Small Business Credit Profile: Handyman Connection

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Owner Derek Christian wishes he had nailed down a line of credit before launching

By Erica Sandberg  |  Published: October 10, 2018

Small Business Credit Profiles with Eric Sandberg

Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Small Business Credit Profiles,” a weekly column featuring small business owners’ journey with credit and credit cards for CreditCards.com.

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Derek Christian, from Blue Ash, Ohio, is an intrepid
entrepreneur and home service expert. He started Castle
Keepers
, a successful house cleaning company, and sold it in 2015 for a tidy profit. Rather than relaxing and living off the
proceeds, Christian launched Handyman
Connection
 the very next year. It’s
a platform that links carpenters, electricians, builders, painters and other
home care professionals to customers seeking quality services.  

“I had a five-year non-compete clause with the
company I sold the business to,” says Christian. “But I wanted to be able to
reapply the skills I had learned in growing a home cleaning business to the
home repair industry. This seemed like a great match, but with an even larger
market.”

He was right. Revenue for Handyman Connection
has doubled every year. Christian is confident the company will reach
$1.2 million in sales by the end of 2018, and he credits credit cards as having
helped him build and maintain his business. 

Is there anything you wish you had done
differently?

I had great credit when I started the company.
My score was over 750, so obtaining the credit cards I needed was not a
problem. However, I made a mistake in not securing a business line of
credit early, which allows small businesses to draw against a predetermined
credit limit as necessary, so interest is paid only on the borrowed funds. This
industry requires a lot of capital. We have to buy supplies and pay our
craftsmen before we get paid by the clients. 

I normally pay my credit cards in full each
month, but it is not uncommon for me to have $40,000 in revolving credit card
debt before I do. I didn’t realize how hard this would make it to get a
business line of credit until it was too late. I wish I had gotten the
line of credit first. I needed to pay down the credit cards in full and
not charge a large balance again. That meant for about 30 days I had to slow
down my company quite a bit to clear up my credit utilization on the cards. The
good news is my credit score rebounded instantly, so it only took a month.

Which credit cards do you use for the business?

I have three primary credit cards. Our
main company credit card is the Capital One Spark Cash for Business, because it gives us a high percentage in cash back on all
purchases. I also use the Chase Sapphire Reserve for travel and meal expenses, as it offers all sorts of additional protections
on travel. The Chase Freedom offers 5
percent cash back and the categories rotate each quarter. We use the heck out
of this card for home repair stores in the quarter where it applies as well as
other categories, like office supply stores. We spent over $140,000 at
Home Depot alone last year, so those purchases add up to a lot of points and
miles!

My primary employees have access to two cards
as well. Each has their own spending limit, which is much lower than mine,
but I can temporarily increase it at any time by logging into the
website. I also use the Capital One app on my phone to watch balances and
make payments as needed.

See related: 5 business expense card options for employers

For years I had no debt, and I had
companies begging me to get a line of credit or credit card from them. Once
I started to charge tens of thousands each month, suddenly I could not get
credit from anyone when I needed it for a large project.

How do you use credit cards to your
advantage?

There are a few different ways. The first
is that I pay my subcontractors via credit card, which lets me finance my labor
cost for 30 days. It helps to keep my cash flow positive since my clients pay
as soon as the work is completed. 

However, not all my subcontractors accept
credit cards, but it’s easy to show them how to set up an online account with PayPal
or a similar service to accept cards. I do get some push back at
first since they don’t like paying the fees, but they quickly come to see the
benefits. Previously, I would not pay them until the client paid me, and
that often caused a delay of up to two weeks. Now I can pay them on the
spot.  Another advantage is that they don’t have to come back to the
office to get a check. Once the work is complete, we process the payment and
they have it within 24 to 48 hours, depending on which service they use!

I also have credit lines from several of my
suppliers who will then let me pay their bill with a credit card. For
example, I have a $5,000 credit line with Sherwin Williams with 30-day terms. I
buy my paint and wait until that bill is due. Then they automatically charge my
card that’s on file. That gives me another month to pay the bill. 

Of course, I also get the cash back and points
as well, which is a nice bonus. I use the points for business travel. The
Chase points are the best as I can transfer them to a single account, and then
transfer them again to a specific airline or hotel.  I normally get the
best return converting these points to Southwest Airline miles.

See related: Chase Ultimate Rewards transfer partners

What borrowing lessons would you like
to pass on to other entrepreneurs?

The old rule that is best: line up your access
to loans before you need them. For years I had no debt, and I had
companies begging me to get a line of credit or credit card from them. Once
I started to charge tens of thousands each month, suddenly I could not get
credit from anyone when I needed it for a large project. I should have
gotten a line of credit before I even started the business.

 




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