Credit Secrets the Banks Don’t Want You to Know

How is Building Corporate Credit Like Rock Climbing?

By Mike Silver

“Falling!” the panicked cry floated down from above.

Sometimes when you’re rock climbing, just as in business, you can tell you’re about to fall. I was belaying my friend, holding the other end of her rope; it was up to me to stop her fall. I tugged hard on the business end of the rope, quickly putting it into arrest mode. I wanted to be absolutely sure to break her fall as quickly as possible.

“Got you!” I yelled up with calm authority. And then: “Are you all right?”

“Yes,” came back the hoped for answer from above.

I had just saved my friend’s life. It was not the first time, nor will it be the last.

It can also be this way for your business. There can be someone there to make sure you don’t fall.

I am fortunate to live in the most beautiful place on earth. I live high up in the Rocky Mountains of Colorado, surrounded by National Forest, next to a world class deep gorge.

A river thunders along the bottom of the gorge. The North Rim of the Gorge rises in a sheer cliff wall straight up over 600 feet. A secret climbing area only the locals know about hides away up in these cliffs.

Rock climbing is quite precise and highly disciplined. After all, when your life or your climbing partner’s life depends on discipline, you’d better get things right! Rock climbing combines the intellectual clarity of chess with the precision and grace of ballet. Movements must be precise and executed flawlessly … or else you fall.

As you probably know well, it’s the same in running a business.

That’s where the rope comes in. It breaks the fall. And it’s up to your partner to manage the rope so you don’t fall more than a few inches, or at most a few feet. Still, there’s something exhilarating about defying gravity and death.

After arresting my friend’s fall, I gently lowered her back to the ground. As her feet touched solid earth, I let the rope in my hands go slack. “Thank you,” She said.

Now it was my turn. I tied one end of the rope to my harness with practiced ease. The rope made a long loop to an anchor high up on the cliffs and then back down to my friend. She secured the other end to the arrest mechanism on her harness.

“On belay” my friend said. This meant I had her undivided attention and my safety was her utmost concern.

I placed my hand on the rock. “Climbing,” I said as a matter of habit. ‘Climb on,” she echoed back.

My fingers inched up to a small crack overhead and wiggled inside. I pulled myself up. My right foot found a tiny crevice to grip on, and then I searched with my left foot to find a rough mound higher on the rock face. Then I was able to reach up with my right arm until my hand felt a little knob I could pull on. With slow, steady, deliberate movements, I climbed higher and higher. My partner pulled the rope as I went so there was just a little slack. That way the rope from above would catch me after a foot or two if I fell.

There is a certain Zen-like rhythm to rock climbing. On this familiar climbing route, I had some time to think and reflect.

For me, building my business is a lot like rock climbing. I have a plan that I follow. I execute the plan, step by detailed step. In my case, I have a trusted partner who I know will take up the slack when I am weak and will catch me when I fall. It is my highly experienced business consultant and service provider. Together, we make sure I don’t make any fatal mistakes.

Back to my story. My climbing partner had just bought a franchise. Make no mistake about it: starting a business is risky. But risk is rewarded if it is well managed. She knew the risks and wanted the rewards of being her own boss and making a good living as well.

When I reached the top of the climbing wall and the end of the rope, I rested and looked around at the breathtaking scenery. My eyes traced the path of the thunderous river in the gorge far below. I took in the magnificent cliff walls rising all around me.

(I know it’s like that when you reach that place in building your business when you finally have the credit to get those big loans you need. You can look around and see a whole new vista ahead.)

Then I took a deep breath and shouted down: “Lower!”

After I got down, we decided we had had enough for the day. We packed up our gear for the walk back out.

Lately, I had gotten so busy I had been neglecting my friends. It had been months since she and I had talked. But the tight bond between us was still there since we literally trust each other with our lives.

Now was a good time to talk. “How did you pay for the franchise?” I asked.

“I put a second on my house” she replied.

“What happens if the business doesn’t work out?” I wondered out loud.

We walked a ways in silence.

Finally, I continued. “The banks don’t want you to know this, but with advance planning… it’s possible to borrow the money for a franchise without promising your first born… or your house.”

My friend is ever the skeptic, so I was not surprised when she challenged me. “How could that be?”

My friend used to work in hi-tech before she got laid off. I gave her an example. “Think about it. Does Carly Fiorina (the CEO of Hewlett Packard) put her house on the line when she signs on a multi-million dollar loan? Of course not! And, why not? Because HP has its own credit history, which it built up over time.”

After a pause to let it sink in (and to catch my breath during an uphill stretch), I continued, “Companies build up credit histories just like you and I did when we got out of high school. The trick is knowing how to get started, and how to build credit quickly.”

She took the bait. “How do you get started?”

I thought for a moment, “Let me give you a sad example from my past. Remember when I started the manufacturing business about 9 years ago? One day, out of the blue, I got a call from Dunn and Bradstreet. I felt so dumb. Somehow, I knew it was vital to answer the questions about my business correctly. But what were the right answers? Well, somehow I muddled through the grilling with the D&B representative.”

“Did you get credit?” She wanted to know?

“Well, yes, sure, I got some credit. At the time I didn’t know what I had, or how to put my best foot forward, creditwise. But my business kept growing, so I thought I must be doing it right. In hindsight, it was a miracle I managed to grow my business as long as I did without hitting up my friends and family for loans… or maxing out my credit cards.”

“So, what happened?” she asked. “The manufacturing part of your business is so small now.” Diplomacy is not one of my friend’s strong points.

“My business kept growing and growing for about two years. I paid off all my credit cards. I bought a big house. Then the unthinkable happened. My company’s growth plateaued. I kept working real hard. But soon, I had to stop drawing a salary.”

I paused for a moment. Was I just catching my breath from the hard walk, or did I really not want to remember? “Anyway, after that, the problems really began. First, I didn’t replace an employee when he left. Then I had the heartbreak of having to lay people off. These were good people. Hard-working people. People I had trained. I just didn’t have the money to pay them any more. I was stuck. I needed money to grow… or my company was going to die. “

“Well, as you pointed out, my manufacturing company did survive, but barely. I’ve noticed that in the past three years it has gotten even more difficult to get credit. Business lenders have gotten real skittish. I can understand why, too, after the dot-com bomb and 9/11.”

My friend looked at me quizzically. “So are you telling me I have no choice but to use my personal credit?”

“Nope. Building business credit can still be done. It helps if you know somebody who knows the ropes, though. It has to be done very carefully, one step at a time. I can tell you from experience that if you don’t know what you’re doing, it takes years of bumbling around to build even a little business credit.”

I forged ahead. “But now there are service providers who have honed the art of building corporate credit rapidly to a fine science. Just like in rock climbing, this requires precise, careful steps. And you have to catch a mistake quickly, before it can ruin the fragile good name of your company. It’s so easy to get red-flagged by the credit bureaus without ever knowing it. I wish I had known about these coaching services back when my company was floundering.”

My friend is good at voicing her critical opinions: “You’re just making it sound more difficult than it is.”

Time to explain. “The corporate credit building process really is strewn with hidden dangers. Did you know that there is no legal protection for business credit reporting? There is no consumer protection act for businesses. As a consumer, you can protest inaccurate information on your credit report and, legally, it must be removed. There is no such protection for your business credit.”

“So is it really worth doing then?” She countered.

I know my friend well, so it was time to lower the boom. “What were you thinking back there when I asked you what would happen if your business did not succeed?”

There was another long awkward silence.

I sighed. “Would it be impolite for me to suggest that having a business without good business credit is a little like climbing up a cliff without a rope to protect you?”

Well, that got her going, as I knew it would. “My business won’t fail!” she sputtered, angrily.

“But you do climb with a safety rope,” I shot back.

She made a comment I will not repeat here.

It was time to make peace. “Good credit building through professional counseling is like climbing a cliff with a trusty rope and an even more trusted friend. I know you and I trust each other out here in the wilds of Colorado. I just want to make sure you know you have the same choice in your business. It’s all about careful risk management. Good business credit is like a good rope: you never think you’ll need it… until one day it saves your life!”

My friend could tell I was trying to make amends. One thing we have learned over years of traveling and climbing together is that we really do have each other’s best interest at heart. In short, we have a deep trust and respect for each other.

It also means I know when it’s time to shut up, and now was that time.

As we approached the parking lot, my friend finally broke the silence. “Thanks for explaining all this to me. I’d like to look at your website again when we get back.”

 

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