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5 Ways Startups Are Leveraging Business Credit to Scale Fast

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The world of finance and economics is evolving fast. Competitors are getting more intense, and the windows of opportunities are increasing. And that’s exactly what’s helping new businesses look towards the horizon as their new boundary.

As a startup owner, the stepping stones that lead to the success of your business include access to capital, opportunities, innovation and better handling of your business finances. But did you ever realize that all of those prospects are standing right at your front door? That’s where business credit comes in.

Now that you have spent quite some time increasing your credit score, it’s time to turn your magic number into opportunities to make more money for your startup. There are several astonishing ways startups are leveraging business credit to scale fast and earn more. It would be crazy not to dip your hand into this flowing river of income.

Startups with better credit scores aren’t resting on their achievements. Instead, they are translating that hard work into opportunities to achieve their financial goals.

Related: How Startups Can Leverage Corporate Venture Capital Opportunities In MENA

1. Reconsidering insurance premiums

Every startup is sure to purchase insurance policies at the beginning of its journey. Once a startup gains a high credit score, it has an opportunity to save a considerable amount by getting a lower premium.

That’s because credit scores are used to calculate insurance scores. Most small businesses purchase insurances while having a lower credit rating. Once the credit score increase, they re-negotiate the premium with their insurance companies to pay a lower amount because of a higher credit score.

2. Refinancing the commercial auto insurance or auto loan

A vast number of startups commercial use auto insurance for their business vehicles. Their credit score indicates whether they will pay their insurance premiums promptly or not during the initial application process.

If they missed their payments or defaulted on debts, insurance companies would increase the commercial auto insurance rates depending upon the business’s insurance credit report.

Likewise, when the business credit gets higher, such startups can revisit their insurance agents to ask for lower premiums, saving extra money.

The same goes for commercial auto loans. An excellent credit score leads to a much lower interest rate of repayments or down payments, ultimately enabling the startup to save more and scale fast.

Related: 15 Strategies for Quickly Expanding Your Business

3. Lowering the interest rate on loans and credit cards

Business loans also make use of the credit scores. A startup with a bad or dwindling credit score may be offered a loan at a much higher interest rate or even be denied a loan altogether.

Startups whose business credit is higher can leverage it to get business loans at lower rates. They have to visit the market, and they will find a lender with an attractive low rate sooner or later.

That’s because everyone wants a good borrower. Loan companies are always falling for startups with higher credit scores.

Similarly, such a startup can enjoy little or even zero percent interest. Each of these opportunities presents itself to help save cash and increase capital.

4. Balance transfer credit cards

Most of the startups don’t know about the “balance transfer credit card” thing. If a startup finds it challenging to pay off the debts due to an increase in interest rates and would like to have some time to pay them off, this is for them.

A balance transfer credit card offers an extremely low or even a zero percent interest for an introductory period on amounts transferred to that card from another card. But where does the business credit come into play?

Here it is. After that introductory period ends, if the business credit of a startup is good, it will have to pay lower interest rates to some banks, while those with a bad credit score will have high repayment rates.

5. Switching to reward credit cards

Here comes the best part. To increase your knowledge a bit, the best rewards on business credit cards are for those startups that have very high business credit.

Any startup with an excellent credit score can choose the most rewarding type of business credit card to make the most out of it. It can earn up to 5% cash backs on selected purchases. And with loyalty travel cards, it earns more and more points that its staff will redeem for free travel, tours and stays at specific hotels.

How about a free business trip overseas? Seems exciting, right?

Conclusion

A high credit score is like having a VIP pass to the best offers. It feels like a home run for a startup. Better business credits lead to peace of mind, ease and expansion of business and easier management of finances in a new startup.

Save more, invest more, and in turn, scale fast.

For an established startup, business credits help bridge the cash flow gaps, and new businesses often have trouble obtaining capital in different forms due to bad ratings.

You may not find a considerable number of benefits for your startup initially. Still, it’s a stepping stone to your business’s financial stability in the longer run.

Related: How Startups Can Use AI-Powered Tools to Scale Up

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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