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2016 is coming to a fast close, and it’s time to start thinking about the direction your business is going to take in 2017.
For many, that means thinking about how you’re going to cover all your expenses—whether it’s for unexpected investment opportunities, emergencies, and more.
Here are two tips for real estate businesses to get ahead of the game in 2017.
Secure an affordable cash cushion with business credit cards
Business credit cards offer a relatively low cost and flexible way for real estate professionals to finance purchases. Additionally, you can use business credit cards to build your business credit profile in order to secure attractive financing terms on loans, bank or SBA loans, in the future.
If you’re looking for a larger amount of cash, credit card stacking, in particular, can help. Here’s how it works:
The stacking company will submit about five to 15 credit card applications on your behalf based on how much funding you need. These applications will be for business credit cards and/or personal credit cards, so if you go this route your personal and business credit will likely be affected by how you handle repayments on the card. The company will submit applications for these cards all together to minimize the effect of inquiries on your personal credit.
Depending on your personal credit profile (you’ll ideally need a personal score above 680), you can secure up to $150,000 or more using credit card stacking. The stacking company will likely apply to cards with 0% intro APRs so you can borrow what you need for the first six to 12 months, interest-free. Credit card stacking companies will charge about a 10% fee of your total loan amount. This is a one-time fee.
Use Credit to Your Advantage
The best time to prep your business for financing is when you don’t need it. You never know when a property or investment opportunity is going to pop up and you’ll want to be ready when it does.
The first step here would be to get your personal and business credit in shape. One of the fastest ways to improve your personal credit is to decrease high credit balances. Paying down your balances and keeping your debt usage low will help here. Generally, if you can keep your “debt usage” ratio under 25% you’ll be on your way to better scores.
In order to establish strong business credit, you’ll need accounts that report your payment history to commercial credit agencies like Dun & Bradstreet, Experian, or the Small Business Financial Exchange. Your new business credit card is an easy way to start. Be sure to make on-time (or early) payments and keep track of your debt usage to make sure you’re not carrying too high of a balance, and you’ll be on your way to building strong business credit scores.
Once you have solid credit scores, you can use your scores to land great terms on financing options, get financing faster, or get flexible payment terms with your suppliers. Businesses that understand how business credit works can also use it as a tool to screen any companies they may be thinking of doing business with. If you have contractors you want to work with, for example, you can look up their business credit reports to see how they handle their business payments and if they’re a credible partner to work with.
Checking your credit, both business and personal, and setting up a cash cushion are two easy wins to kick 2017 off right for your business.
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This article was originally written on December 16, 2016 and updated on January 27, 2021.
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