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Gerri Detweiler: Getting Money For Your Business

My guest is Gerri Detweiler. She has more than twenty years of experience helping people in this confusing world of credit. She has earned a reputation in those twenty years as a reliable and independent resource on personal and small business credit. She is the Education Director for Nav, the first site to give business owners free personal and business credit scores and tools to help them build financially healthy companies. This show is one after my own heart. We are talking about the world of business credit and getting money and funding for your business.

In this show, you're going to discover what is necessary for building business credit and why should you even concern yourself with doing it. We also talked about the score which is completely different from the personal credit arena. The business credit score is something that you want to know about and a very favorite question of many people, “How can you get credit in the business credit world without a personal guarantee?” Although we're given a lot of love to business credit in this particular show, we also talked about other forms of funding. If you're in a spot where you would like to have some money for your existing business, you are in for a treat. If you're thinking, “I want to be able to start or launch a business,” then you absolutely must hear what she has to say. I'm going to give you a little bonus strategy as well. We also talk about the growing concern that is business identity theft. If that sounds intriguing, then you're going to love this show.

Dustin
Earlier on in your career, you thought you had found your dream business partner. He'd handled the sales and marketing and you do what you do best, the consulting. The business started taking off but you noticed you weren't getting paid. All of a sudden, he disappeared and you found yourself out of $40,000. Gerri, what happened? Looking back, could you have prevented that?
Gerri
Looking back, there were some definite warning signs and some things I could have done to prevent it. I had been introduced through a friend to someone who had the contacts that I needed to market this product. I did all the work to create it and it was a lot of work and it was a good product. Sales were taking off. He kept emailing me saying we've gotten these sales and these sales, but then there were always excuses about why the check wasn't coming.
It got to the point where I got pretty worried. At that point where I knew we had at least $40,000 in sales or at least $40,000 that was owed to me, he stopped responding to me altogether. I talked to an attorney. The attorney said, “We can sue and we can get a judgment, but then you have to collect the judgment and that could be difficult.” At that point, I decided to cut my losses. When I talked to other small business owners about that story, all of them have some nightmare client that paid late, didn't pay at all or tried to negotiate the amount that they were owed down to a point where the job wasn't as profitable as they thought. I am not the only person but you did ask me, “What could I have done differently?”
The first thing I would have done differently is I would have required some mechanism where the payment would be made jointly as opposed to going into his account. All the revenues went into his account, then he was required to pay me. The second thing I would have done is he had a company that had been around for over a decade. I would have checked his business credit report. Anyone can check business credit reports. If he didn't pay me, there's a good chance there were other bills that weren't getting paid. One thing that happens as entrepreneurs is we get so excited about the opportunity, but we don't always follow our gut and do the things that we need to do to make sure it's a legitimate opportunity.
Dustin
I'm with you. I've entered into many deals. As a creator, if you want to get your work out to the world. It's exciting, fun, thrilling and those are pesky details to me and I do realize there are other personality types where it's like, “No, we do those details first.” That’s 100% spot on and completely relatable. We've all had not so great encounters. They shaped us and they make us better business owners and entrepreneurs.
Gerri
The second time, it would not happen. I hope.
Dustin
You are very near and dear to my heart because earlier on in my career, I got into the business credit space putting out an info product. I'm excited about our conversation here. One of the things you had mentioned was business credit reports. It's crucial and critical for people to start there because that sets them up for the foundation of getting money for their business. Let's start there, business credit report. What do business owners need to know about a business credit report?
Gerri
First, they need to know that these things exist. I've been in credit education for several decades now and when I first started, I wrote the first mass market book that talked about FICO scores back in the day. I do workshops and say, “How many of you have checked your credit report or score?” People would give me this blank look like, “I don't know what you're talking about.” Now, we have lots and lots of places to monitor our personal credit for free. On the business credit side, the research still shows that about three out of four entrepreneurs don't know that business credit reports exist or don't know how to check them and don't understand how they work. These credit reporting agencies have been around for ages. D&B is one of the oldest credit reporting agencies in the country, that's Dun & Bradstreet. These reports are sold every single day about businesses but unlike consumer credit, there's no requirement that anyone get your permission or disclose to you as a business owner that your business credit is being used. There's truly a lack of transparency around it. That's what contributes to the fact that business owners don't know.
Dustin
In personal credit, it seems to me that it's incredibly regulated. There are disclosures and you get things in the mail. You're saying business credit reports does not operate in that same fashion.
Gerri
It’s consumer credit. We have the Fair Credit Reporting Act and that law has been updated several times since it was enacted in the 1970s. There's no federal and no state legislation.
Dustin
Why is that?
Gerri
What Congress has said in the past when it comes to business in general, they've said business owners are sophisticated. They can hire attorneys. They can hire accountants. We know that about 96% of all small businesses in America are one person. They aren't necessarily getting all those things reviewed by a professional. There are a lot of traps that business owners need to be aware of.
Dustin
When I first got started, I didn't know about business credit reports but then I went down that path of becoming an educator there. It became very obvious to me. Why should a business owner, especially as we mentioned you want to create and you want to go make sales, why should a business owner divert some attention to pursuing this and knowing about their business credit and trying to optimize it and do all that?
Gerri
I can give a number of reasons but let me give two important reasons. The first important reason is that it could significantly impact your cashflow. There are types of financing that take place every day in the business world, construction, manufacturing and retailing, where the supplier will allow the business owner to get goods or services without paying for them right away. It's usually called vendor credit, supplier credit, net 30 credit, where the payment is due in 30 days. That type of credit is often based on the relationship and the business credit of the business, less so the personal credit of the owner. You can improve your cashflow for your business by building strong business credit and having these opportunities available to you.
The second reason that's important is that business identity theft is a growing problem. I was at a conference where a business owner came up to me. She's been a self-employed freelance writer for a decade or more and she said, “My relatives started getting calls about this credit card that I had supposedly not paid and I pay my bills on time.” She dug a little further and she found out someone had opened up a business credit card in the name of her business. Because that credit card issuer doesn't report to personal credit, she didn't know. It had gone delinquent. They were getting calls and it was like her brother's ex-wife or something. That's crazy.
Business identity theft is a problem. If you look at what's going on in personal credit, in 2018, we got the rights. For the first time, a new federal law went into effect that says we can freeze our personal credit reports for free, freeze and unfreeze. Before that law went into effect, it was all based on state law and you had to be a fraud victim. Now, it’s anyone. Think about it, if more people start locking down their personal credit, what are the courts going to do? They're going to say, “Where's the opportunity?” If business owners aren't checking their business credit, which most are not doing, then they may not find out about it until accounts have gone severely delinquent and then it's very difficult to clear it up.
Dustin
I'm excited because you also created two courses with us. I want the readers to know that. One of the things that I found fascinating, you mentioned Dun & Bradstreet and giving people a DUNS number, which is one of the many numbers or things that can get identifiers for business. You had mentioned in the course that if you're going to chase those lucrative government accounts or contracts, you’ve got to have it. If you want to get a grant, in some cases you’ve got to have it. Talk to us about the importance of a good old DUNS number here.
Gerri
A DUNS number is the identifier in the Dun & Bradstreet credit system. It's equivalent to the Social Security Number for D&B. By the way, a question I always get is, “Is my EIN, Employer Identification Number the same as my Social Security number for business credit?” It's not. Each of the bureaus has their own identifier that they create. In the case of DUNS number, it has been the identifier that's required to bid on government contracts and to get a government grant. That often spills down to other contracts. Let's say you have a landscaping business, snow removal or construction or any of those businesses. I just met a business owner who buys and sells papers to the US government, millions of dollars in papers that he sells as a government contractor. You're going to have a DUNS number.
I will caution that in the future, there's going to be a new number called the SAMMI number. There's been a new contract awarded by the government for that identifying number. Right now, it's DUNS number and you also need one if you're going to start a D&B credit file or Dun & Bradstreet credit file. It's a simple step but one that if you don't know could stymie your ability to bid on a government contract. It takes about 30 days to get that number. If you see a great contract that's perfect for you, but you don't have that number, it could mean you have to wait.
Dustin
The SAMMI number, is that a Dun & Bradstreet product?
Gerri
No, it's another contractor.
Dustin
It’s interesting because they've been around forever. The other thing I found fascinating too is people that want to do business with the big boys and girls, Walmart, Target and all the big retailers. Everyone has that dream of, “I want to get my product in there.” You had mentioned they also look at that as well.
Gerri
Many of these large retailers or a large company that you want to do business with, it doesn't have to be a retailer. It could be you want to subcontract to another contractor. They will often check to make sure you have a DUNS number and check business credit to see if there are any red flags. It makes sense if you think about it. They may love your product, but they want to make sure that you have the financial capability to keep that product on the shelf if it sells or to fulfill the contract that you have been assigned. Even if you're subcontracting as a construction firm to another contractor, they want to make sure that you can pay your employees and that you can staff up to fulfill that contract in a timely manner. Business credit does happen behind the scenes in more cases than many business owners realize.
Dustin
People are excited. They had this understanding, “I need to get it.” Where can people get their business credit report? Is it free?
Gerri
It is not free. There's no legislation that requires free disclosure in any instance, not once a year, not when you're turned down for credit, etc. like there is with consumer credit. You would have to go to each bureau separately. The major three bureaus, the three most dominant bureaus are Dun & Bradstreet, Equifax and Experian, which also have consumer credit reports. They also have separate business credit or commercial credit divisions. That data is kept separate from your personal credit in completely different databases. Until lately, you'd have to go and pay typically starting at $90 or more to check it. I work at Nav and our mission is to make that information transparent. If you go to Nav.com/wealthfit, you can get your credit data from Dun & Bradstreet, Equifax and Experian for free. There is no credit card required, no hard inquiry on your credit and then you can monitor it on an ongoing basis. We think that's a great place to start.
Dustin
Thank you big time for that. I know having been in the business for a little bit, the reporting is different. It's not the same as personal credit. It's warranted for you to share with us what makes a good credit score and what are the ranges? Let's start there.
Gerri
I love that you ask the question in workshops, “What is a good business credit score?” Usually, I get answers like 720 or 680. People think in terms of the personal credit scoring ranges, but business credit has very different ranges. For the most part, with the Dun & Bradstreet PAYDEX score, which is their flagship score, but it's not their only credit score and with the Experian Intelliscore, the range is zero to 100. The best score would be 100. If you're in the 80 to 100 range, you're good to go. There are a variety of different scores with different ranges and some of them go above 1,000. One of them with Equifax goes to 585. What I tell business owners is you always have to look when you're checking your score to look at the range and see where you fall in that spectrum. At Nav, we give letter grades to try to help people understand whether they're doing okay or whether there are some things they can improve.
I was looking at some data from our team at Nav and they found that it's very common for small business owners to have no credit references or very few credit references appearing on their business credit. The heart of a business credit score is the information about how you've paid your bills in the past. They're trying to predict how you're going to pay in the future. How you've paid in the past is how they do that. Without accounts reporting to your business credit, it's very difficult for them to do that and to create a business credit score that is helpful and meaningful to other lenders or other companies that may be checking it. The number one challenge that we see with business owners is that even though they pay their bills on time and they feel like they're doing everything right, they don't have accounts that are showing up on their business credit and so it's impossible to create a business credit score.
Dustin
I want to talk about that. I want to take a little side tangent here because you are the expert. I know whenever I used to talk about business credit, people would ask me about personal credit. You've mentioned Nav.com/wealthfit to go get your business credit report. Do you have any preference for where people should get their personal credit report?
Gerri
With a Nav account, you will also see your personal credit from experience. You will see that. I also recommend that every year you take advantage of your right under federal law to go to AnnualCreditReport.com. That's a federally-mandated free credit report website and get your full report from all three bureaus to check in. The site is not pretty. People think it's a little bit scammy, but you want to make sure you’re on AnnualCreditReport.com. It's not a beautiful site because credit bureaus have other things they'd like to sell, but it's a good way to check in. I also wrote an article, 150+ Places You Can Get Your Credit Scores for Free. On a personal side, I highly recommend you monitor your personal credit with all three agencies.
The reason I say that is they don't share information with each other unless required by law. For example, a fraud alert. I had a situation a few years ago where one of my mortgage companies was reporting me late six times. It appeared on one of my credit reports. I was going to get a car loan and that's when it popped up. I got it fixed with the source but then a few years later, it popped up on one of my credit reports again. It’s the same problem. I got to fix with that one and then it popped up with another one and I got to fix with that. It's whack-a-mole of my credit. If I hadn't been checking all three, I wouldn't have known. If a lender checked a bureau with the wrong data, they would think, “She's not paying her bills on time.” It's important to make sure you're monitoring all three.
Dustin
My last one on personal credit because I definitely want to go back to business credit. When you listed the 150 places, which is an awesome resource. If you go to half, let’s say you go to 75 of those places and you pull your credit report, are you going to get dinged for that?
Gerri
When you check your own credit report through a service that provides any kind of credit monitoring, it's a soft inquiry. It does not impact your credit scores. It's perfectly fine to monitor your own personal credit. Let me add a tip here. On the business credit side, inquiries are not an issue. Even if they log the inquiry, it's not a credit score factor. Not to say go apply everywhere because they might check your personal credit and that might create inquiries, but it shouldn't be something that should stop you from checking your business credit or shopping for the best business financing.
Dustin
Getting back to business credit, does it work the same way? Is there bad data on a business credit report and do you have the same rights to write them a letter and say, “This is incorrect?”
Gerri
You have no rights. I'm going to say there's no regulation. However, to be fair, they're going to usually respond to your disputes in a fairly timely manner, but they don't have to do it in 30 days like they do with consumer credit. It can be a little bit cumbersome, to be honest. One of the credit bureaus, for example, requires you to purchase a full report and then write on it and send it in to dispute it. It's not as smooth as it is with consumer credit in most cases, not in all cases.
What I would say there is, first of all, mistakes happen. There was a Wall Street Journal report that found a higher error or inaccuracy rate with business credit than with personal credit. My personal pet theory about that, one of the reasons, there are many inaccuracies. First of all, the reporting isn't consistent on the side of the companies that report to these credit bureaus. The main reason there are a lot of mistakes is because business owners aren't checking. If you aren't checking, you are the only one who can look at that report and say, “It's correct or I forgot about that.” Whatever it may be, you are the ultimate check on whether your personal or business credit is correct so you need to check.
Dustin
You were in the studio recording the courses and I found this fascinating. You had mentioned there is even a new score that these bureaus are calculating based on the business’s social media. Can you share a little bit about that?
Gerri
Experian announced that they had created a new social media score for small businesses. They can tap into the social media accounts of small businesses. This is not on the consumer side so don't worry, your Facebook friends are not going to kill your credit score but on the business side. They don't specify which social media sites are they talking about, but they can tap into that data to create a risk score out of that data. If the Facebook following of your business is leaving you lots of nasty comments and you're not responding, I suppose that could be an issue.
To be fair, a lot of what they're doing in this arena is because they're trying to bring in more customers because the small business market is hard to target. You own a consulting firm. I own a coffee shop. We're both small business owners, but we're very different and we feel very different. We don't even hang out necessarily in the same places because we have different kinds of businesses. Lenders are trying to say, “How do we target these small businesses? How do we find them and how do we extend them more credit? These are ways that they're looking at to see if that will be effective for them.
Dustin
I want to get people excited. We've been talking about reports, which some people will say this isn't the most attractive topic. I know something that will get them excited and then we will talk about tactical steps on how to improve our profile. I'd like to talk a little bit about once you have a score in place and you've optimized things, you now go out and apply for business credit cards or lines of credit. What is the realm of possibility in terms of the amount of money or funding people can get when they've cracked the code? They figured this game out. They've optimized things. They're checking their report. Can you share some stories or some possibilities of what business owners are tapping into?
Gerri
I will give you an example of Nav cofounder, Levi King. He started his first business of five businesses. It was a sign manufacturing firm in Idaho. He started in his twenties. He was raised on a farm where debt is bad. You don't use credit and you had no credit history whatsoever. He would struggle. He'd get a job to install a sign. You'd have to buy the steel, the plastic, the cement and hire the labor, pay the overhead and then get paid later by his client. One of his suppliers said to him, “Why don't you fill out a credit application?” He said, “What do you mean?” He said, “We can let you pay in 30 days with credit approval.” It took a little while because he didn't have any credit to initially get approved, but once he did he said, “That alone made a huge difference in the cashflow for his business.” He went on to get a secured credit card with $500 deposit and $500 credit line. By the time he was 30, he had over $150,000 in credit lines available to him to help cashflow his business. That's ultimately the goal for the small business owner is to have options.
Dustin
I hope people get the message loud and clear. It's easy and exciting to get in and do the sales. It's that old adage, “When's the best time to plant a tree?” You ought to be doing this right at the start and doing this because something's going to happen in business. If you are in this for the long haul, you’ve got to be building in. If you don't take action to do it, you missed out when you need it the most.
Gerri
Look at what happened with the government shutdown. I was in an Uber with a very bright woman. We got into a conversation and she said she and her husband owned a construction firm that did a lot of government contracting. It’s very successful. We're talking millions of dollars in revenues. The government shutdown, because their bills weren't getting paid, literally had her driving an Uber until she could get back on her feet. If she had the credit in place to weather that storm, she would have been in a much better position. Think about it in two ways. One is you could run into a crisis. No one wants to but it happens. It could be something as simple as they dig up the street in front of your store location and no one's going to come in because they think it's closed for business.
It could be any other kind of crisis: someone gets ill, a key employee, a supplier goes out of business or whatever it may be. The other and this is the fun one, is the opportunity that comes along. You get the opportunity for this big job, but you need to staff up, you need to buy more supplies or you need to get insurance. I talked to another small business owner who needed to get some expensive liability insurance in order to fulfill a big government contract. She has a janitorial service. You don't realize until you're in the situation, all the different things that can happen that require additional capital. I agree with you, Dustin, completely that you want to do this early before you need it.
Dustin
I'm so fortunate when I got started as a young guy in my twenties, I was able to get $93,000 in business credit. I invested a lot of that in my own education and because of that, I sit here now. I went to seminars, I went to conferences, opportunities that you talk about and crisis like sometimes I didn't have such a great cashflow month and I was able to weather the storm. I’m obviously a big believer. Once we understand the opportunity and we know where to go and get the scores. How does one go about building that score and making us or our businesses look attractive to lenders?
Gerri
The most important thing is to have accounts that report that you pay on time on your business credit. It's easier said than done because in consumer credit you go to get an auto loan or a credit card or student loan, it's going to show up on all three of your consumer credit report. That does not happen with business credit. There are some who report to one. There are some who report to all three. There are some who don't report to any. You have to be proactive about doing business with companies that report and that's one of the things we talked about in the courses. How to identify and how to start building credit with these companies that report.
You also touched on something else about your own personal experience that I want to make sure we highlight. That is when you got business credit accounts, I would suspect, and you can tell me if I'm right or wrong, that most of those didn't show up on your personal credits. You were separating your business and personal credit. If you had a month where you needed to tap out that credit card, you didn't bring your personal credit scores down. That's a very common scenario. The Federal Reserves says about half of the small business owners use personal credit cards in their business. If you get high balances on those credit cards, it brings down your personal credit scores and then it's more difficult to get other financing and you're caught in this vicious circle.
Dustin
I remember when I was young, I'm like, “Nothing's happening. I wasn't buying a house and I had a car.” I can tell you being in certain situations where you want that credit score, when a life event happens, you're running your business off your personal credit cards, your score is horrible but you’ve got to get that house like it's the time or that car or whatever else. You're going to be glad that you're on business credit cards or lines of credit there that aren't affecting your personal credit. I want to ask this question. I'm sure it's your favorite and one you get a lot. Everyone wants to know, it's the million dollar question. Is it possible to go and get cash lines of credit where I can use them anywhere in the world, not at a particular store? Is it possible to go and get these without a personal guarantee?
Gerri
It is possible to get credit lines without a personal guarantee, but it's not something that typically happens at the beginning. When you're building your business, especially when your business is young and you don't have strong business credit and you don't have sufficient revenues, lenders are going to want to see you have some skin in the game. They're going to want a personal guarantee. A personal guarantee isn't always bad. As long as you pay on time, it doesn't affect you. A personal guarantee doesn't necessarily mean that it reports to your personal credit. In fact, in many cases, it does not. I think that's the most common question I get and one of the reasons I think I get that question is there backing into it because they're saying, “I don't have great personal credit. I still want to build business credit. How can I get started?” The good news is you can. There are suppliers and vendors who don't check your personal credit score and who will extend business credit terms. You will start small but you will build it up over time and you can build business credit. Having said that, I'm a huge proponent of making sure that working on your business and personal credit at the same time, you need both. They both go hand in hand and the stronger the two are, the better off you are.
Dustin
Unless you think there's more to add here, I want to talk about some other forms of finance. We've been hot on the business credit topic. Should we go there or is there anything else that you think is important for small business owners to understand business credit?
Gerri
The only other thing I will touch on, this was a question you raised about the possibilities and that is there is a FICO score specifically for small business. It can take into account the owner's personal credit as well as the business credit of the business and it can even bring in financial data for the lender who wants to add that into the score. With this score, it is used as a pre-screen, which means it's the first step in getting one of the most popular SBA-guaranteed loans out there, the 7(a) loan. If you are going to go for the SBA loan in the 7(a) program, this score will be pulled immediately. It is possible to get a passing score with stellar personal credit and no business credit, but it's a lot easier if you have both. That's another possibility. These SBA loans have great terms, low-interest rates and great repayment terms. They're very popular with entrepreneurs, but your credit will be a factor in getting approved.
Dustin
If people are interested in business credit but they don't want to stop there and they want to look at other forms of lending. That's what you educated us about in the other course, that there is this whole other world of funding out there for small business. Can you get a little bit into what are the different channels or arms of funding available?
Gerri
I love to talk about financing because many small business owners think a business loan means your bank. There are many other options out there. There are about 6,500 different lending and finance sources targeting small business and so they range. I will give you a fun example. Kiva.org is a philanthropic organization. They make 0% small-dollar loans to entrepreneurs. Your first long might be $5,000 or $10,000. For some businesses that get them started, that gets them their first product prototype or it gets them into the market. What they do is it's a hybrid of crowdfunding and microloans, which are two types of funding that we talked about in the financing course. With crowdfunding, you get a few backers who back you for $25 to start it, friends, family and people you know. They open it up to the platform and the platform will fund the loan for that small business. You do pay it back but you don't pay any interest or any fee.
I like bringing that example to light because a few years ago, things like that didn't even exist. Most banks don't want to make smaller dollar loans. It's too expensive for them. The average underwriting costs for a bank is about $6,000. We see banks that will say, “$500,000 loan is too small. We're not interested. We want to make the $1.5 million loan.” Not all are like that, but you have to look broader. If you're having trouble getting bank financing, which is what we call top tier financing in the course, then you have to look broader and look at these other options. Online lenders, crowdfunding might be an option, microloans. There are microloans almost certainly in every state in the US. Many communities have microloan programs, as well as looking at things like your business credit card.
A lot of business owners think of a credit card as a way to pay something. They'd been paid for something. They've been maybe conditioned to think credit card debt is bad, but the average business credit card rate is about 18%. When you compare that to some of the other types of fast financing out there, that's pretty good. It might make sense or you might use your business credit card to get a 0% balance transfer for eighteen months. Deposit those funds into your bank account and use that wisely to do whatever you need to do in your business and pay for it out of cashflow. There are a lot of different opportunities out there.
Dustin
I wanted to get your take on big banks versus small banks or credit union. It seems like people walk into a big bank and they're immediately told no. We hear these stories and the media even plays it up. Is there a safer harbor at a credit union and what do we need to know about if we're going to go there?
Gerri
The biggest thing you need to understand about going to a bank credit union or small bank or other traditional lender is that they probably have certain types of businesses that they tend to offer financing to. If they aren't going to offer financing to you, it may not be because of your business or your qualifications. That may be they don't lend into that particular industry. You have to find one that's a fit for you. Having said that, they almost always check personal credit. We have great Federal Reserve data on this that came out and showed that business owners with strong personal credit and strong credit scores were much more likely to get funded through a traditional financial institution. Those with weaker credit had a very difficult time. That research also showed that the satisfaction rate tends to be higher with small banks, but it can be harder to get funding from small banks simply because their focus may be more limited. They have to go through a very detailed review process.
If you're going for that type of funding, I would suggest number one, you have good personal credit scores. Number two, your business has been in business for two years or more. It's not to say they never fund startups, but it's unusual. I would also say you need significant revenues that are demonstrated through a business bank account. At least probably six figures in annual revenues that you can demonstrate for the past year. They're going to ask for a lot of paperwork. It's going to take a lot of time and while you're doing that, look at what other options are out there just in case that doesn't come through because it can sometimes take 30 days to get a decision. If you do, it will be the best money that you get.
Dustin
Credit partners can sometimes be a controversial topic depending on how they're used. What's your take on credit partners? What's your stance on that?
Gerri
Do you mean someone with good credit?
Dustin
Maybe I have bad credit and it's like, “I can't do what Gerri's telling me. It's going to take two years to get my credit score up. What if I find somebody with good credit? I could partner with them and bring them to the business.” What's your take?
Gerri
It's not always as easy as it seems. I have to give that caveat. In fact, I was at a workshop where a panel of bankers was asked this very same question by someone in the audience. He said, “I have a business partner who doesn't have great credit, what do I do?” First of all, never try to hide a business partner. Do not try to leave them off the application because that data is probably somewhere in the business credit report. This happened to Levi, our cofounder at Nav, where he filled out an application and something showed up on the business credit and the bank thought he was trying to hide a business partner. It was his brother-in-law and he wasn't a partner in the business, but he was showing up at the business credit report. They do not like you to do that. What all of these bankers said on this panel is, “We're going to look at both and we want a good reason and explanation. If you have someone with low credit scores which is also trying to get a loan.”
I will go back to the fact that if you don't have great credit, start working on it now. Build business credit, which you can do even with less imperfect personal credit so that as time goes on, you are going to see your credit score hopefully improves and you're going to be in a better position. The one thing that many business owners don't know about personal credit is most personal credit scores emphasize the information in the last 24 months. If it's still on your credit report but it's older, it has much less impact provided you're paying bills on time now and you have good data are going forward. It's not credit purgatory for seven years if you have bad credit. You can do things right now to start getting on a better path.
Dustin
You mentioned other forms of funding and one of those being crowdfunding. I was very lucky to hear the story of a Cowboy Cricket Cookies. What's your thought around crowdfunding? It’s new and I feel like it's not as regulated yet. That stuff is coming to pass. What’s your stance on crowdfunding? What do you like about it and what do you think business owners should consider? Then will you tell us the story of why we should eat crickets?
Gerri
Cowboy Cricket is a small business started by a young couple. I was fortunate enough to award them an award at the SCORE Awards Gala. SCORE is a nonprofit mentor organization that's available to any small business owner around the country and provides free mentoring to small business owners. She got the idea that she wanted to farm crickets. Her husband thought she was nuts, but they ended up doing so and they're growing rapidly. They now have over seven farmers raising crickets for their snacks and their flower, which they then create it with the Chocolate Chirp Cookies. They didn't start with crowdfunding, but when they decided to introduce new flavors of the Cowboy Cricket snacks, they did a crowdfunding campaign and I backed that campaign. I’ve got to try all the new flavors.
This is a great way to do two things. One is to raise money for your business and two is to test your marketing and your products with your audience. I have spoken to business owners who say, “I crowdfund, not for the money but because I want to test my marketing.” Having said that, businesses that are the most successful with crowdfunding put together a good marketing campaign and many of them have a list to market to you already. In my book, Finance Your Own Business, I talked about an entrepreneur who does custom Ducati engine modifications or something like that. I don't know what I'm talking about, but I know it’s Ducati and I know it was custom modifications. He had an email list. He went to a crowdfunding campaign and said, “Here's what I want to do.” He sent it out to his email list. His customers are like, “Yes, I want that.” They funded his campaign right away and he sold the campaign out very quickly.
If you have some list that you can market to, that's going to help you with crowdfunding. There are four types of crowdfunding, but the main two I want to emphasize, one is a reward. That's like your Kickstarter where they offered the new flavors of the crickets to the people who backed the campaign. That's a reward, you give a product or some reward. The second one that is newer that you mentioned and I think you were alluding to with the regulation is the equity crowdfunding. That's where it's easier to find investors in your business. You're not paying them back. They become shareholders in your business, investors in your business and that's regulated by the Securities and Exchange Commission through these new crowdfunding platforms. They're called equity crowdfunding. There are all kinds of new opportunities to find money for your business. It does take some work. You have to have a good campaign, good lists, but it can be a very cost-effective source of capital for your business.
Dustin
Shark Tank and Dragon's Den and all these shows that are out there. We see these entrepreneurs competing for this Angel money and VC money. In your experience in all of the years you've been in the finance arena and working with small business owners, what is the likelihood of someone to go and get financing or funding that route?
Gerri
The data show that fewer than 3% of businesses are going to successfully get Angel funding or venture capital. It is not a major source of funding for most small businesses. Those who are successful probably have a track record with the executives. They've started to run businesses before. They've been executives. They've launched other products successfully. If you're starting out brand new, a brand new concept, you're better off looking at other types of funding.
Dustin
I want to take our interview in a different direction here. You've been a prolific writer having appeared in Yahoo, MSN Money, ABC, CBS, NBC News, Forbes, The Today Show and many others. You've also authored or co-authored five different books. What are the secrets of being so prolific?
Gerri
Deadline, that's my secret. I wrote my first book, The Ultimate Credit Handbook, back when there were no books about consumer credit. That was the book where I first talked about FICO scores. I wrote that on my own. I was so naive. I loved a book called The Joy Luck Club by Amy Tan. I saw her and thank her agent in the acknowledgments. I wrote to her agent and sent a book proposal. I went to the library and got a book on how to write book proposals. They got back to me right away and said, “We were looking for a book like this.” That's how I got my first book contract. All my subsequent books, I've written with a co-author and my latest book was written with Garrett Sutton, who is an attorney and Rich Dad Advisor. He's written lots of books and I find that I work best when I have someone holding my feet to the fire. That's how I operate. If left to my own devices, I will fiddle and fiddle.
Dustin
There’s nothing like a deadline. Where do you think this comes from? Is this your upbringing? Your mom and dad, were they writers?
Gerri
No, not at all. My dad's a school teacher. My mom was a nurse. I don't know how I honestly fell into it but I do. It was interesting, I’ve lived in Japan for a year as a high school exchange student. I was going through a box of things my parents sent me when they were cleaning out their house. There was an article that I submitted to the English language Japanese newspaper at the time and the article was published. That was my first published piece. I got this idea in my head that I wanted to write, but I didn't study it in college, I studied business.
Dustin
Not only are you prolific in writing, but you've also been interviewed over 3,000 times in financial topics affecting consumers. I got to imagine being interviewed 3,000 times has generated a ton of press. How does one get to be interviewed that many times? I'm thinking, as a small business owner and entrepreneur, I would like to get interviewed.
Gerri
First of all, I think every business owner should work on their communication skills. When I was in college, I was so terrified of public speaking that I went to one of my professors in tears because I had to give a public presentation in a group. It wasn't even a solo presentation. I was terrified. I got thrown into it through work. One thing that helped me a lot was Toastmasters. I was a member of Toastmasters for a number of years and I highly recommend it. Anyone can join. It's a great organization that helps you overcome your fear of public speaking in a very safe environment. It's not expensive either. I was trained well by someone who knew what they were doing and I tried to be a good student and I tried to listen and follow along what they were saying. The great thing was now when I started, if you wanted to have that platform, you'd have to pitch a news outlet and you have to get on the news. You don't have to do that now. You can start it with your social media platform and you can have an audience that way. Get out there and talk to people and that you're going to gain the experience and over time if you're open and willing to learn, you will get better.
Dustin
What are you most excited about these days? What are you working on?
Gerri
I love what I'm doing because I get to talk to small business owners around the country. I get to work with both small business advisors and entrepreneurs. I can't think of anything more fun, more satisfying and more exciting. I’m super excited about my new WealthFit courses. I can't wait to see the response to those and I want them to be helpful. What makes me happy at the end of the day is if I've helped someone. I hope that those courses are helpful to help those entrepreneurs succeed. The more small business owners we can help, that's great for everyone.
Dustin
Gerri, I want to thank you big time for being on the show. Thank you for flying all this way to record the courses. I encourage you to go check out the courses on WealthFit.com. If people want to keep tabs with what you're up to these days, maybe check out a couple of articles, check out Nav, where's the best place for someone to go?
Gerri
I'd encourage you to sign up for a free Nav account at Nav.com/wealthfit. That's truly free and it won't affect your credit scores. Once you're on the Nav site, you're going to see me in many capacities, whether it's articles or educational materials. I'm also on social media somewhat. I get better on that, but I do try and I'm always happy to connect with small businesses.
Dustin
Gerri, thank you big time. I appreciate what you're doing in the world and keep getting after it.
Gerri
You too, Dustin. Thank you so much.

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