At Equities.com, we’ve always been focused on building an active community among the leading voices within the world of finance. As with many other fields, in finance, we’ve noticed a significant shift away from traditional sources of financial news, tips and predictions, and toward a growing number of financial bloggers.
In this series, we profile some of the most distinct and noteworthy voices in the world of financial blogging. Here, you’ll find our recent interview with Marco Carbajo, founder of the site Business Credit Blogger. Read below for Carbajo’s advice on why you should never start a business with personal credit, and the growing weight of your social media presence in calculating your credit worthiness.
EQ: You started both Business Credit Blogger.com and Business Credit Insiders Circle. Can you walk me through how both of those sites came about?
Carbajo: Sure. BusinessCreditBlogger.com is a blog I started with the purpose of providing in depth information on topics that surround the business credit and business financing industry. The site features a wealth of free information and resources for small business owners and startups. Our mission is to provide small business owners with proven systems, tools, support, training, and resources to build creditworthy businesses plus have access to the funding needed to grow, operate, and expand without putting personal credit at risk.
Meanwhile, the Business Credit Insiders Circle is an actual online-based platform where we provide a business credit building system to business owners. They register their company, and our system takes them through the entire business credit building process from structuring their business, getting listed with the business credit agencies, establishing credit in the name of the business, etc. So, we go through the entire process from A to Z, in an online platform, which allows us to maximize a business owner’s funding potential. We also address any personal credit issues they may have with credit solutions and education. The system itself is a subscription-based platform that enables business owners to build a creditworthy business by accessing our small-business friendly credit sources, vendors, suppliers, lenders and business credit cards without putting their personal credit at risk every time.
EQ: I see. So did the blog stem from Business Credit Insiders Circle, or vice versa?
Carbajo: The blog started first, and after that we launched the software. For many years I did one-on-one consulting. When I got to the point where I could no longer take on more clients, I needed a platform to point prospective entrepreneurs toward, so I shifted my focus from one-on-one coaching to providing a platform that could benefit business owners on a national scale for building and maintaining strong business credit profiles and ratings. Everything that I would teach one-on-one is available on the platform, and it even allows business owners to adapt these new strategies, adjusting both their existing company, and for any future businesses they may start. That has allowed us to expand our reach, and help thousands of business owners nationwide.
EQ: Well, you’ve certainly come a long way. What was your original inspiration for starting the blog?
Carbajo: Originally, my background was in the credit and business consulting industry. I’ve been in the industry for 22 years. As a company, we utilized business credit a great deal when we needed access to capital. A large majority of clients that we consulted were business owners, but many of them were unaware of personal and business credit separation. They did everything using personal credit, whether it was investing in real estate or running the daily operations of their business. I realized there's a big gap in awareness and knowledge when it comes to the business credit building process. That’s what really excited me about bringing this information to entrepreneurs and business owners throughout the country, and I believe the best way to accomplish that was through blogging and social networking. That’s what inspired me to start it, and it’s been my mission ever since.
EQ: I assume there are very real risks when it comes to connecting your personal credit with your business credit. What sort of risks are out there?
Carbajo: Well, if you have yet to establish a creditworthy business, it’s important to focus on establishing a business credit profile with all three major business credit reporting agencies; Dun & Bradstreet, Equifax Small Business and Experian Business. Lenders, creditors and suppliers pull reports from these agencies when assessing the credit risk of a company. Without an established business credit file, credit grantors will rely on a business owner’s personal credit, because that is the primary risk assessment barometer they have. As a result, a business owner puts their personal credit and personal liability at risk every time – because every transaction, whether it is credit cards, etc., affects your personal credit.
It’s not just the personal credit and liability that’s impacted, there’s another risk – from a tax perspective. If you’re comingling personal funds with your business funds, it's a nightmare for your bookkeeper, but at the same time you could jeopardize the protection of the corporate veil. Separating personal and business credit is another important part of protecting the integrity of the business entity that you have established.
EQ: When you're starting a business and building credit for that business, you're really starting from scratch. What are the primary steps one should take?
Carbajo: There are a couple of primary steps. In our platform the first step is to ensure that your company is in lender compliance. By compliance, I mean that you're set up as a real business, and so the first thing that every business owner should do is go through those compliance steps. This could be steps that they've already taken, but it's also ensuring that the details are consistent – from formalizing your business structure, to having a Federal Business Tax ID (EIN), having a separate business checking account, etc.
In addition, your business phone number should be a dedicated business line, and you should also have a dedicated business email, and a company website to name a few. There are a lot of details that go into this process but once a business meets these standard requirements it will be ‘credit ready’. The next step is to look at your existing expenditures for your business. Where are you spending your money on a day-to-day basis, and how are you spending it?
For example, if you're travelling for business you have ongoing fuel costs that you’re incurring. Rather than using personal credit cards or using cash you should be using a fleet fuel card. Basically, you should conduct an assessment of where you’re already spending money to operate your business – are you using business credit for those expenses or personal?
EQ: You've been doing business consulting for more than 20 years now, but what led you to the field to begin with?
Carbajo: I took various types of credit education courses way back in my 20s. I was always fascinated with the concept of leveraging credit so I attended seminars, workshops and courses on business credit & business financing,including FICO® education seminars. It was truly an incredible experience working with industry experts, successful entrepreneurs and business financing companies which ultimately led me to sharing this knowledge and experience on a national scale.
EQ: You’ve been writing the blog for about 11 years now. Has it basically gone the way you anticipated? Did you have an original intent for it? Do you have a goal for it today?
Carbajo: My long term goal is for BusinessCreditBlogger.com to be the leading authority site for entrepreneurs, startups and small business owners in the area of business credit and business financing. Just like Google Inc. (GOOG) is the standard universal platform when you're searching for information, and Twitter is the standard universal platform for microblogging, my goal is for the Business Credit Insiders Circle’sbusiness credit building system to be the standard platform used for building a credit worthy business. Simply put, this is the system to use to ensure you establish a creditworthy company, so you can stop putting your personal credit at risk and maximize your funding potential. That’s my long term vision for it.
EQ: What advice would you impart to prospective business owners, or even those who have already been at it for a while?
Carbajo: To sum it all up, the number one thing that a lot of business owners have missed is that they have to know their numbers. The numbers are the most important thing in every aspect of business, because if you don’t know your numbers, you're basically building your business while blind. You could be generating revenue, but if you don’t know your cost of goods sold, or you don’t know your profit margins, you’re not controlling costs.
People think “I’ll just get more credit, I’ll just get more money, I’ll throw it in the business and I’ll be okay,” but a lack of money is not necessarily the problem in most cases. One of the major roots of every company's demise is a business owner not knowing their numbers, and not knowing how to improve the bottom line.
EQ: What do you suggest a business owner do to improve their numbers?
Carbajo: They should be diligently looking at their profit and loss statements, going through their numbers and finding ways to improve their profit margins. Also, it’s crucial to create your financial projections from the bottom up rather than the top down. As a startup, you have to assess what amount of funds you're going to need to launch the company, to keep it operating, and to grow that company.
The problem with many small business owners is that they only focus on getting the funds needed to start the business, but as the business starts growing, they may need to hire more employees. They may need to purchase more inventory, and then they start looking for money. I like the philosophy of digging your well before you get thirsty. It’s in a company’s best interest to start the business credit building process during the early stages in order to have access to the capital they need when they need it.
EQ: Even in the niche world of financial blogging, you serve a specific market. Do you correspond much with other finance bloggers?
Carbajo: Yes, I currently contribute regularly to sites such as AllBusiness.com, About.com, Dun & Bradstreet Credibility Corp. and the Small Business Administration. I also collaborate with other industry experts such as Diane Kennedy and other financial bloggers in the industry.
EQ: Since you began a decade or so ago, financial blogging has taken off quite a bit. Have you noticed greater trust in finance bloggers throughout the industry?
Carbajo: I believe so. In the finance blogging world, trust is a crucial factor. In my opinion it’s all about transparency, honesty and integrity in the information and services you provide. I pride myself on providing top-notch information – even free information – as well as video tutorials, tools, references, and resources that help to establish a connection with business owners.
The other most important factor is the social connection – the ability to be accessible online. Whether it's Twitter Inc. (TWTR) , Facebook Inc. (FB) , LinkedIn Corp. (LNKD) or YouTube. I believe all those should work congruently, giving people the ability to connect with you as they prefer.
In the coming years your online presence is going to be an increasingly significant factor in how lenders and creditors view the creditworthiness of your company. What's really interesting is that it's already happening. For example, Kabbage, a leading online provider of working capital, does not just look at your revenues coming in from PayPal Inc. ($PYPL), or eBay Inc. (EBAY) they also review your Facebook and Twitter profile as well. With strong social profile factors, you’re able to get greater quantities of credit. So, it’s essential to not just focus on your personal credit and your business credit, but also your social profiles – your online credit. Now is the time for business owners to focus on building up their social real estate as this will play an even greater role in financing in the coming years.
For more on on business credit from Marco Carbajo, visit BusinessCreditBlogger.com.
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