Eliminate Personal Guarantees! Build Your Corporate Credit.

Business owners: did you know you don't need to provide a personal guarantee for your business loan? It is possible, but you have to build your corporate credit. This episode welcomes Andrew Cervenka from Growth Architects.

About Andrew: With a passion for seeing small and mid sized businesses succeed, Andrew, a Senior Consultant at Growth Architects, provides the necessary tools, guidance, and processes to aid business owners with maximizing their funding options through the development of true Business and Corporate credit. Every dollar spent in and on a business should be working toward building the EIN (Tax ID) credit profiles, because not only is it the way to remove personal guarantees with business funding and therefore protect the business owner's personal assets, but also a business entity has significantly stronger borrowing power for more capital availability at better rates when its credit is developed.

Website: thegrowtharchitects.com

[00:00:12.620] - Alice

Hello. Welcome to Books in the Biz, a podcast that looks at both the financial and operational sides of success. Please welcome our hosts, Dan Paulson and Richard Veltre. Dan is the CEO of Envision Development International, and he works with leaders to increase sales sales and profits through great cultures with solid operations. Rich is CEO of the Veltre Group and a financial strategist working with companies to manage their money more effectively.

[00:00:40.430] - Dan Paulson

Hello, and welcome to Books and the Biz. We are here for our first winter edition. At least two of us are, Rich, you're out of luck. You're getting rain down. We're getting snowed on out here, Wisconsin, so enjoy that wet weather while you still can. Welcome Welcome, everybody, to Books and the Biz. We are here with Andrew. I'm going to screw up your last name, Cervenka.

[00:01:07.110] - Andrew Cervenka

Perfect. Nailed it.

[00:01:08.260] - Dan Paulson

Hey. I could screw up Smith. So the fact that I got Servenka light, right, I'm pretty darn happy.

[00:01:14.580] - Andrew Cervenka

I I'm not going to say it's like a cerveza, but Cerenca, not cerveza. I do enjoy a beverage now and again.

[00:01:22.350] - Dan Paulson

Well, it's Thursday, and it is noon somewhere, so we can break out that cerveza as well. I also have just come back from the dentist, so I'm going to let Rich take most of the conversation here, but I'll kick it off with... So Andrew, why don't you tell us a little bit about yourself, and give us a little bit about the company that you're working for, because I was very interested when we met a couple of weeks ago. I know a number of business owners that always have to personal guarantee everything. Personal guarantee loans for the business and the whole bit. You got a unique approach to that, so I'm curious to hear more. But why don't you tell us about yourself first?

[00:02:00.930] - Andrew Cervenka

Well, thank you so much for having me here, guys. I really appreciate giving me the spotlight here for a little bit, at least, to share a strategy. Background was in automotive, 2006 to 2022. The final 10 years of that, I was a territory sales manager for a manufacturing company out of Eau Claire, Wisconsin, Kirt Towing Products. So dealing with small business owners a lot, regional distributors, e-commerce resellers, things of that nature. But with two young kids at home, a My life on the road needed to change. I wanted to stay married, and I want to see my wife, I want to see my kids. So I started exploring opportunities, and I came across what Growth Architects does, and really started diving into it more because I didn't believe it at first. No personally guaranteed, not putting assets at risk for business funding. That's just unheard of with all of my previous clients. So really dug into it and learned the process, and it It just makes sense at the end of the day. I mean, it's not smoke and mirrors. It's not magic. It's a strategy that does take time to implement and build. But if we're able to even start chipping away at those personal guarantees for business credit cards, graduate into corporate credit cards, moving to a line of credit that is not personally guaranteed, the vehicle equipment financing, not personal guaranteed.

[00:03:23.370] - Andrew Cervenka

If we can start chipping away at that, and even if we can reduce the personal guarantee on business funding by 50 %, that is a It's a major win in my book. You can start separating and living in the real world, it might not be achievable for every business to get fully off the hook with personal guarantees. But as I said, if we can start chipping away at that, turn the business into a business partner that can sign for that funding without always attaching it to your personal credits, personal assets, guarantees, et cetera. It's just a win-win in every situation. So that's where we're at here with that. And I'll pass the ball back to you guys.

[00:04:05.710] - Rich Veltre

Is there a size starting point? So I looked a little bit into the background and what I think you're going to say your strategy is, okay? Just so you know, because we haven't really spoken before, but I've worked with companies anywhere from the startup to the $100 million enterprise. And it's been a great ride, but I have to make sure I have the right hat on, right? Because if I'm working with the $100 million company, it's a totally different strategy than if it is the startup, right? Because they're up against different issues. So my immediate first question really has to do with, what size business are we necessarily talking about, or is there one?

[00:04:55.890] - Andrew Cervenka

Truth be told, there isn't one. I I've worked with pre-revenue startups. We've worked with north of 100 million in revenue. It means different things to different sizes because our approach and strategy is first looking at the bankability of the business entity. So as a new small business owner, you're coming in. We want to help with the guidance and strategies of keeping everything in line, checking all those boxes to keep you bankable, making you bankable, and move forward on developing the credit for the business entity. And on the larger side, those businesses have it all figured out, and they know about business and corporate credit, and they're working towards it. We would come in as a complementary service to fill in the gaps where there is lacking in reporting. So if you're picking up what I'm putting down, the strategy is aligning business expenses, all the money that's going out the door as much as possible to lenders, vendors, creditors that are reporting to the business credit bureaus. And for those of you that aren't familiar, there's the four top ones. I mean, there's a whole myriad of them that lenders look at. But the four main ones to focus on for our strategy would be Dun & Brad Street, Experian business, Equifax business, and Credit Safe.

[00:06:12.690] - Andrew Cervenka

And like I said, there are some other ones out there. But those are the main four that we would focus on and help develop a credit profile with by aligning business expenses to things that report. Truth be told, roughly 93 % of vendors and creditors out there in the business realm do not report to those bureaus because a: no small business owner is asking for it and they don't realize the power there, and b, it costs the creditor money to report good things to those bureaus. If you're a bad apple and not paying your accounts on time, they will report negative all day long. They can do that for... I don't believe it's a charge to report negative, but they're not going to pay money to report good things when nobody is taking advantage of the strategy and it doesn't matter. So nine out of 10 business credit cards do not report positive payment history to those bureaus. That's the one that I always outlined because it's tangible, something that everybody, most every business owner uses a business credit card, and they're paying it responsibly, and they're getting great points kickback, but all that money they're spending out the door and paying on time is not being tracked and reported to the bureaus to build those credit scores.

[00:07:29.920] - Andrew Cervenka

Okay.

[00:07:31.440] - Rich Veltre

Do you see a trend? Because I know that from the businesses that I've worked with, I don't see people looking at the credit score. It's not the first place to go. They go and actually do the legwork to go after references and go down the line of building the credit by asking those questions. But do you see the ability that down the line, businesses will be able to go and pull a business credit score, or is there a cost prohibition to that?

[00:08:07.010] - Andrew Cervenka

There are services out there. Experian business, you can pull reports, but every time you do it, it's public knowledge. I mean, it's a big, big thing. Credit scores on the business are big things in manufacturing. So Experian, you can run a business credit report there. Credit Safe, you can run a report there. You'll get your score. For example, we utilize Credit Safe for any of our clients to look at their scores, a zero to 100 scale, but then pair that with there's a physical credit limit dollar written on the score as well. So you got to put those two together to really get a scope on where you're at. I mean, you want to be 80 plus, but there are four different tiers to building business credits, and each one is zero to 100. So you can have a 90, but only a thousand dollar credit limit. You're not going to be able to finance a car. They're just not going to do it. So you need to know the navigational steps to take to move from... I liken it to your business just turned 18. It can't buy a car, but it can get a JCPenny $500 credit card, and you got to use it responsibly and slowly the credit builds, and you're getting larger amounts as you move through the tiers.

[00:09:22.790] - Andrew Cervenka

And finally, when you get to that tier four and even $100,000 credit limit, you can work with manufacturers and dealerships and get a vehicle financed at 40,000 all on the EIN. You just have to know how to ask the right questions and how to get them to do that.

[00:09:42.630] - Dan Paulson

So since most creditors don't report, you said 90 % don't. How do you go about starting this process thing? Because I can't imagine you call up one of your vendors and say, well, I need to start reporting to Experian business and all these other ones, knowing that there's going be a fee to it.

[00:10:01.180] - Andrew Cervenka

Yeah, very true. It's an ever changing landscape. Like with a service like ours, we have a SAS platform that houses data, and it's updated weekly, if not daily on the Vendors coming into the marketplace, vendors leaving the marketplace, moving different tiers. But where we have the advantage is we're finding that data for our clients to say, okay, this vendor reports to Dun & Bradstreet and Experian, and it fits your bill because you can pay XYZ expense with that. So instead of just swiping your business debit debit card or paying by check, let's use this vendor that is reporting, you're getting the same product, da, da, da, da. And we just move forward with that. But in the marketplace, you start googling this, you can find a lot of the tier one, tier two. I mean, tier one vendor starter accounts or whatever you want to call them. Uline Granger. I mean, that's pretty common knowledge if you really start looking at this. But when you start getting to upper tiers, tier three, tier four, it becomes a little more questionable on more trial and error, I should say, at that point. Like everybody thinks it's a status symbol.

[00:11:19.850] - Andrew Cervenka

I mean, Amex business, it takes a bit to get there. Their business credit card, that one doesn't report, but something like a US bank business credit card does report Or here locally in Wisconsin, Associated Bank has a business credit card that reports. So it's that strategy, and knowing how to navigate through this to build it, is where a service like ours would really come in handy, if you're trying to get this done.

[00:11:45.360] - Rich Veltre

Do you have a proposed timeline that you think? Because I can see it, right? You can start, and maybe it takes six months, you bump up a little bit, then another six months, you bump up a little bit. Usually I hear it's the six months, it's the year. But if there's another tip or trick or something that's not going to divulge everything in your set- More or less.

[00:12:14.530] - Andrew Cervenka

Yeah, I mean, anything worth done is worth putting the time into. And this is not a shortcut. We can't just create credit out of nothing. So it's really we're at the mercy of the reporting system. You utilize an account, you spend $100 with them today, pay it off in 30 days at statement, then it's another 30 days to report. So if you can utilize four vendors, say, at a tier one space, and you're utilizing them monthly, three months, you'll graduate to tier two, rinse and repeat, tier two, another three months. It can be built. The score can be built over a 12 month period if you're focused in on it and know how to work the system.

[00:12:59.810] - Rich Veltre

Okay. And I'll say this to one question for you, and really, it's just, would I be saying this correctly? Because I know who my audience is. I have a good idea who Dan's audience is. And The first thing I want to tell people is, and I mean no offense when I say this, Andrew's not going to save you. The focus has to stay to build the business and work with Andrew. Don't expect Andrew to just work a miracle for you. Would that be a fair statement?

[00:13:33.110] - Andrew Cervenka

That is extremely fair. With our service, like I mentioned, we're a software platform, SaaS, and we assign an analyst to work with the business owner over a one year run one way to learn their goals, their hopes, their dreams, what their plans are, and maybe give them realistic benchmarks. Analyst, fractional CFO, level, whatever you want to call it. But we're focused in on is one thing. We're not going to save your business if you're in desperate need for credit right now. I'm sorry, this is a strategic move to plan for the future and the continued growth. So if you need a vehicle or two in a year's time, think about it now. It could happen. We could get you there. Or if you're looking at business acquisition or things, like I mentioned earlier, whatever credit you build for business, you can tag team with yourself and your credit and put the two together to maybe tackle some bigger projects quicker. But yeah, it's not a magic pill. And we're here as more of a consultancy. We have the roadmap and the local guide sitting next to you. Okay, this is how we do it. Maybe we can take some shortcuts here.

[00:14:51.420] - Andrew Cervenka

Okay.

[00:14:52.690] - Rich Veltre

Yeah, I think that's the... Especially with my clients, I mean, I'm talking to them and saying, understand understand that you can't just go take a magic pill, and then tomorrow it'll look different. It's not going to work that way. I really like the words that you use it because you're saying plan, you're saying look forward. Dana are always saying, don't be reactive, be proactive. Think about where you want to get to, and then work towards that goal, and give yourself a realistic timeline. So it really does fit in to the fact that, if you're trying to build a $5 million business in five years, you're probably going to need some degree of credit if you're growing that big from zero to five million, or if you're going from 50 million to 100 million, it's the same. It's the same deal. It's just there's an extra zero on it. So somewhere along the line, you're going to need the credit. So somewhere along the line, either you're going to sign, but if that's going to be your resistance, then you can't expect to grow that fast. So these are the things that have to go into the conversation.

[00:15:58.530] - Rich Veltre

So I'm really appreciating what you're saying, that this is, hey, guys, take a look at your two year runway, your five year runway. If you're a landscaping or a snowplow company, it's snowing by you guys. So Let's throw in. Snowplow guys probably didn't expect it necessarily today. So do you have enough trucks? Is the plow working? Did you buy your salt yet? All these things that you might need credit for because something came up, and had Had you been working two years ago towards this, you'd be ready to go.

[00:16:34.900] - Andrew Cervenka

Absolutely. I wholeheartedly agree there. And God bless the guys that can operate on cash, the smaller guys, obviously, that try to operate on cash. But you're running into a barrier. And I mean, maybe they have their reasons for it. But in my mind, a lot of it goes to they got burned in the past by a bad business deal or something. They damaged their personal credit. They never want to do that again. So they're operating strictly on cash. They still want to grow. We're not saying take debt just to take debt. But if you can build up some breathing room, negotiate maybe some better payment terms with your vendors, have these lines of credit as an option to lean on, yeah, you're going to weather the lean times and be able to make strategic moves and not dump every bit of profit back into the business trying to make it grow.

[00:17:28.210] - Dan Paulson

So what's the process If you don't mind that you walk. So if there's a new company coming in, let's stick to the snowplow example. So there's a snowplow landscaping guy. He's going, I want to get this structured so that I don't have to rely on my personal credit anymore. You're coming in. Walk me through the steps of how you're getting that person from where they're at today to where they're off their personal credit maybe a year or two years from now.

[00:17:54.890] - Andrew Cervenka

Yeah, absolutely. So onboarding with us is very smooth. We have an introduction to the analyst that's going to be assigned to them for the year, off to the races, essentially. The first two meetings are, where are you at? What are your goals? We're looking at your personal credit at this point as well because it still matters. So whatever we can do on strategy is to help you there. We're going to give you guidance. But a lot of it with our platform and tools, AI is everywhere, and it's heavily utilized in the banking industry to determine if you're bankable or not. If you fit their box or you don't fit their box, They want to give you the money, but if they don't fit the box, you're not going to get it. So looking at, gosh, I think it's north of 150 data points now that fall into the lender compliance aspect. And it can run the gamut on things as simple as, do you have a professional email? You have a website, but you're still using joesnowplow@gmail. Com. That's a red flag in lender compliance issues. It's all about legitimacy of the business. Make sure you have a landing page, professional email.

[00:19:03.900] - Andrew Cervenka

A really oddball one that still matters in some underwriting is, do you have your business phone number registered with 411? That's something that nobody uses anymore, but it's slow to change those underwriting things, and it's still in there on some of these accounts and things. So it's having that knowledge, helping that business owner get those corrected in a three-month runway. All well, we're looking at their business expenses is making sure that whatever we can move over to get captured and reported somehow. For example, moving from business credit card A to business credit card B because it does report. If you only have one business credit card. We could probably make that happen very easily and just start utilizing the business expenses to move forward and move the needle on building that credit. Excuse me. Yeah, that's That's pretty much it in a nutshell. And we're meeting with a business owner once a week in the beginning for the first 90, 120 days, obviously around their schedule. We live in the real world. If we said Monday at 10:00 AM every week, it's never going to happen. So we're here to be flexible and help them.

[00:20:20.190] - Andrew Cervenka

But yeah, after the 90 day, 120 day runway of getting them in the bankable space, then it's the credits. When you have the data like ours, the credit building is easy because then it's just taking the accounts that matter to your business and using them. You can't open these accounts and spend $100 one month, wait three months, spend another $100. They need that repeated monthly utilization and payment. If you can pay them off every month, that's even better. But on time or early payments, and it's really handholding at that point as a touch point to remind them that this is what needs to happen to continue to build this and start getting the credit to a point where you can step back, personally guaranteeing every bit of funding needs.

[00:21:13.570] - Dan Paulson

What if a client wants to stay with a vendor they have, but that vendor doesn't report to the credit bureaus? Do you have strategies to help onboard maybe that vendor so that they qualify?

[00:21:28.390] - Andrew Cervenka

That would be a great scenario to happen that way.

[00:21:32.420] - Dan Paulson

It doesn't work that way.

[00:21:33.200] - Andrew Cervenka

It doesn't work that way. It costs them money to report. So we would just have to see how can we get creative on paying. For example, I sat down with an insurance person two, three weeks ago, and she was just mentioning her client. So well, can we ever get the insurance company's report? I extremely doubt that. But how can they pay you? Because she had one large client $70,000, pays the whole year premium up front. I said, oh, well, we can take credit card. Okay, let's figure out how to... They're going to pay it off the next day anyway, so they'll pay insurance credit card today and then tomorrow, pay the statement off. You just captured $70,000 of extremely positive repayment history and it's reporting on your profiles. I know that's not the scenario with every vendor. Some people don't like to get paid by credit card. So we're looking at every way we can get creative to get it captured.

[00:22:36.370] - Dan Paulson

But some things- So electronic funds transfer through the bank, does that provide any opportunity?

[00:22:44.270] - Andrew Cervenka

Unfortunately, no.

[00:22:45.460] - Dan Paulson

No, I didn't think so.

[00:22:46.520] - Andrew Cervenka

No, no. Banks don't report. They're not... Until you hit a certain threshold, no matter how good your business credit is, they're going to want a personal guarantee. It's just It's just their risk model. They're dealing with small businesses, five million, 10 million in revenue, two million in revenue. You're a thriving business. You're always making deposits and things like that. But they just don't want to outlay the risk on their part. So it's the corporate funding institutions that we can connect people with are non-depository. So if you're at a bank you love, stay there. If you need a line of credit, we can take you to market and see who's going to give you a good rate and hopefully find one without a personal guarantee for you.

[00:23:35.890] - Dan Paulson

So where do you find those lines of credit then? Are they just with other banks or are there other third party institutions that do that?

[00:23:42.430] - Andrew Cervenka

Some third party institutions think about The Wall Street type money. Back to the insurance companies, they're making billions of dollars a year, and they want to make some more. So they will lend into that corporate funding network to be able to gain a few points here and there, and they will base it off of corporate credits as a guide for how much they'll give you and rates and terms.

[00:24:10.640] - Dan Paulson

Good. Rich, what else you got? You're the financial guy here. You got to have a ton of questions.

[00:24:16.750] - Rich Veltre

Well, I think the other thing is, I wanted to ask you because you mentioned a couple of times looking at the expenses that a business owner is reporting. How much of a struggle is that for you to get comfortable? Well, I guess to get comfortable, I guess on top of that, it's a teaching moment for the client, basically saying this is stuff that's important because there's so many people out there who say the accounting is not important, and they wonder why I'm laughing. So I'm looking for a little bit of this is now another reason why accounting just potentially became important, if I understood what you were saying, that you're looking at it from a standpoint of, you're going to consult this client on how to get to the next step. And it matches what I'm trying to push them for, where they just think I'm just being a typical accountant. You're now the opportunity to say, no, he's right.

[00:25:21.190] - Andrew Cervenka

Yeah. So if you're, I mean, any time you go to seek funding, and you had the books run down, and it's showing a little little to no profit over year over year, then you're just shooting yourself on the foot. There has to be the trade off there. If you want a million dollars, but you didn't show that you made much money on paper at tax time, then you're hard-pressed to get that million dollars from anybody. So with the expenses, we're not their bookkeeper. We're not telling them what to do at tax time. It's just utilizing tangible expenses that they have, your fuel for your vehicles, your lease payments, anything that requires dollars going out the door. We want to assess it and see if it can be captured somehow and reported.

[00:26:17.650] - Rich Veltre

Okay. So for the people listening, it's important. Have your books up to date. Have them regularly looked at. Have them regularly reported, even if it's just by you, at least, make sure you understand it that way when you're talking to someone like Andrew, you're saying you're having a viable, valuable conversation.

[00:26:37.500] - Andrew Cervenka

Yes, absolutely.

[00:26:40.380] - Dan Paulson

So Andrew, how how do they get a hold of you? What's the best way to reach out? We're in the process of launching our new website, so I don't want to misquote our landing page there.

[00:26:57.350] - Andrew Cervenka

But you can definitely find me on LinkedIn I'm very active there. My calendar booking links even attached to my profile. If you're if you're watching this, my email is on the screen. But Andrew C. Like Charlie at thegrowtharquitects. Com. andrewc@thegrowtharchitects.com I mean, yeah, it's easy to find me.

[00:27:19.480] - Dan Paulson

Well, we will definitely put that in the show notes. So if you're listening to Books in the Biz, if you go to booksinbiz. Com, we actually have transcriptions of all the episodes, so we will have it there as well so people can see it. Andrew, is there anything else that we want to leave our guests with that is important as they start potentially building their corporate credit?

[00:27:43.680] - Andrew Cervenka

I always enjoy a conversation with business owners. And a half hour of my time I will give to anybody that wants to talk about the strategy, even if they don't decide to utilize our help, I can try to leave them with some actionable steps to start moving down this path. And And as we alluded to earlier, it is a strategy for the future, a strategy for growth. And it needs to be taken into consideration because this is a vastly underutilized strategy by small businesses in America.

[00:28:17.210] - Dan Paulson

Oh, I agree. I had a client actually several years back. We were trying to help her actually get her own bricks and mortar business. She was doing business in another location and having to rent space. And she basically had to finance her life away. She had two different, actually three different properties. The bank required all three properties in order to finance this new building that she was building. And I think she's managed to... She's in a good situation by that point, but still, this was pre-COVID, so go through all the COVID stuff. And she's tied up in this business with all these other properties that she owns. So this is definitely something that's important. I would strongly encourage any business to talk to and really figure out how to get out of the personal credit situation with your company, especially if we're talking about businesses that are in the several millions of dollars, 5, 10 millions, which is still pretty good size company, especially for a small business.

[00:29:15.960] - Andrew Cervenka

Absolutely.

[00:29:17.570] - Dan Paulson

Well, great. Andrew, thanks again for coming in. We really appreciate it. We will definitely get your contact information here. Rich, as always, it's good to see you. Stay dry out where you're at. We'll try to keep the snow off backs.

[00:29:30.560] - Andrew Cervenka

As far as this goes, you can also reach Rich and I.

[00:29:35.420] - Dan Paulson

We have a new address now. So xcxo.net is where you'll find us. And of course, as Andrew and everybody else is starting to learn, we are helping try to fill that fractional gap with some experienced talent. We would love to talk to you if you are the experienced talent. We'd also love to talk to you if you're the business looking for some experienced talent. You can reach me at dan@xcxo.net. Rich, how can they reach you? I'm going to test your memory on this.

[00:30:02.580] - Rich Veltre

Rich@xcxo.net.

[00:30:04.880] - Dan Paulson

Excellent. We got it. All right, everyone. Thanks again. And we will talk to you next week as we approach the Thanksgiving week. So thank you, everybody. Take care.

[00:30:15.140] - Andrew Cervenka

Thanks, guys.