Some of you have actually been emailing me, wondering when I'm going to spill the beans on how to access the hundreds of thousands of dollars in business credit cards that you'll be getting.
After all, getting unsecured business credit cards are actually the easiest thing to get when it comes to business credit provided that you put the time, effort, and appropriate energy into fixing/rebuilding your personal credit to get yourself over that 680-FICO score threshold.
Now, since getting unsecured business credit cards is quite easy to do and it's much easier than you think to get several of these cards that are collectively worth $100,000 within a very short period of time, you're probably wondering how to use this credit as a down payment on a property, for instance.
Many of my students have asked me..."Can I just give escrow my credit card for the down payment?"
Um...no. You can't.
What you can do is this:
1) If you plan on having and operating a functioning business (say a distribution business, for example) then you'll get something called a "merchant account." This merchant account will allow you to be able to charge credit cards which can include your own. (There is a restriction against this in the merchant agreement about running your own credit cards but that's a risk you'll have to take.) It's recommended that you have a different business set up than the company that you are establishing business credit under in order to successfully pull this off without a hitch.
2) You can "pay yourself" through PayPal. For example, if your spouse has a PayPal account and you (or your company that has the business credit established, which is preferred) have a PayPal account, you can have your spouse do a "money request" or send a PayPal invoice for services for whatever amount (cash) you want to take off your business credit card. You can easily get the money off your cards this way. It's recommended that your spouse have a PayPal account set up under a different business name than the one you have business credit under, particularly with a different tax ID number. You don't have to have a corporation to go to the IRS.gov website to get a tax ID number for a "sole proprietor" business. (For example, your spouse could "start" a company called Terry's Flowers and go to the IRS.gov website to get a tax ID for this company using his/her personal social security number to secure this tax ID number. This tax ID can then be used on the PayPal account where the money request is coming from, thus "shielding" your spouse (who probably has your same last name) in the transaction as being someone who is related to you; this makes it look like there is no relation between you and the establishment who requested the money for services from you.
3) Cash advances are limited but are also available for some of your business credit cards. You can "max out" on the cash advance limit for each of your credit cards.
Since getting $100,000 in unsecured business credit with multiple business credit cards is quite easy to do within just a few months' time, you can easily extract $30,000 or more of that money without anyone (mainly your credit card companies) really being any the wiser to what you're doing. And getting a whopping $30,000 is a decent amount of cash if you're buying a "quad" or if you need that 10% down on a commercial SBA loan.
Also, when paying for due diligence (property inspections, appraisals, etc.), you can use these business credit cards to directly pay for these services in many cases as well.
When you borrow this business credit, make sure you have the means of paying it back. If this money is going toward a cash flow property, make sure you understand the interest rates on the down payment money you are borrowing off these credit cards to make sure the property still cash flows. Also, make sure you take more cash off the cards than what you need for the down payment so that you can wait the first 45 to 60 days to start seeing the first of your cash flow after closing without being strapped for the money to pay your credit cards.
The other day I promised to lay out the exact steps you need to do to get the type of business credit I was able to line up recently with my relatively new company. In order to do this, though, it's only fair that I break it down into 2 parts since getting this type of credit requires seemingly "separate" things in place.
Now, before I tell you exactly how this is done, I need to first make it clear why business credit is where it's at. Building personal credit alone won't get you to those unsecured six-figures (and one day seven figures) as I indicated in my last email when I was showing you the difference between my 2 Bank of American unsecured credit cards that I got in the same month: my personal card yielded me a pitiful $5,000 unsecured credit card while my new business's unsecured credit card is $30,000! Big difference!
Why the difference?
Think about it from the bank's perspective.
If you were Bank of America and you were analyzing a personal vs. business credit application, the first think you'd wonder is...what's someone getting a personal credit card going to do with it? Then, what's someone getting a business credit card going to do with it?
When someone wracks up debt on a personal credit card, they quickly get into financial trouble. It many cases, it can become the financial "death" of them within a very short period of time. And it almost doesn't matter how good their personal credit is now. A small (and even temporary) financial off-balance (i.e. loss of job, high medical bills, etc.) can sometimes lead to getting into a lot of debt...and fast.
In business, "debt" isn't only accepted...it's expected! Many businesses use credit to balance cash flow against giving clients and customers extended credit terms (like net 30, 60, or 90 accounts). And business owners need a means of balancing their incoming cash flow which is where credit comes in.
This may seem obvious but one thing you probably didn't know is this: while banks drew back on giving out personal credit ever since our recent banking collapse, they've been virtually forced by the government to keep offering up credit to businesses.
Why is this?
The only difference between the Great Depression in the 1930s and our complete economic demise by 2008 is one thing...and one thing only: credit to businesses.
The reason so many businesses folded in the 1930s to the point where they had to close show (thus offering no employment to people which makes the economy go around) is that banks completely stopped giving out any type of credit to business owners.
When businesses can't stay open for business, they shut down. When people are out of work, they don't get a paycheck. Without a paycheck, they stop buying. Then the economy shuts down.
The government didn't want that to happen...again.
Now, I don't know exactly how it went down but I imagine it played out something like this. Imagine the bank is a lower-echelon thug and the bank is a gangster named Bruno, dwarfing the thug in size.
Bruno to thug: "Come here!"
Bruno drags thug forcefully by his ear into a dark alley, probably around 1am.
Bruno: "Now, I just want to make sure we have an understanding here. We don't want a replay of the Depression so, no matter what, we're going to keep lending money to businesses to keep the economy from collapsing completely."
Thug: "Or else what?"
Bruno: "Or else I'll make your life very miserable."
Thug: "And how's that?"
Bruno: "You don't wanna know. So...do we have an understanding?"
All the while, during the conversation, Bruno was punching his hand the whole time to drive the point home.
And that's how I envision that it went down. Take it or leave it, that's a symbol of how it pretty much went because nobody can quite pinpoint what the threat would have been but suddenly, around 2010, banks not only started offering business credit but they were raining it down on businesses whether they needed it, wanted it, or not!
Of course, there was a single criterion to giving out this money to businesses. Based on the major reason we had the credit collapse to begin with (which was non-qualified individuals getting loans on houses they couldn't afford in the first place), the banks had to be careful with lending out business credit.
And no, it had nothing to do with having business gross receipts (i.e. "business activity"), businesses that were "well seasoned," or businesses with a lot of built up business credit.
And it definitely had very little to do with whether the business had a Dun & Bradstreet profile with built business credit either. (Surprised??)
Unlike the "old days"(just a few years ago), personal and business credit now go hand in hand. You have to boost your personal FICO to about 720 or above ("mid" score) in order to fully qualify for endless amounts of business credit.
Yet surprisingly, this is fairly easy to do!
So, I'll quickly lay out the very simple steps of bolstering your personal credit before delving into the business credit part.
1) Pull your "tri-merge" credit report. I recommend using Experian.com and paying the $39.95 to pull all 3 reports which will include the FICO for each. (Don't fall for the $1 bait-and-switch deal because they'll bill your credit card forever for some monthly monitoring service that you don't need.)
2) Dispute everything that's negative. This includes "hard" inquiries. In this step, you'll also fix personal information including phone numbers and addresses to make sure your account is current.
3) Start rebuilding personal credit at the same time by getting yourself a car loan or lease (if you don't have one) and getting 2 credit cards: these can be secured or unsecured depending on what you qualify for in the present state of your credit. Use the credit cards and never exceed 45% of the total credit line in charging activity. Pay your car payment each month on time. This process will automatically build credit for you while you're chiseling away at the negative things on your credit reports.
4) Keep disputing and disputing and disputing while using other critical strategies to get these negative things removed off your credit reports. The more consistent you are with the process (by disputing every 35 - 40 days), you'll have Triple A credit within a few short months...especially while rebuilding at the precise same time. (That's the key!)
In the meantime, you can start the process of building your business credit at the same time. This also can be done in just a few months.
Here are the steps:
1) Get yourself a corporation. Yes, it helps somewhat that you have some "seasoning" which means the age of the corporation. Two years seems to be the "magic number." So, if you already have a corporation that's 2 years or older, you're ahead of the game. If you don't, that's okay. You can consider getting a "shelf" corporation that's already seasoned 2 years for you or you can start from scratch (incorporating right now) if you have a long way to go with your personal credit (i.e. just filed for personal bankruptcy). By the way, your corporation needs to be in your home state and not in Nevada (unless you live there or you are foreign to the U.S.).
2) Once have your corporate resolution documents (after incorporating), get an EIN (employer identification number) with is equivalent to the "social security number" of your corporation. You can get this number at the IRS.gov website.
3) Open a business bank account with a large bank like Wells Fargo or US Bank. You need your EIN in order to do this.
4) Get your first business credit card. If you're still working on your credit, go to Wells Fargo and get a secured business credit card. They are the only bank that offers this program right now. Otherwise, get something like a Chase Ink credit card or other business credit card that's unsecured if you have at least a 680 mid FICO score.
5) Use the hell out of that single business credit card. Use it, pay it off, use it, pay it off. Keep doing this. All activity will be reported to Experian Business using the company's EIN. Use this card for 6 months and wait until you get a business credit card offer in the mail. (Always fill in the application and mail it in. Never apply online. It's weird but when a human being has to type in your application information, it usually gets approved. When you apply online, a computer makes the decision on your credit worthiness...and they are pretty hard to surpass because one minor "glitch" on your credit report can throw you into a "decline" as far as the computer is concerned.)
Within a year, you'll have tons of unsecured business credit cards, adding up to at least $100,000. By having (and using then paying off) these credit cards, you'll qualify for all kinds of unsecured business loans.
Now, I have one secret for you that a lot of my students have been asking me about for years and it goes somewhat as follows:
"So, if I have $100,000 in business credit cards, how can I tap into that money to use the cash as a down payment since most credit cards don't allow for huge cash advances?"
And I have a secret. And no, you won't show up at a closing with a MasterCard telling the escrow officer to "put it on this card." (It doesn't work that way.)
In the next entry, I'll tell you exactly how to tap into that credit card cash. (I think it'll surprise you.)
The other day I sent you an email about my recent Bank of America experience with a personal vs. business credit card.
And I think I proved that you'll always get more -- much more -- when it comes to business credit, even if you have a fairly new business.
Here's an example of the power of taking a conscious effort in building business credit for your company:
Because of all the promotional materials, ad space, trade show booths, equipment, raw materials, and printing I have to do for my newest company (which is only 2 years old), I've been using my business credit cards a lot.
On the other hand, Global Success is over 5 years old but I've used my business credit for that particular business minimally due to wanting to stay as solvent as possible.
Britney at US Bank talked me into a business credit card for my newer company and for Global Success. Since I was doing other banking business there I said, "Sure, why the hell not?"
Both companies were instantly approved for business credit cards except...Global Success got approved for much less! What?!
Let me reiterate: The older company with more "seasoning" that has made millions every year (as per our annual tax returns) is approved for...less? Much, muchless?? WTH??
Then I put 2 & 2 together in almost an instant.
Because I've been consciously building credit for the new company (because I know what the hell I'm doing due to plenty of practice), the new company has kick-ass credit while the other one never had the need for credit and therefore didn't build it up well enough.
The newer company is only 2 years old. Two years and 3 months, to be exact. There is only one good tax return (for 2012) that actually showed that the company did decent (but still not as well as Global Success). The year before was at a lossdue to its first year being in business.
I didn't start actively building business credit for this new company until I got anAmerican Express card for it last summer. Then I got a 2nd American Express card for the company about 6 months later.
I used those credit cards to death and all of the activity was immediately reported to my Experian Business credit report (through the company's EIN).
Last month I applied for a Chase Ink business credit card for the new business. It was instantly approved for an unsecured credit line of $18,000. (In the meantime, I can't get approved for a personal unsecured credit card for over $5,000 if my life depended on it!)
And I just mentioned that Bank of America just approved the company for an unsecured credit card with a credit line of $30,000.
Meanwhile, Britney at US Bank is shoving a $250,000 unsecured loan down my throat that I really don't need but I think I'm going to take it today. I can use the money to build up more credit simply by borrowing it and then paying it off within 6 months...or less, and never really using the money at all for anything.
Between this new loan and a small handful of business credit cards, I'm at $313,000 of unsecured credit not including the one American Express that has no pre-set spending limit.
And I pulled this off in less than a year without busting my ass or anything like that. All I did was get a couple of business credit cards, use the hell out of them, and...that's basically it! That's all I did!!
Okay, so there are a few other steps that I didn't quite mention. But it's all simple stuff that you have to work on regularly and religiously.
In the next entry, I'm going to break it down to you so you know exactly what you need to do to gain access to this type of credit and then, after that, I'll tell you how to access the credit for things like down payments on apartment buildings. (My strategy for accessing this credit, especially unsecured credit cards, will probably surprise you.)
I have this perpetual battle with some of my students who don't quite "get" how important both personal and business credit is in this day and age...
Yet they wonder why a bank won't finance them to buy a stick of gum because they have a 425 personal FICO score.
And it actually shocks and amazes them.
But think of it in terms of this:
If you were a bank and someone wanted money for, say, a $10 million apartment complex and yet they had no assets, no personal credit, no business credit, and can barely "vouch" for the fact that they're an American citizen (if they can even do that)...would you give up the money?
I didn't think so.
Remember the giant credit debacle of the 21st century? Remember when lenders were giving home loans with 100% LTVs (and even over 100% LTVs) to people who had "stated" income...meaning they simply "stated" what they made and they were financed?
And remember where that got us, right?
Yes, exactly right. Foreclosure-ville-galore!
And the banks don't want a replay of that. At least not quite yet. At least until they've forgotten about the 21st century lending debacle, that is.
So, in the meantime, it all boils down to credit.
I've been working diligently on my credit since I filed bankruptcy back in 2003. I've fought with creditors, even sued a couple. I've chiseled all the bad marks off my credit reports, even having hard inquiries removed.
Fixing and rebuilding personal credit came first. My personal credit was so bad that I had to get secured credit cards in order to start building credit. Between those and getting a car loan, I was on a fast rebuilding track for my personal FICO score. Within a year I dramatically increased my FICO just by doing those 2 things.
Once I got my FICO above 720, a whole new credit world opened up for me but...
It wasn't about personal credit.
I now have excellent credit. In fact, I have a banker by the name of Britney who calls me literally every other day to give me business loans. She called me yesterday (for the 3rd time this week) when I was standing in the middle of Universal Studioswondering what the "status" was of my considering her latest loan offer...which was somewhere in the neighborhood of $250,000.
I told her to call me back on Monday. I don't need the money. But maybe I can use it for something to keep building my credit. Or I'll just borrow the money, stuff it into a bank account, and then pay off the loan in 6 months to beef up my Experian Business FICO score.
One of the biggest changes with business credit is DNB vs. Experian Business. I've noticed a huge change in how to build business credit over the past couple of years. Building business credit used to be an endless chore that would be equivalent to holding down a part-time job just to keep up on it since DNB (Dun & Bradstreet) requires you to build (and maintain) your own credit profile.
And that sucks.
Plus they have limitations on which types of creditors you can have.
That sucks even worse!
Then Experian Business came along.
And it's freakin' seamless to work with.
For example, you have a Social Security number. You apply for a personal credit card and the bank uses your SS# to tie you to your credit profile. When you use the credit card, all of your activity is reported to your Experian, Equifax, and Transunion credit reports via your SS#. This happens automatically.
Experian Business works much the same as the above scenario except using your company's EIN (employer's identification number) to tie your business into its own credit profile. Therefore, any business credit card you use with the EIN attached will automatically be reported to your Experian Business credit report.
Automatically without you doing a damn thing except for using and paying your business credit card.
Told you...freakin' awesome!
So, why tinker around with DNB -- building profiles, fighting with a customer service rep over which accounts you can add to your profile, arguing with them over your tax returns -- when you can have Experian Business build credit for you? Just by using a business credit card??
DNB has its place in the food chain. But it's not really something you concern yourself with until you start needing higher dollar amounts such as $500,000+. Then you need to have some type of built up DNB credit.
Until then...you build business credit the easy way!
I have a 4-month Personal & Credit Mentorship Group starting on Wednesday, August 7th. It's my last group for the year.
This group will show you, step-by-step, how to fix and rebuild your personal credit while building business credit at the very same time.
And yes, you can still do this if you don't have a business that has "gross receipts" or tax returns. You can do this if your business is brand new!
In my next entry, I'm going to tell you how my newer company gained access to over $300,000 in unsecured business credit while my older company didn't...and why. (It'll actually surprise you! What'll surprise you more is how easy and quick it was for me to build up so much business credit with my new company in less than a year!)
A couple of days ago I laid out how awesome it would be to have someone fund your deals with 100% LTV but I think I may have skirted over something that's rather important.
It's awesome to be able to have access to these 100% LTV financial resources in my new2014 Motherload Resource Directory but, since these are private investors that you'll be working with, they're not just going to write you a check for any deal.
You do have to prove that your deal is a cash flowing investment. This is done through an executive summary and, in some cases, a mini business plan.
Each private investor has different requirements to what they want to see (and they let you know in full detail what that is).
Here's a few tips for you if you're interested in using these investors for your deals:
1) When doing your numbers on a deal in the CFE (Cash Flow Evaluator), make sure you account for a higher interest rate on a 100% LTV loan. This can range from 9% to 16% on average and these loans are typically interest only which means no principle is ever paid. If you borrow $1,000,000 you'll still owe that same $1,000,000 in 10 years from now.
2) Make sure you're targeting deals that are slightly underperforming where you can still get a deal on the asking price. You don't want properties that are at a 50% occupancy level and you don't want to pay top dollar for a fully occupied property either otherwise the numbers won't work on both accounts.
3) You will need to have a solid future proforma of the property regardless of how it's performing right now. Even a 100% occupied property (today) will still have a higher cash flow value in the years to come provided that you find the right value-add opportunities for the property. The more you can show a higher future cash flow value, the faster you'll be able to get private investors and lenders to write checks to cover your 100% LTVs.
So, again, private investors and lenders won't lend to you based on you knowing how to pick up a phone to call them and on the sheer fact that you're flapping your lips to hit them up for money.
You have to show them that you have a solid cash flowing deal.
Here are some ground rules when you get the 2014 Motherload Resource Directory:
1) Do not call any of these people unless you have a deal. Period. Otherwise they won't talk to you. (And I don't blame them because without a deal you're wasting their time.)
2) Make sure your deal has at least an 8% CAP rate at a 100% LTV.
3) The "hotter" the area, the faster these people will write checks for your deals. They love Florida, Texas, California, Arizona, New York, and most other states. Believe it or not, they're not seeing value in areas that are still borderline "depressed" such as Memphis, Atlanta, Detroit, and Las Vegas to name a few.
The deal on the Motherload is running out. Click on the link below to check it out:
The other day I saw this picture of a mansion in a magazine that some celebrity was on the verge of purchasing and I thought to myself...
How could someone -- anyone -- go from wherever they are in life and be able to purchase a mansion like this in 12 months or less?
Of course, my initial answer is that it would be improbable for most people to pull it off simply because they don't realize or believe it's a possibility unless they win the lottery or some great uncle who is a multi-millionaire kicks the bucket and leaves their entire fortune to them including a mansion, of course.
Then there are those out there who want this level of success, believe they can attain it, and even have a viable means of grasping onto it but...they don't follow through, work hard enough, execute their plan properly, or give up at the wrong time.
But what if...?
What if -- in addition to you already knowing the bona-fide path to financial success (i.e. real estate investing as a means of passive income) -- you had a means of getting 100% of the cash you need to invest in real estate?
And no, I'm not talking about transactional "wet" funding for flipping either.
I'm talking about being able to hit up someone like a long-lost rich aunt who is willing to shell out any type of funds for you on any real estate deal ranging from $250,000 to $100,000,000 provided that you can show her that the deal will make money (vs. being a loss).
And the terms?
Don't worry. She's not going to ask for a stake in any of your deals. She won't be asking for a piece of the monthly cash flow or a percentage of the gained equity.
All she wants is to be paid back...plus interest.
And because you've shown over the years through some wavering on what you wanted to do with your life, maybe a couple of failed businesses or stupid business ideas, and perhaps thumbing your nose at some of your creditors, your aunt isn't going to charge you the lowest possible interest rate. She's going to charge you between 9% and 16% depending on the deal and how risky it is.
But...this isn't a problem. Right?
After all, she is giving you 100% of the money needed for your deal so paying a higher interest rate isn't that bad of a deal, especially since she'll be forgiving of your past credit problems that may still be reflecting on your personal credit history.
If there was such an aunt in your life who could pull off everything I mentioned above...and knowing what you know now about how powerful passive income real estate investing is in MHPs, apartment buildings, and commercial-commercial properties...how long would it take you to be able to afford that mansion I was talking about at the beginning of this email?
A year? Six months? Less?
It would take as long as it'd take you to buy up as many properties as you could to buy the mansion and where this mansion would be. Obviously a mansion in Malibu is a lot more expensive than a mansion in Tulsa of equal square footage.
The bad news...you don't have an aunt who can do all of this.
The good news...I now have lenders who can!
It seems that we have fully economically "recovered" when it comes to the confidence coming back in the real estate market because I've seen some changes so powerful in the past couple of months that didn't even exist back in 2005.
And what is that? 100% LTV financing for commercial and residential-commercial real estate.
These programs are brand new, available through only a handful of private lenders, and the benefit to them is getting a higher interest rate on a market they now believe is "secure" based on the newly found strength in our economy.
Plus, this is also based on a demonstrated current and future value of the property you are investing in which means you aren't going to be going after vacant REO apartment buildings (not that there are many left anymore anyway) that need millions in rehab.
And yes, some of them are forgiving if you've had personal credit issues. (When I say "forgiving" I mean they'll accept minor or older credit problems provided that you've shown you started fixing and rebuilding your credit. I don't mean they'll accept you with a recent bankruptcy with 10 foreclosures piled on top, all in the past 12 months. No one -- not even God Himself -- would finance you with credit that bad. If that's your story, find someone --anyone -- to "partner" in with you until you get your personal credit squared away.)
For the first time ever, I'm able to present these sources to you in my 2014 Motherload Resource Directory. I have 6 of these 100% LTV lenders. I have 1 lender who works exclusively with Florida commercial properties. I have a lender that is actively and aggressively looking to fund properties at a 100% LTV but they want to be part of your deal as an equity partner.
Plus I have several more new lenders and brokers with a wide variety of different exciting loan programs available for the first time in my 2014 Motherload Resource Directory.
If you've purchased a prior version of the directory, you'll get an "upgrade" discount. Otherwise, you'll still get a discount for my 4th of July Blow Out which is ending soon.
If you've missed any other offer I've ever done before, this isn't the offer you want to miss out on. Period.
Everybody knows that the world of real estate investing is all about other people's money (OPM). Anyone with a rich aunt or an endless supply of money can easily make money provided that they're smart enough to know the appreciation value of real estate (instead of blowing the money on dope and hookers...or some other such nonsense).
If you've been struggling with getting money for your deals and have been frustrated with the lack of resources due to the "dry spell" our economy has undergone in the past 7 to 8 years, here's your lucky break. (Finally!)
I have a short audio seminar about this phenomenal new Resource Directory athttp://www.monicamain.com/motherload_resource_directory/.
This deal ends very soon and once it's over...it's over!