Having their own successful business is something many millions
of people dream of doing. Many do, of course, but so many
others never quite get around to it. One of the factors that
may discourage people from getting that business off the ground,
is a lack of start up capital; and another may be the risk
of losing their own money.
With a bit of thought, planning and effort, though, it may
be possible for you to not only raise some start up capital,
but do so through business credit. In other words, borrow
against the business rather than personal assets.
You may be thinking that you have no business yet. That may
be so, but it does not mean you cannot obtain business credit
to get your plans started.
Building business credit is completely different from building
personal credit, and it is best to keep them separate if possible.
Some credit reporting agencies will sell a business FICO score
based on both the risk of the business and the personal credit
of the owner. In some instances, the owner’s personal
credit is linked to the business credit, separate credit records
are profitable. You should also bear in mind that you do not
have the same credit protection laws with business credit
as you do with personal credit.
There are some important steps to follow in building a good
business credit record. Here are a few for you to take into
1. Prepare Business Plan And Structure
You are now in the world of business credit, not consumer
credit. This means that you are trying to project yourself
in a business-like way. In preparing yourself to do this,
you will have the added bonus of preparing yourself for the
transition from being an employee to being a business man
or woman. The more business-like you become, the better your
business will do in the future. But first things first. Your
first job is to convince potential lenders you are going to
have a viable business. The quality of your preparation is
important; if you go seeking business credit without doing
your homework, you will be sent back to the drawing board.
To begin with, set up a proper business structure, and if
you require any licenses, make sure those are in place. Also,
prepare a business plan, with the aid of an advisor if necessary.
You can use this to show that you have thought about the business:
the products, the markets, the competition, pricing, and all
the other elements of the business. Be prepared to defend
your projections for sales, and your estimate of start up
and running costs.
Again, this has the added bonus of being a good preparation
for you, regardless of seeking credit for your business. You
will become a better business person for preparing your business
plan. Hopefully, that will stand you in good stead as your
business grows successfully. Planning will become a part of
your monthly or annual routine.
Another preparatory move that will help you is, in the US
at least, getting a business credit profile. This can help
you to build up business credit without using your personal
credit. The benefits in having a business credit profile are
many. Most importantly, you will have more cash for the business,
convenience in purchasing, protection of your personal assets,
limiting of personal liability from the business, and the
ability to prepare your business for future lending needs.
2. Become A Good Credit Customer
You will, of course, need to buy equipment, services, stocks
and other materials for your new business. If you can find
vendors who will grant you credit, all the better; but is
best if they are companies who will report your credit history
to the major business credit reporting agencies. Dunn and
Bradstreet is probably the best know internationally.
Unlike with personal credit ratings, or FICO scores, with
business credit scores income or income potential play an
important roll. The top scores are reserved for the large
stable businesses, but with careful and diligent business
and credit practice, you too can achieve a good credit rating.
3. Obtain A Credit Assessment
In order to enter the business credit market, it is best to
do a credit assessment. This will determine if you comply
with the lender and credit bureau’s requirements. Once
you have done that, look for businesses that issue credit
without the need for established business or personal credit
checks or guarantees. Once you have transacted business with
vendors on credit, you can utilize those references to build
your credit profile with the credit reporting agencies.
In many US states, there are non-profit organizations and/or
government organizations that will help you with obtaining
business credit. Often there are loans available for start-up
businesses or even government grants. Check your state government,
or national government if not in the US, web sites for such
Many retired, or semi retired, businessmen volunteer to help
start-up businesses. If you can, take advantage of such help;
it will all build your knowledge as you set out on the road
to a successful business with a good credit standing. Experienced
business people will forewarn you of many of the pitfalls
of starting your own business, and you will be better prepared.