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Startup Business Financing:Finding Funding for your New Small Business

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Startup Business Financing

 

Having a tough time finding funding for your new small business? It’s no secret that one of the main reasons businesses fail is lack of capital.

So to help better prepare yourself for success in your new business venture I’ve put together a few tips and funding options you may find useful.

One of the key things you should first determine is how much funding you need to not only start your business but also stay in business too. Don’t make the mistake of underestimating these numbers by projecting unrealistic revenues from future sales.

Next, plan a short term and long term startup business credit strategy which consists of funding the launch of your business (short term) and building your business credit files (long term).

Starting a new business involves risk and limiting the use of your personal credit and personal guarantee should be a priority for you.

Unfortunately, many business owners fail to build business credit separate from their personal credit right from the onset. As a result they find themselves back peddling and end up relying on their personal credit to finance the growth and expansion of their business.

Only after they exceeded their personal credit capacity do they realize that building business credit should have been part of their overall strategy. Don’t let this happen to you!

Some of the more popular options you have for startup business financing (short term) include:

P2P Loans

Microfinance Loans

Social Loans

Loans for Small Business

Business Credit Cards

Startup Business Grants

By also building your business credit files (long term) your business will be in a position to qualify for its own financing at much larger amounts without using your personal credit or personal guarantee.

Some of the funding sources that result from building business credit (long term) include:

Vendor Credit Lines

No Personal Guarantee Business Credit Cards

Business Line of Credit

Equipment Leases

Fleet Programs

Remember, you can obtain 10 to 100 time’s greater business financing with a strong business credit file than you could using your personal credit.

When you compare business credit vs. personal credit there are many serious things to consider including protecting the corporate veil.

Finding funding for your new small business can seem like a serious challenge in today’s economic environment especially if you resort to conventional means. There are many creative business financing options available so don’t get discouraged.

Part of building a successful business is putting a sound business financing strategy in place for both the short term and long term needs of your business. By doing so you can overcome one of the most common factors that cause businesses to fail which is lack of capital.

Ready to start building business credit for your startup? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, business credit cards with no personal guarantee, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio ($597 value) =>

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A step-by-step business credit building system providing business credit with no personal guarantee. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Business Credit Bureau:Equifax Launches Small Business Program

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Business Credit Bureau – Equifax

 

In a recent press release Equifax announced the launch of a small business program that now allows you to order your small business credit report.

This is great news for business owners because up until now the only way you could obtain a copy of your report was if your company was declined credit based on a member pulling your report.

Here is a brief overview of the press release:

Equifax Inc. (NYSE: EFX) today announced the launch of its Small Business initiative with services to help businesses understand, monitor and strengthen their own credit performance as well as the credit health of the companies they’re doing business with.

Through Equifax’s new Small Business website (equifaxsmallbusiness.com), customers can purchase the Business Credit Report, to easily and cost-effectively check the credit reports of nearly 25 million firms, supplying smaller companies with the type of information to help reduce losses, establish business credit, and benefit from profitable business relationships.

The reports, available via credit card individually or in discounted multi-packs of five, help customers evaluate a potential partner or supplier as well as gain valuable insight into their own business credit score. Unlike others in the industry, Equifax has an exclusive partnership with the Small Business Financial Exchange (SBFE), an organization made up of more than 400 small business financial institutions with a database on more than 24 million companies. This exclusive relationship allows Equifax to combine this unique information with its own distinctive data to offer the most comprehensive, relevant and predictive industry information in the United States.

“Equifax is dedicated to supporting this important segment of the business population by giving them easy access to the same comprehensive business credit data available to larger corporations,” said Dan Csont, Chief Marketing Officer, Equifax Commercial Information Solutions. “With a minor investment, a small business can prepare itself for large opportunities and mitigate risk.”

Equifax Business Credit Reports which are simple to obtain, easy to use and interpret include:

  • A trade and lending summary showing a company’s financial and non-financial obligations.
  • A public records summary detailing any judgments, liens, or business registration with secretaries of state.
  • Three scores to help evaluate a company’s credit risk, payment history and likelihood of business failure.

To help keep an ongoing, watchful eye on critical partner, supplier and customer relationships, Equifax also offers Business Credit Monitoring and Alert services. This service tracks a company’s credit report and sends a daily email if significant changes occur to it. Businesses also use the service to monitor their own business credit scores to help manage their own commercial credit.

To view the press release in its entirety titled Equifax Launches Small Business Program visit the Equifax web site.

SOURCE Equifax Inc.

With Experian launching its new Triple Score Business Credit Report and Dun and Bradstreet joining forces with Transunion and now Equifax announcing its own small business program it’s clear to me that business credit is finally getting the much needed attention it deserves.

Ready to get your business listed with the major business credit bureaus? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners obtain business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, the Washington Post, the San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Business Debit Card: More Than a Checkbook and Better Than an ATM Card

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Business Debit Card

 

Opening a small business bank account is a vital part of running a business. I’m sure you’re familiar with online banking and overdraft protection but let’s cover the key advantages of the business debit card also known as the business check card.

While checkbooks will always play a part in your business the faster and more convenient way to make company purchases, track expenses, and manage finances is with a business debit card.

This card works like your business checkbook and each time you use the card to make a purchase the amount of the purchase is deducted right from your account. Basically the limit on your business debit card is the amount of funds you currently have available in your business checking account.

Now keep in mind some banks will provide overdraft protection and may even offer an unsecured business credit card that you can link to your account. This comes especially handy when you may not have enough funds to cover a debit card purchase.

For example, let’s suppose you have a $500 balance in your small business bank account and have an unsecured business credit card linked to that same account with a $1,000 limit.

You go to the store and purchase a computer for $900 using your business debit card. Since you only have $500 in your account the unsecured credit card picks up the difference of $400 by tapping into the $1,000 limit you have available therefore allowing the transaction to go through.

Another advantage that comes with a business check card is convenience. Each bank that offers a business debit card will either carry the Visa or MasterCard logo allowing you to use your card anywhere Visa or MasterCard is accepted which is pretty much everywhere.

This again comes in handy if you travel because you don’t have the hassle of getting out-of-town checks cashed. You also don’t have to deal with providing two pieces of identification or waiting for check approval.

Maintaining good records is another major plus that comes from using a small business debit card. When you use the card each and every transaction appears on your statement so you can easily track your business expenses which make it a lot easier on your bookkeeper too!

Finally, a business debit card also has all the advantages of an ATM card so you can make cash withdrawals at thousands of locations. When you apply for your debit card the bank will issue a personal identification number (PIN) to help protect the account and prevent unauthorized use.

Even though using a business check card does not build your business credit files it does play a key role in your bank credit and banking history. So use your debit card responsibly and avoid mismanaging your account at all costs.

Ready to start building bank credit and business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building program helping business owners establish business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

FACT Act Furnisher Rules Go In Effect on July 1st: Are you ready?

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Fair Credit Act

 

Last year the FTC and federal banking agencies passed the  Fair and Accurate Credit Transactions Act Furnisher Rules which imposes major new responsibilities for lenders, servicers, collectors and other financial institutions that report information to credit bureaus like Transunion, Equifax and Experian.

On July 1st, 2010 these new rules go into effect and needless to say they are long overdue. Here’s a quick overview of what it consists of:

Accuracy and Integrity Rule

This new rule requires that all companies who supply data to consumer credit bureaus must establish written policies regarding the accuracy and integrity of data it furnishes to the credit bureaus.

In particular I am happy to see that finally the issue of ‘integrity’ of information is being addressed. For far too long consumers have had specific information like credit limits absent from their files. When some creditors do not supply this important data it provides misleading information in evaluating the true creditworthiness, credit standing and credit capacity of an individual.

This lack of ‘integrity’ in data has for many years impacted debt-to-credit utilization ratios, credit scores, financing ability and interest rates.

This newly revised “integrity” provision requires that furnishers provide a credit limit to the consumer credit bureaus, if applicable and in its possession, in order for the furnished information to have “integrity.”

However, on the business side many suppliers and servicers supplying data to the business credit bureaus fail to report the credit limits of businesses.

Unfortunately, this provision does not address the data being supplied to business credit bureaus and the ‘integrity’ of information being supplied in this industry needs to be regulated as well.

Direct Dispute Rule

This rule now allows consumers to take their disputes directly to the company that supplied the data rather than having to deal solely through credit bureaus.

In addition, the rule also includes a debt collector that provides information to a credit bureau as well. It only makes sense because many times a company may sell its debt to a third party collection agency and consumers need to have the ability to initiate a direct dispute with them too.

Now if you are a data furnisher, you are ultimately responsible for the ‘accuracy and integrity’ of your data. Non-compliance has legal consequences so you should prepare your company to meet the new compliance requirements that go into effect on July 1st.

You may want to check out The Consumer Data Industry Association which has a repeat broadcast event with Mr. Stephen Van Meter, Assistant Director of the Community and Consumer Law Division at the Office of the Comptroller of the Currency, and Mr. Andrew Smith, Partner at Morrison & Foerster, for a key discussion on the requirements of these NEW rules.

In their discussions they will cover the new policies and procedures that each data furnisher must establish and implement as well as direct disputes and the required content of a direct dispute notice.

Looking to maximize your consumer and business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A corporate credit builder system providing business credit services for business owners. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Build Business Credit and Protect the Corporate Veil

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Build Business Credit

 

Setting up a corporation helps shield your personal assets and personal liability for the debts or actions of your company. It’s treated as a separate legal entity and you must treat it as such which includes avoiding the co mingling of funds, assets and credit files.

One of the reasons to build business credit that gets overlooked the most is protection of the corporate veil.

Unfortunately, corporate veil piercing is the most litigated issue in corporate law today and is more common with small privately held entities. While there are many factors that can cause this let’s focus on the alter ego theory.

Under the alter ego theory a creditor looking to pierce the corporate veil must prove that the owner did not operate his entity as if it were a separate legal entity. This includes some of the formal requirements such as required meetings and recordkeeping.

But did you know this also includes separating your personal financial affairs from your entity’s financial affairs?

By co mingling assets which involves using personal resources like your personal credit cards for business purposes and vice versa you open yourself up to the alter ego theory.

So does this give you incentive enough to build business credit for your company?

You see one of the underlying benefits is the ability to establish a new and separate credit file that is unique from your own personal profile. By doing this you can obtain trade credit, credit cards, leases and loans strictly in the name of your business.

This enables you to separate the financial affairs of your business completely eliminating both your personal credit and personal liability from the equation.

When you decide to build small business credit, the following are the first basic steps:

  1. Incorporate or form a Limited Liability Company
  2. Obtain a Business Federal Tax Identification Number
  3. Complete Corporate Compliance
  4. Open a Small Business Bank Account
  5. Get Listed with the Business Credit Bureaus
  6. Establish Business Credit History
  7. Optimize your Business Credit file and Scores

As long as you respect this separateness, your business entity will have no issues being recognized as a separate entity and will be ultimately responsible for its own debts.

Now there may be instances where a personal guarantee is required to secure a credit line or loan especially if your business has not established enough creditworthiness but make sure the agreements are properly recorded and formally authorized by your entity if in fact your entity’s management structure requires it.

Remember, proper recordkeeping is critical to protecting your limited liability even when you establish business credit in the name of your business.

Don’t leave yourself open to a possible alter ego theory because you don’t want to have unlimited, personal liability for all the debts of your business.

Ready to start building business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) => 

About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system providing business credit without a personal guarantee. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

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