and that’s what will happen, everything will be going through there but, it’s a scary thing when those overdraft charges just keep on stackin up. Sometimes I can feel like that pit that you just can’t get out of.
Gerri Detweiler: Absolutely, and there’s a lot more consumer protection when it comes to consumer credit cards, consumer bank accounts than there is for business, and so, you do have to really think through these options and be more proactive than you might even be as a consumer, which is already a lot of work for a lot of us.
Kim Sutton: I want you to share the title of your book, but do you have a couple other recommended readings that you could recommend to the listeners?
Gerri Detweiler: Yeah, so Finance Your Own Business is my latest book with Small Business Attorney and Rich Dad Advisors, Garrett Sutton and that’s going to cover a lot of what we talked about today as well as different financing options. I can also share a link where you can download my business credit building checklist, which is just basically a simple checklist on how to build business credit that’s free, and then I have a number of EA guides that I’ve written for NAV on things like financing, and personal credit strategies for entrepreneurs, and other guides that may be helpful. So, on the financing side and credit side, those are the resources I’d recommend, and of course hopefully getting a NAV account too, so you can start seeing what’s happening with your business credit and stay on top of it.
Kim Sutton: Fabulous. And listeners, just you know, all the links will be in the show notes, which you can find at thekimsutton.com/PP595. Gerri, is it nav.com or where?
Gerri Detweiler: Yes.
Kim Sutton: Okay, awesome.
Gerri Detweiler: Yes, nav.com and if you go to slash podcasts (nav.com/podcast), so nav.com, N-A-V.C-O-M/P-O-D-C-A-S-T, that’s where the free business credit billing checklist is, and there’s additional information offers on that page. If you decide you want a NAV premium account which gives more detailed reports and other benefits, there’s a coupon code to put the word podcast in there and get a free month of premium, but the basic NAV account is always free. No credit card is required and checking does not affect your credit score, so check away, and monitor, and build their credit.
Kim Sutton: Amazing. Thank you so much. Gerri, I just want to thank you so much for joining us today. You’ve provided me a lot, I know you’ve provided the listeners insight as well. Listeners, I would love to hear what Ahas you’ve gotten out of today’s episode, so please head over to thekimsutton.com/PP595 and leave a comment below the show notes. Gerri, thank you so much again. It was an absolute pleasure chatting with you. Do you have a parting piece of advice, or a golden nugget that you could share with listeners?
Gerri Detweiler: Yeah. I think my partying piece of advice is to, let’s say, Fix the roof where the sun is shining, so take care of these tasks while your business isn’t in a crisis, and then you’re going to have a lot more options and flexibility. If something good, or something not so good comes along, you’re going to be able to fall back on all that groundwork that you did ahead of time.