At one time, owners of businesses had to get business credit against the things that they owned personally and based on their personal credit score. If you set the business up as an official entity- separate from yourself, you can apply for various business funding, including loans or credit cards. What happens if your personal credit score is not-so-good?
You can take some steps to increase your chances of getting a business credit card (or some other form of business funding) by doing the following:
Take steps to increase your personal score. Is your credit score below 640? This type of business structure automatically means the business is separate, and not just an extension of you. Believe it or not, using a PO Box can hinder your ability to get a business credit card or loan! Having a business phone line also will increase the way the business is looked at by lenders, and ensures the business is reachable.
Get a credit card in your name and then use it only for the business. Over time, you'll build up your personal credit score, which is seen as a boost for the business validity- and eventually you'll be able to obtain funding and credit cards under the business name.
Getting business credit cards and financing is a necessity that all businesses will face from time to time. There is a need for cash flow in order to grow and increase the business. With some careful planning and preparation, most businesses will be approved for a business credit card even if the owner has personal credit that is slightly less-than-perfect.
Establishing a franchise is becoming one of the most popular ways to start a new business, and it’s also among the best methods of setting your business plans in motion. Franchising is possibly one of the most secure and ideal ways for new entrepreneurs to quickly enter the business arena.
When you are looking to finance a franchise, your first stop should be your local bank. It may be a good idea to approach your bank and ask about the options it has available for financing franchises. Seeing as you already have a financial relationship with them, it may be a good idea to see if they are eager to advise you about their lending options. Most high street banks will have specialist franchise units that can give advice on services and products that are adapted specifically for financing franchises.
While high street banks do look favourably on lending to new entrepreneurs, they will still expect you to raise at least 30 to 50 per cent of the costs yourself, along with you presenting a business plan and yourself successfully.
If you get hold of an application form, it is important that you fill in all the sections in as much detail as possible. The more information you provide, the better you will look to the bank. If you are not thorough enough, the bank will be uncertain about how your money will be used.
It is also crucial to include a thorough business plan. This is important when starting any type of business as it will tell the bank, and also yourself when referring to it in the future, what your goals are and how you will accomplish them. It helps you to calculate your budget, which will help you a lot when you approach the bank for money. Although there are many websites and guides on the Internet that can help you construct a strong business plan, a complete one should include an intimate and technical study of the business you plan to go into, projections and cost analyses, calculated estimates of working capital and a suitable marketing plan. If you are unfamiliar with writing a business plan, then seek professional advice or consult business software that you’re able to download online.
Also, it is beneficial if you have a good credit rating as there are three main criteria that banks look at when assessing your credit rating: stability, income and track record. They will also examine your income and whether this amount is a suitable living wage, because if you cannot handle your own personal finances then they are unlikely to think you can be trusted to manage a business.
Through assessing your credit rating the banks are able to explore how successful you've been in paying off past debts. If you have a record of not keeping up with payments, repossessions and so on, you should get these sorted before asking for a loan because they could really damage your chances of business success. With the correct support, your entrepreneurial spirit will be nurtured and good progress can be made.
Financing a small business does not have to be complicated, as there are a number of resources that can help you along the way, as well as numerous financial and government institutions that cater to those wishing to finance a small business.
What will the capital be used for and what industry does the small business operate under? Equity financing is looked at as the amount of equity to debt ratio that you have in the business. The biggest resource of equity financing comes from venture capitalists. Debt financing can be obtained through banks, credit unions, lending companies and other financial institutions that offer services to small business owners. The government, both on the federal and local level, also has numerous programs in place to assist people in securing financing for small business.
One of the most common places to look for financing opportunities is with the United States Small Business Administration. This entity has a number of programs in place, including special financing programs for women, veterans and Native Americans who wish to secure funds for a small business. The U.S. Small Business Administration has a comprehensive website that explains in detail all of their available financing programs.
Another source of funds for small businesses come in the form of grants. Before using debt financing to fund a small business, it is wise to first exhaust all other avenues.