So now what happens is, instead of you chasing money, it turns. Money starts chasing you.
About This Episode
Stephen Wible has a background in real estate sales, house flipping, and property management. Today he's the Director of Business Development at Credit Suite, where he advises business owners how to build and use business credit. This episode will teach you how to start to build business credit so that you can protect your personal credit while investing in building your business.
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JON: Hello and welcome to Shop Talk: The Real Estate Show. I'm Jon Forisha, and joining me on this episode is Stephen Wible. Stephen has a background in real estate sales, house flipping and property management. Today he's the director of business development at Credit Suite where he advises business owners on how to build and use business credit. All right, Steve. Well, thank you for joining me.
STEVE: Oh, my pleasure. It's great to be here.
JON: So let's just start with how did you get into real estate?
STEVE: Oh, that's a great question. I actually came out of the manufacturing role. Jon, I grew up in the printing industry back in the old days before we had all this digital printing. Uh, my father had a printing company in his basement and I eventually worked from anyhow, so I learned the printing industry. His father was in it and he was great at it and my dad got mad at me one day and I, and vice versa. And I quit. Now, when you only have worked for your father, I was 18. Uh, you don't know where to go. Who's going to hire you, you're certainly not going to get a good reference when you quit. So I joined them. I joined the Marine Corps because they didn't want a reference. Anyhow, I did my time there, got back out, then asked for my job back. I was told no because he'd already hired somebody. That's, that's my father's integrity coming through. He hired somebody to replace me. So I said, let me borrow a suit and your car. Let's see if I can sell. So long story short, uh, I ended up more than doubling the business. I ended up leaving and starting my own company, built that up with a partner and sold that company, uh, got a noncompete and then I had to decide what I wanted to do with the age ripe old age of 27. And I'm in my 50s now. So my brother happened to own a couple of investment properties in Camden, New Jersey, and he said, Hey, you might want to look at this. So we looked at it and we agree that was a good idea to go ahead and move forward with that. And we bought our first property. Actually we bought 35 properties, one shot, first deal. Now we had to figure out where to get the money. So, uh, long story short, we ended up selling 18 of those properties, which covered the cost of the entire 35 and then we just took off from there. What we realized pretty early on was that we needed to get our license. Yeah. One of us needed to get our license. So my brother got his real estate license, uh, and we use that. We leveraged his license to get more deals to get commissions back. You know, the story. Uh, and at one point I was walking out of a $300,000 home and this was back in the, in the late 90s. So nice home. And I realized I couldn't buy it. I'm, well, I'm halfway down their sidewalk and I went, Hey knucklehead, if you'd had your license? They would've listed with you. And that's a $9,000 commission, right? 18 if I double ended. Yeah. So I immediately went to school. I immediately went to school, got my license. Uh, and my friend, our first year, we sold over 115 properties, as a team. My brother and I, we were consistently top five in the state of New Jersey for RE/MAX. And then I moved to Florida. The crash happened, moved to Florida. That's how I ended up in real estate. It was kind of an accident. And then getting my license was an accident and so on and so on.
JON: It's funny to me how many people have an answer similar to that where it's just like, Oh, I just kind of happened into it. You know, it's a thing I decided to try out and then it went, well. So how did you, you and your brother went from no properties to 35. How did you do that? How'd you get 35 properties?
STEVE: This is going to blow some people's minds. We were looking in the newspaper and if for those of you who don't know what a newspaper is, it used to come to your house. It was printed on a piece of paper. Uh, anyhow, we were looking in the wanted ads and you know, homes for sale and we're looking and we see somebody selling three properties for, I believe it was 90,000 back then, they were row homes. Yeah. Uh, so we reached out, called to set an appointment, went to look at the properties, kinda liked what we saw and said, I flat out asked them, do you have any more? And they said, well, yes. And my friend, we have 35 or it might've been 36. Uh, went and looked at all of them. Some were bought up, some were rented, you know, it was, it was a hodgepodge. And I said, all right, well you want 30,000 each, would you take 11,500? And they said, we'll get back to you in the next day. They said, yeah, we'll take it. Wow. Like, great. Here's $1,000. Now I gotta go find $350,000. Um, and I closed it. And ironically, those gentlemen, because we performed, gave us an opportunity to buy a $4 million apartment complex from them five years later that we flipped or financed for five and a half million. Because we performed on the first deal. So that's how we ended up, kind of ended up with our first set of properties. And then once we learned, and if you've ever rehabbed row homes in one area, you get a real, a real feel for the cost of rehab a property, cause they're almost all identical. Right? So it almost became simple math. I'd walk in the house, I knew it was going to cost me 28,000, $900 to rehab it just based on what I saw and it just became really, really easy.
JON: Wow. So what is the secret to home flipping?
STEVE: Well then it was one, know your math. Yeah. And two, and I'm going to tell you, somebody told me this a long time ago, you don't make your money when you buy or when you sell properties, you make it when you buy them. That was the secret. So, what the danger was, anybody who survived '08 and lived through the '03, '04, '05, '06 madness was people were buying properties. Yeah. Like it got that. They were like, well doesn't matter what I pay, it's going to be worth more. Anyway. So I began losing more and more deals cause I was trying to stick to my guns. No, I know what it's worth. Retail, I know it's going to be to rehab it. And then I even fell into that one. The market crashed. I had 35 properties under construction. Now I'm in the suburbs though and there are a hundred plus thousand dollar homes or more cost, hopefully retail 250 and next thing you know they're all worth 50 so it's, yeah, it's bad. I guess I'm the only one that happened to, I'm sure nobody else went through that just me. But it was a great lesson because I immediately thought back to what that gentleman had told me, you'll make your money when you buy it. Yeah. Makes sense. So I made the mistake of losing sight of that. Just buying just to buy, right. Greed is really what that is. So I would never do that again. Never, never, never.
JON: What do you think of all these HGTV shows where, you know, their whole thing is home flipping.
STEVE: I can tell you for a fact that I know somebody very, very close to me that was on one of those, uh, and it's completely... Ah, I can't say it. It's, it's not factual. Let me put it that way. I mean, literally it's staged. So fix it. Or was it, uh, listed, flip, sell it or list, I don't know.
JON: Whatever. Some combination of those words.
STEVE: Yeah, yeah, yeah. I had, I had a family member that was on one of those and the house was already pre-bought. It was done. Decision was made and then they went through the whole act of looking at properties. They already own the house. Yeah. So I, I don't, I don't watch any of those shows. I used to, I used to work on reality shows and I mean they're all, I have to tell you, if you don't mind, I know it's a short podcast, but I have to give you a little bit of an anecdote. I, when I was selling homes, I met a woman and I recognized her immediately back in the day that, you know, the very first reality show was The Survivor. Yeah. Right. So I met and I was, my wife and I were huge fans. So I met her and I saw her house and I realized who she was and I kind of naturally had to talk to her. And then she told me that all of the competitions were staged and I lost complete faith in everything. At that point, I'd never watch the show again. Now she said they ran real competitions, but then the winner would be the winner and then they would restage it. So there was drama involved and I went, all right, I'm done, I'm finished. So reality shows, I'm like, once I found out reality shows weren't reality shows, I was like, all right, bring back prices. Right.
JON: But they're so cheap, you know, easy to do.
STEVE: Right. So anyway, sorry about that.
JON: That's okay. So you also manage a lot of properties.
STEVE: I did. I had a property management company, um, and I had construction. I had, you know, obviously the real estate agent business. I had the flipping business, I had the wholesale business. Um, I've done it all at one point I sold the management company just cause it just made sense for me not to manage all these properties. It was just taking up too much time. Honestly. I was tired of the phone calls about my smoke detector at two o'clock in the morning. Um, so if anything, any of you who are real estate agents out there, if you want to get into the property management business, by all means because there is money in it. But God bless you. I never wanted micromanagement. Yeah, it really is because you have to deal with complaints and you have to deal with them in a professional manner, in a caring manner. And sometimes you really just want to scream. Yeah. So it takes a certain type of person. I'm a type A, I am not a good manager when it comes to that. My brother is awesome at it. He's more of a huggy type person. So he was great. My dad was good with that so I was a nightmare. I was like, I, you know, listen, it's beeping cause you need batteries. Go to the store and buy batteries and put it in. So anyway, but it was a very profitable business. Very profitable.
JON: And today you do a lot of speaking about building business credit.
STEVE: Yes. That's a great segue because I had built business credit for all of my businesses. And let me explain what business credit is because people get very confused about what it is. They think business credit lines are just going to get a line of credit for their business. It's not what it is. If you were in the manufacturing world, you would understand that entire world operates on business. Credit. Business credit is credit that other companies or lenders will give to your business that's not tied to you personally. So in the manufacturing world and the printing world, I had to buy paper on credit. I had to buy ink on credit because I was in turn manufacturing something and giving it to let's say Blue Cross Blue Shield on credit and they had to pay me in 30, 60, 90 days. So that whole world operates that way and almost all manufacturing does. The problem is that this isn't taught anywhere. So you get people who go into business like real estate agents and yes, you truly are in business for yourself. You're not an employee. Uh, you can utilize that same philosophy for your business and why, why real estate agents don't is beyond me. For example, whenever I talk to them, and I talk to real estate agents all the time, my brothers still one and so is my sister. I mean, we're still all agents. Hey, that car you're driving. Did you buy that? Well, yes I did. Why? Why didn't you buy it in the company name? Why did you sign for that? Personally, you realize that because you're in this business, you understand the utilization. It directly affects your credit score. The number of inquiries, how much debt you have, your debt to income ratio. So why not put what you can on the business. Gas cards, Visa, MasterCards marketing money, buying computers, driving your car to think of all the things that we spend as real estate agents, right? Yeah. Why would you want to use any of your own personal credit to pay any of that? Even if you're somebody who likes to pay it off every month, which I get. Then when it comes time for tax time, now you've got to go dig in through, figure out what was a business expense, what wasn't. Well, if it's all on the business, it's easy, right? You just take all those statements and you just hand them to your accountant. I'd have my taxes filed within 30 minutes.
JON: Very easy too. What about something like your car? I mean you're using it for your business, but it's also what if that's your main personal mode of travel?
STEVE: Absolutely. I understand that. So what I would do, and here's how it works from an accounting point of view. And I certainly, I'm not an accountant, I'm not a tax attorney, so bear with me, but I would still buy the business name, particularly if more than 50% of the miles are being done for business. And if you're a real estate agent, I guarantee you that's the case. So I would buy it in the business name, I would have the business sign for it. So it's not on me personally. And then as an employee of my business, I would get charged a 1099 for the miles that I drove it. Right? So if you're one of those people that just keeps track of all your miles and whatnot, um, but to me the better move would be have that for the business. Buy a beater car that you have for you personally that you may never drive. But that's what I would do. I would have two separate cars, like in my family and my household. We have two cars. So my car was in the business, my wife's car was in personal and we drove that for personal, right. So the entire car could be written off cause it was all for business. All the gas that went into with the insurance that went to it. And if you really think about it, one of the biggest issues that real estate agents run into, especially once you are beginning to become successful because you're reinvesting is at the end of the year, you get that 1099, you have a heart attack. Yeah. Right now it's panic. It felt good getting that money and now you're like, Oh my goodness. And by the way, guilty, I've been there, I had it, a payment arrangement with the IRS because it just, it happens. Um, so if you plan in advance, it makes sure your business expenses are, all of your business expenses are tied to your business. You're doing a couple of things. You're keeping your personal credit high. Uh, so if you do end up with that big IRS bill, maybe go get a personal line of credit to pay it. I hate to see you do that. But also, uh, it's really easy to manage, uh, your expected looking for your expenses. I knew my entire car payment was on my business. I knew all those gas cards that I had, the gas cards I had are all against the business when I bought my new computers, any of the marketing I did, it just made it easy. But more importantly, I'm going to tell you, if you protect your personal credit, opportunities come up and I'm going to tell you I feel bad for real estate agents because how many times as an agent have you been showing a house to somebody? I thought yourself, man, I should buy this. What a great deal. Right? But you can't because maybe your, your credit score is not cause you're, you know, for, for any number of reasons why had this happened to me. I had a $300,000 apartment building. I had 20 minutes to make a decision on what my credit score was so high. I remember attacking it that I was able to make that decision by that property and flip it for 1.2 million.
STEVE: I mean, it took me a year to do it between, you know, buying it, cleaning it out, repairing it. But that's really the reason that you want to protect your personal critics. When those opportunities come up, don't call your best client, do it yourself. Put that and put that money in your pocket or better yet, go into partners with your best client who understands rehabbing or any other opportunities that come up. And that's really the whole point of this. Any business owners using their personal credit to run their business is just setting themselves up to never be able to grow. That's the reality of it.
JON: So how does somebody start building up business credit?
STEVE: That's a great question. First thing we're going to talk about is credibility. And what I mean by credibility is there, in today's day and age, 50% of of credit applications are fraudulent. 50% wow. Mind blowing, right? So the banks had to come up with a way and lenders and creditors had to come away to sift through those fraudulent applications without using man hours. You can imagine the man hours and Bob that they had to look at every single application so that they set up artificial intelligence and Jon, it's happened to you. I'm sure if you ever apply for a credit card online, yeah, of course you get an instant answer. You know, nobody actually looked at that application, right? Right. Artificial intelligence made a decision based on certain points, factors. In business credit, the same thing happens, but they're looking for things that we can control and that banks are not going to share this information with you because then you could be a fraudulent application. Then I want you to know, one of the things that we're going to look for is your email, and I see this all the time and by the way, guilty. Stephensellshomes@gmail.com. Pretty good email, right? Not bad. Wrong. Automatic denial. Automatic denial because that's a free email. A legitimate business owner wouldn't use a free mail email. They would use something like this firstname.lastname@example.org. Hmm. Because then you own the domain, you got it. So, because artificial intelligence is checking that it's looking up your website, it's going to see your website in a flash. It's looking for your phone number. Almost every real estate agent I know gives out their business phone number is their cell phone. Yeah, right. Well that's an automatic denial. Here's why. Back in my day, and I think you're younger than me, probably a lot younger to me, I used to pick up the phone and pick and dial 411 and ask for Joe's pizza at Tom's garage, whatever you were looking for, and had that directory assistance that would help you. Unfortunately that still exists today. That's still around today. And it's the very first thing artificial intelligence checks to see if you're listed. If you're not a legitimate business, denied or they're looking for fraud. So they're not saying that you're not lendable, they're just trying to eliminate these applications. Right. So the problem is you can't list a cell phone and you have to use a virtual phone number or a real phone on your desk, a virtual phone number. I know everybody out there is thinking, Oh great, I have a Google number, right? Because I have one too. My friend, my real estate signs still have my Google number on them. The problem is Google owns that number. You don't, you're not paying for it. It's free. They can pull it from you. It's not listable. Hmm. But if you go to somebody like RingCentral or freedom fois or grasshopper where you actually have to pay $29 a month or whatever the number is forward your cell phone, that's a legitimate business number. And that can be listed with a national 411 database. So there's another example that's just too, and I bet you 90% of your listeners failed already. Yeah. That's no reflection on your listeners. That's 30% of business owners in general. Well, and I think it goes against how most business owners, especially real estate agents, how they're thinking of how they want to appear to their clients.
JON: They want to be approachable. They want to be, you know, I'm not some stuffy salesman. I look at me, I've got my cell phone listed right here. You can catch me day or night. So, what you're saying, I mean it may go against how they're viewing it for their clients, but I think that's also what you're saying is that business credit, you need to look at it differently, right?
STEVE: Well, and here's the thing. Look, we're not saying don't give out your cell phone. We're saying when you fill out a credit application, cell phone goes under cell phone. Business number is a real legitimate business number. Sure. Right? So I may give you my, Stephensellshomes@Gmail.com Because that's the one I check the most. But if I was putting in a credit application, if a building's three days, right? And these are just two of 125 points, the lenders look for two. We can go into, when we talk about landlords, one of the favorite addresses landlords will use is a PO box because they want to hide who they are, where they live. Makes sense. Unfortunately, that's an automatic denial. And if you look at it this way, a little bit of an anecdote again, uh, I want to borrow 10,000 from you, Jon, and you gave me a credit application and I put down, uh, I have a email@example.com is my email. My phone number is a throwaway cell phone and my address is a PO box. How comfortable are you going to be giving me 10 grand?
JON: Yeah. It seems like you don't exist.
STEVE: Yeah. You'd be like, ah, this guy's going to be gone in five minutes if he gets the money. Right. So what would you feel better if it was a legitimate business phone number? I was listed with the, now you could dial 411, you've got a legitimate email address. And my address is a, let's say a virtual office or a real commercial building, or even my home. At least you could find me. Yeah, right. Well, unfortunately they are the only three things that a business owner could put it on. An application that will pass a commercial building that's yours not, and all of a sudden the basement of your real estate office, uh, a, a virtual office or your home address and your home address is fine. It's like getting a C in English. You'll still pass even if everything else from there fails. So these are some things and of course we teach all this at our website. Can I mention our website?
STEVE: All right. If you go to creditsuite.com on the front page just to update, we can give you a business credit building guide. These are just three little things that we talk about. If this was a video I would share with you my fundability factors, and it's a huge wheel and it's just all these different beta bullet points, a data point, excuse me, that they're looking for, and it gets complicated. But ironically, once you're set up credibly or your fundability factor set up, then it becomes easy. Now you start to get credit with places like Office Depot, Home Depot, if you're an investor, lows, you're getting gas cards, you're getting vehicle finance, you're getting a Visa, MasterCard, you're getting the type of things you can use for your business that's not tied to you personally. And I'll tell you this is a complete game changer for real estate agents. A complete game changer. I mean all their expenses are, and there are a lot of them. Don't let people kid you. If you're just starting in the business, it's not free to do real estate. It costs money. It's a business and you have to look at it like it's a business. You're going to spend money on marketing, you're going to spend money on your cell phone, which by the way should not be in your name, should be in your business name, right? Sprint gives business credit. They will give you phones, iPads, you name it in the business name. So all of these little things, nobody teaches. They don't teach accounting in high school anymore. I mean I learned how to throw out a check book in high school. They don't do that anymore.
JON: The most frustrating thing for me coming out of college was just, there's no, there's no kind of like personal finance class. You know, there's nothing to teach you how credit cards work, how you should use them, things like this with building credit. I mean honestly so far what you're saying, it sounds a lot like Search Engine Optimization, which is something everyone should be doing on the internet too, you know, cause Google sort of runs the world now and if your website, if your internet presence isn't built to Google's liking, then you're a ghost. And so a lot of this, it should be common sense, you know, like the PO box and having an actual email address that you own. So what do people do once they have all these things once they're creditable?
STEVE: Okay, perfect. That's a great question. So you've got two decisions at this point. You can move forward without personally guaranteeing anything. Or you can take a course, a shortcut and begin personally guaranteeing some of your early business credit. Because the problem with being new, quote unquote, for business credit is the same problem as when you're 18 years old, you go for your first credit card, right? You have no profile. Okay. So you're going to start off with either like in the personal world, you started off with somebody co-signing or maybe a secure credit card and business credit. You'll get terms of that with places like Quil.com, they sell office supplies. Or maybe you'll get credit where you'll get a net seven gas card. We have seven days to pay the bill. You're going to get credit. That's not fun. It's just not. However, it's important. It's the foundation to your home, right? You wouldn't build a house without putting down that foundation. Yeah. So that's the foundation. Once you're done with the foundation and you've got enough trade lines reporting on your D & B and your experience and D & B for those of you listening is Dun & Bradstreet. You can go to DandB.com and get your free Dun & Bradstreet number, which you need to have. It's free. Don't let them sell you anything, by the way. Uh, you don't need it. So once you have that set up and you have those numbers, these creditors will begin reporting to those, those credit reporting agencies, those business credit reporting agencies. Uh, and then once you have enough reporting, you can move on to the next tier and it's store credit. It's real credits. Exactly what it sounds like. It's credit with stores. Again, Office Depot, Home Depot, Lowe's, uh, you pick a store, I don't know. Saks Fifth Avenue. They, they offer business credit. Right? Think about gifts for your clients. Right? I had a client who's an accountant who I didn't know Sachs offered this, she went to Saks fifth Avenue, apply for business credit, got approved cause she had enough trade lodge reporting and bought all her clients gifts from Saks fifth Avenue on business credit. Wow. Amazing. So almost all major stores offer it. Everything from Walmart, Sam's club. Matter of fact, speaking of Walmart, Walmart's entire business model is based on business credit. Anything you buy from Walmart they haven't paid for yet. They get credit from other businesses to put their products on their shelf. You buy it, they take your money and they eventually paid those. That is business credit. So once you have enough of that reporting, then you can get the fleet credit cards, then you get vehicle and it just goes on and on and on. And what's really great about this job and anybody with good personal credit out there is going to understand this and get it immediately. If you have great personal credit, you can probably go to your mailbox three times a week with a credit card offer, a loan offer, right? It just shows up in your mailbox. You didn't ask for it. It just shows up. I always asked the same question to how did they know to send that to you, Jon, and not to me as your next door neighbor?
JON: Because they're looking at credit scores.
STEVE: Well, they're not looking at credit scores. That would be illegal. Okay. What they do is they buy that data of scores between 680 and 750 in this zip code. Yeah. Blah, blah, blah, blah, blah. Right. So they're buying data, which is basically all credit reporting agencies are, they're just data whores - I mean hounds. Or both? Maybe both. Um, so don't you think the same exact thing happens in the commercial credit world? I would imagine it does build a strong business credit for sure. Me as a lender, as a commercial lender, if I wanted to find new customers, I would buy data from D & B or experience. I want people with 15 to 25 trade lines reporting been in business two years, I'm going to mail them right. For very focused mailings. Yeah. Same thing happens. So now what you see happen is that instead of you chasing money, it turns and money starts chasing you, which is just a really cool feeling if you're a business owner and that sounds amazing. What is important about it is if we do end up with another downturn and we will, for sure, not when, not if it's the way, I mean, um, if things go bad and your industry tanks a little bit and you're beginning to suffer financially, if you shut down your business the right way, you can walk away from all that debt free and it didn't affect you personally. Now, of course, I don't want anybody to do that, but if you don't want to fail to plan, right? So otherwise you're planning to fail because it will happen. It does happen. And you want to make sure that your family's protected. Cause we all opened our own businesses. We all go into our business for our own reasons. But the majority of time I hear people say for freedom for my family, well, you don't want to saddle your family with a half million dollars in personal debt because the market crashed. Right? Guilty. I did it myself. Does that make sense?
JON: It makes sense. Yeah. So you, this was before you found the gospel of building business credit?
STEVE: Well, no, no, no. I, I knew about it, but then when the market crashed? I decided, Hey, you know what? I got a house with a lot of money. Let me go ahead and borrow against it when I almost own outright because this downturn can't last more than what a year or two. Oops.
JON: And again, it's a shame that it only happened to you.
STEVE: Yeah. I, you know, I, I always feel like I'm the dumbest person in the world. I'm the only person that got smacked. What I should've done is borrow all that money against my house, forgot the business, came to Florida and bought everything that was available at that point. Yeah. I, I'd be, I wouldn't be talking today unless I was sitting on a beach somewhere. So if what I'm saying makes sense, uh, and it should make sense if you own your own business and I don't care, again, back to real estate agents, if we have a lot of real estate agent listeners, you are in business for yourself. Unless you're being paid a salary, you are in business for yourself. Absolutely. Treat it as such. Build your business credit profile, build your business credit because at some point. Uh, if you have the talent and the willingness and the ability to expand, you're going to end up with your own team and maybe your own office. Wouldn't it be great if when that office opens up, you already have a huge business credit profile and you could buy that building? You can buy all the computers you need. I mean, just think about the future and not just today.
Speaker 4: Yeah, that's great advice. I think a lot of our listeners are probably at that early stage and they're thinking about where can they go with this.
STEVE: So great place to start. Everybody should start there. The biggest issue we run into as business owners who have been in business, we have to give them that mind shift. They have to go back and correct some things they've been doing for years and years and years and years. Yeah. But ironically, and this is straight from a business valuation company, this is not just us spouting. You know what we want to say. If your business has a business credit, it adds a huge amount of value to the value of the business.
JON: Sure. I mean, because what you're saying is you're separating business credit from your personal finances. So if the business, if you end up selling it, the business credit goes with the business.
STEVE: Thank you. Exactly. Exactly. And I use the barbershop mentality to barbershops. Same clientele, same street, same building, same volume, everything same. But this one has $300,000 in credit available to it. Which one's worth more? Which one would you buy? The one with the credit. Right, exactly. So if you're just starting out today, that's fine. Work on it now because five years from now, if you hadn't, you're going to go, ah, I wish I had. Yeah, it really makes a difference.
JON: So if you're going to a bank for a loan and the bank says no, where does that leave you?
STEVE: Well, one, you want to know why the bank said no. And unfortunately in the commercial credit world, they usually don't tell you they should come back in six months and play again. The odds are it's probably one of those credibility issues. Yeah, and they're not going to tell you about it. And then the second problem is, and I want to be real clear about this to your listeners, business credit is not going to get you a cash loan by itself. Never going to happen. Don't think about buying houses with business credit. Don't think about, I'm going to get a $500,000 credit line. Not going to happen without them looking at you personally because you're talking about FDIC insured. There are certain boxes that you have to fit in. However, I will tell you it will change whether or not you get approved. For example, I had someone who owned an ice cream shop and a vegetable stand ice cream for the summer. Obviously vegetable stand for the winter. They applied for an SBA loan, 50,000 was denied, had good personal credit, decent cash flow. Went through our program, build up his business credit profile, went back nine months later, I think it was nine months, reapplied, got an automated a hundred thousand dollar approval. His credit hadn't changed. His cashflow had changed. What changed? $100,000 approval. But here's what's crazy. When he went in for the closing and filled all the documents out, the loan officer who would, he had never met, it was all over the internet, said, I don't understand how you got an approval when you were just starting out and I don't see anything changing. And he laughed because he knew. So they didn't even teach the loan officer to think about that. They don't even teach the loan officer. Cause if I could show you there's a wheel, uh, and the right side, right upper corner is all about personal credit. And then you get down below that it's about cashflow and profit loss and blah blah blah. And then the whole left side of your business credit profile. So think about having a wheel and, and you've only got a quarter of it filled in. What does the bank have to look at? Just you. Yep. There's nothing else to hang their hat on. So they have to dive deeper and deeper into you. And that's when they started talking about that the income and potential future earnings and things that you don't even want to think about because they have nothing else. There's nothing saying, Hey, this is a solid company. There's nothing. Hmm. As a matter of fact, it's even worse than that. Jon, if I pulled your business credit report right now and I would never do that to embarrass you if you have nothing reporting, if you have nothing reporting, which means you've not done anything wrong, right. There's nothing bad, nothing good, nothing. It's going to say that they predict you would be bankrupt in the next 12 months just based on averages. Just based on you have nothing reporting and based on their knowledge of people in business with nothing reporting, they're going to give you what's called a 28 and tele score 28 means a risk factor of six which is high, like the end of the scale. So 28 is super low. You want to be in the 90s and the risk factor of six, which is super high for risk, yet at one trade line, you get that 28 shoot up into the eighties seventies and eighties and your risk factor will go from six down to three or two or even one. So it's not like personal credit where you have nothing reporting, you have no score in business credit, nothing reporting. They give you a bad score automatically. Wow. So even those who are like, eh, I don't know if I need business credit, guess what? I pulled your business credit report. It's going to tell me that you're probably going out of business now be a lender and look at that score. Crazy, right?
JON: So what can someone do if they've attempted to build up good business credit, but it has not gone well if they have a terrible business credit?
STEVE: Oh, so they just have a bad profile and it's legit. They just didn't pay their bills. It depends on how many trade lines it is. If it's one or two, you can build around that. In other words, the good will outweigh the bad. Okay? If you're somebody, I hate to use this term, but I did when I was in real estate. If you're a credit criminal, you just never paid your bills and you've got 15, 20 trade lines, all of them bad. I don't know how you got the 20 to begin with. Um, but yeah, you're pretty much done. As a matter of fact, I'm glad you brought that up because the problem with business credit is it's disputable. You can certainly, if it's not yours, it's disputable and removable. But if DMV thinks you've committed fraud in any fashion, like buying trade lines, using a shelf corporation, which I see way too many times, people buy shelf corporations, age corporations, they call now a DOB will Mark your file as fraud and it can never be removed. Wow. Never be removed.
JON: So with that being tied to the business, couldn't somebody, if they have just run their business credit into the ground on that business, couldn't they just, you know, get rid of that one, start up a new business, start a new business credit?
STEVE: Absolutely. That's what we recommend. I don't recommend you lose your time and grade. Cause time in business is important to creditors, right? Because obviously as you know, most businesses go out of business in the first five years. So the longer you get, the closer you get to that five years, the better you look. Um, so I never recommend people throwing corporations away, but if it's racked, my favorite is, Hey, I have bad business credit. How long have you been in business? Nine months. Start over. You're only nine months of business. And by the way, for those of you who think you started your business two years ago, but you just opened your business bank account yesterday, as far as lenders are concerned, you opened your business yesterday. So if you're running your business through your personal account, I know a lot of real estate agents do this. Uh, you're not in business as far as lenders are concerned. Now, the caveat being every state has different rules. I'm licensed in New Jersey and in Florida, and in New Jersey, I cannot be a corporation. I have to be me as an individual. Florida, I can be a corporation. Steven Wible PA. Hmm. So everything ran through my business checking account, New Jersey. It had to be personal unless I was a broker and opened my own company. So I understand that every businesses, every state's going to be different. Your state's going to have its own rules, understand the rules, taught you to broker to make sure. But if you can be licensed as a corporation, do it. Do it so you can run like a business. Yeah. Well, I only know that because I happen to be licensed in two different States in two different sets of rules. So it and Pennsylvania, I believe you can also be a corporation as well.
JON: It never fails to amaze me how different state laws can vary. It's something we battle all the time here because we do, you know, Pre-Licensing and Continued Education across the country and a rule in one state can be just vastly different from the state right next to them. It's crazy.
STEVE: Oh yeah. I mean, Philadelphia, New Jersey, I'm from South Jersey. So the Pennsylvania is kind of one market, right? Yeah, it's one TV market. Uh, my brother was licensed in both and just, it was so much tougher to pass it New Jersey than it was in Pennsylvania. And when I got to Florida, I called it the wild West. I'm like, are you kidding? This is easy. This is to me. Took me three minutes. I got into, I got into class in Florida. I was, I felt like I should be teaching the class. Um, it was so easy because you could pretty much do anything. I mean, I'm being facetious obviously, but there are rules, but every state's different. Um, now that I've lived here a long time and I understand why the rules are shut the way they are, they make sense to me. But yeah, every, every state's different. So not every state is going to allow you to be a company. Uh, there are ways around that. Talk to your account and you can start a company, maybe real estate management, whatever, and do something different. But again, I don't want to give advice because every state is so, yeah, lots of stuff.
JON: That's a lot. That's lot of stuff. This is my last question. And so when I ask of all my guests, if you could go back to the beginning of your career and change one thing, what would it be?
STEVE: Oh, I already know the answer. I wouldn't refi my house. I would not have refiled my house. I'd have left it alone. I wrote it down. I'd have suffered through, you know, whatever I had to suffer through, because it recovered. Hmm. You know, it's funny. Uh, one of the things I like to play with now is day trading stocks. And I have a rule. What goes down will go up. Well, it goes off. We'll come down. Uh, I did approach real estate that way. That was my mistake. I thought it would end a turn. And it did. I just thought it would end on my time when I wanted at. Um, so I learned my lesson. The second lesson is when there's blood in the street by real estate. And what I mean by that is when the market crashed, when I saw it coming, what I should've done is liquidated immediately. And even maybe refied my house went to an area that had already crashed, and Florida was one of the first ones to crash Tampa area was one of the very first ones to crash in. New Jersey was a little behind it. So I had some, some notice I should have taken all my money, made it liquid, waited maybe a year or two, and then bought everything I could, I could buy because all the hedge funds stayed. They all came down here and I sold them a bunch of homes, lots of over a thousand homes. Uh, and now those homes are worth five times what they paid for it, five times what they pay for it. So that's what I would, if I could go back in time, that's what I would do differently.
JON: Wow. Great answer. All right, Steve. Well, if anyone wants to learn more about you or how they can build or repair their business credit, uh, where should they go?
STEVE: Just go to firstname.lastname@example.org. Or simply just go to creditsuite.com. Download our free guide. Get started, learn a little bit about the basics, do your research, check us out on YouTube. We give away a lot of free information. We're about helping every business owner, so, and certainly if you go to email@example.com just ask for me. It'll get forwarded to me and I'd be happy to answer any of your questions.
JON: Awesome. Well, thank you so much for joining me.
STEVE: It's my pleasure, Jon. I really appreciate you having me on.
JON: That's it for this episode of Shop Talk, thanks for listening. If you enjoyed the episode, you can subscribe to us and leave us a review on your podcast player of choice. Join us next time for a detailed discussion about finances for real estate agents. Shop Talk is a production of The CE Shop.