If you are running a business out of your home, then there are many details that you need to keep in mind. You should probably be reading up on as much information that you can get ahold of on having a business at home. One of the most essential pieces of running a bussiness from home that you absolutely need to know from the start is to get a business credit card to use for everything related to your business.
Unfortunately, as a business consultant, I have talked with far too many business owners that come to me after failing at running a home based business. Why? Poor management of finances. Far too many people use their personal savings, retirement, home equity, and credit and that is a very dangerous thing to do.
I thought that the importance of seperating your business credit and personal credit was obvious, but maybe it is not. Registering your company with the business credit bureaus and getting business credit cards that don’t show up on your personal credit ultimately allows the home based business owner or Entrepreneur to have the freedom to truly keep their personal finances and their business finances separate. This is essential throughout the year and obviously when it comes to tax season as well.
There is no reason why the finances of a home should be mixed up with the finances of a business. Keeping the credit profiles, credit cards, bank accounts completely seperate will set you up for more funding options in the long run.
Here’s the bottom line: Entrepreneurs and home based business owners need to separate their business and more so because they usual operate from virtual office spaces or from home. This will be impossible without registering your company with the business credit bureaus and establishing business credit cards that do not report to the personal credit bureas. So apply If you want a widly succcessful enterprise you must do what widly succcessful business tycoons do. It will make a huge difference to the organization and success of your company and ability to raise capital.
Funding is a major challenge to consider when embarking upon the journey to start your own business. Figuring out where the funds will come from can sometimes become very stressful. This is an obvious obstacle that ultimately prevents many people from starting their own small business.
Bank loans are usually the step that most people take when wanting to start their own small business. Banks do tend to make it tough on the every day person wanting to start their own business.
Obtaining government grants is not as easy as one may think. The US as well as other countries has numerous programs that cater to the needs of potential small business owners.
Relatives or friends
The downside to the suggestion of relatives or friends is that they very well may feel that they own a stake within your business. This of course has no legal binding however; it can create serious rifts between you and your loved ones.
Your personal savings
Dipping into your personal funds is yet another way to fund your small business. This is usually done through a cobination of pulling from savings, retirement, and home equity and is not a recommended way of funding business ventures. It becomes extremely important for a succesful business to seperate business and personal finance.
Private donations or investors
If you feel you have a great new idea for a new small business, you can possibly sell your great idea to potential investors; these are commonly called venture capitalists. The disadvantage of this method is that the idea has to be creative as well as unique; you have to literally convince the investors you are going to make money.
Trade Credit and Unsecured Business Lines of Credit
These are two option often overlooked in funding new business. Trade credit and credit lines in the name of the company are easy to obtain if your business has a strong business credit profile seperate from the owners personal credit.
How much would it help if you could access $25k, $50k, or even $100k for your business? Have you ever made a decision to not invest in your business because of money? Today at my Jump Start Workshop i worked hand in hand with 12 business owners just like you; Showing them strategies to get the money they need to start, invest, and grow their business in this weak economy!
It really is no Accident. I can show you how too. Don’t Miss The Next Workshop!
See what they have to say:
Steve Halen, My Trade America “I got 3 credit lines set up today!”
Danielle Moruffo, Elite Financial “Shameca is Awesome!.”
Jodi Rubin, Window Wonders “I got $72,000 in 3 Weeks!”
At The Workshop You’ll Learn:
- 7 Steps to Funding Your Business Using Other People’s Money (OPM)
- A Secret Super Tool To Get Easy Funding That’s Often Over Looked
- How to Get $25,000 in as Little AS Two Weeks
- The Thought You Are Having Right Now That Stops You From Getting Approved and How To Over Come It!
- Simple Strategies to Unconver Hidden Profit & Cash in Your Business
As the owner of a company the task of obtaining capital for your business can be quite intimidating. The reason most businesses are unsuccessful because they don’t have the slightest clue where to begin in the funding process. This is why seeking expert assistance is so important. Here are 5 compelling reasons your company needs a Cash Flow Strategist to obtain Capital.
1. Out of the 7 million businesses who apply for funding each year, 5.6 million don’t qualify at banks.
2. The Small Business Administration reports that 97% of business loan applications fail.
3. 80% of businesses fail in the first 5 years due to lack of capital
4. Lenders are placing more emphasis on business credit scores. The business MUST have three separat business credit scores.
5. Attempting to obtain business financing using personal credit can severely limit the amount of capital available to the business.
This is why many business owners turn to a Business Finance Consultant to help them create a funding plan, establish their business credit and navigate the business funding maze.
Shameca Tankerson, is a Speaker, Trainer, Author, and Cash Flow Success Mentor to entrepreneurs and service professionals. Using a proven system, she opens a candid dialogue about money that teaches her clients how to breakthrough to their next income level and expand into a cash flowing business with a new collaborative business model that is liberating, Inspiring and Powerful. To Get your F.R.E.E. “Spark Your Cash Flow Financial Success Kit” – Making Room For Money: 5 Financial Mistakes Entrepreneurs Make That Sabotage Their Cash Flow (And How To Avoid Them). Visit: http://www.MakingRoomForMoney.com
Costly Mistake #10: Rushing Your Business Credit Profile!
Two Words: RED FLAG
Dun and Bradstreet Partners with the federal government to provide information on small businesses in America. One of the biggest components is fraud. There are certain activities within a business credit profile that will cause a company to get on D&B’s Radar. One activity is quickly beefing up a credit profile in a small time frame.
Remember organically a company builds good business credit in about 3 to 4 years, so, if a start-up or young company initiates the companies profile and has 5 or 6 new vendors reporting every week, that activity will seem suspicious. Once a company has been red flagged by D&B it is very difficult to obtain business credit.
The hottest sources in lending today are based on cash-flow. The types of businesses who are succesful at getting $50k to $150k in business capital have distinct characteristics. Businesses in these targeted industries can expect to easily get bank loans, unsecured business lines of credit, working capital, and trade credit.
- Small, Growing businesses on Main Street
- Have Walk-in customers, many transactions
- Steady cash flow and a small cushion for unplanned needs
- A desire to grow, and a plan on how to do it.
You can achieve a 90% probability of getting a $20k loan with:
- $25,000 per month in credit card volume
- $10,000 average daily bank balance
- FICO Score 640 or higher
- Revenue of at least $300k
Industries that Can Get up to $150k in as Little as 2 Weeks:
Restaurants, Medical & Dental Offices, Retail Stores, Franchises, Consultants, Warehouse/Distribution, Manufacturing, Small Grocery, Contractors, Commercial Janitorial, Staffing, Automotive Parts Shops, Automotive Repair Shops, Florist, Dry Cleaners, Pharmacies, Salons and Spas, Pet Care, Apparel, Furniture Stores, Gift or Novelty Store, Small Gas Stations
Costly Mistake #2: Destroying Your D&B File by Checking it Yourself!
Can you go to Dun and Bradstreet and check out your own profile or check to see if you even have one? Yes, You Can!
But here’s the problem, if you go to Dun and Bradstreet too early and pay them to set up a credit profile, they’ll give you a number and access to log in to see if you have a credit profile. That won’t help you if you do not have a profile with D&B.
Depending on what package you get. The package can cost anywhere from free to $700. With the purchase of some of those packages they say they will build a credit profile for you. They really won’t do it. They’ll just get a number for you and they’ll see if there are any vendors you currently work with that will report.
Then when they start to check your corporate compliance, if everything isn’t in order, they will redflag you or put comments on your file. “Secretary of State lists this persona as a CEO. This person from the company listed somebody different as its CEO.” They will start putting things in your file that is potentially negative information. (insider information from a former Dun and Bradstreet employee)
In this economy credit can be difficult to come by. What would it mean to your business if you had another 30-360 days to pay the companies bills? The truth is NO lender will give you a loan specifically to make payroll (with no assets as collateral).
BUT, the company could use TRADE CREDIT to preserve cash flow. This means use business credit with vendors for office supply items, computers, printers, envelopes, gas, etc, and free up the CASH you need for things your business can not get on trade credit – like payroll!
Here are 5 steps to securing Trade and Cash Lines of Credit for Your Business.
1. Understand the Role of Personal Credit
Although your personal credit score is not the deciding factor on whether or not your company gets business credit, it is part of the equation for determining what type of credit your company qualifies for.
2. Register a Business Entity
Sole proprietors CAN NOT build “true” business credit. In order to build a business credit profile the company must me an LLC, S-Corp or C-Corp.
3. Create a Strong Business Image with a Paydex Score
Establishing an image of stablity for your small business or start up business is essential. Companies where you do business, as well as lending agencies and customers will scrutinize your business profile carefully. Strong business credit happens by building business credit with a Paydex score.
4. Hire a Professional
An expert in the area of business credit has already done the research, knows how to accurately build a companies business credit profile and have built an extensive list of funding and credit sources that are lending money is this economy. Don’t risk being turned down or red flagged.
5. Manage Your Companies Image
Your business image is developed through organized administration and implementation of systems in all departments. It is also influenced by your ability to manage your finances and the strength of your business credit Paydex score. Pay your credit accounts on time.
Costly Mistake #1: Starting Your business as a Sole Proprietorship Will Prevent Your Business from Accessing Maximum Capital!
Over 70% of all small business owners still operate as sole proprietorships. The problem with sole proprietors is they self-finance their business with their personal credit cards. Unfortunately, the accounting world is telling these people, “You don’t make enough profit to incorporate, stay a sole proprietorship and keep it simple.”
But this really shoots them in the foot when it comes to financing later. I’d rather see people incorporate as soon as they get started. Stop using their personal credit cards, get the business credit cards (not psuedo business credit cards), and begin using them. Protect your revolving debt and keep it as low as possible.
If your personal revovling debt is 80% -90%, you are automatically going to get rejected by the bank when you apply fo a business credit card, or you may get a very, very low limit. It is extremely important that you incorporate as soon as you start your business and stop using your personal credit cards. Keep your revolving debt low, and work on your personal credit score.
During our current unc
ertain economic times, banks, credit and financial support has changed dramatically over the last couple of years. Even with governament bail outs of banks, most are not supporting you, the entreprenuer. Although they have cleaned up their balance sheets, they have not loosened their criteria for you to secure a bank credit card, loan or line of credit. However, THERE IS HOPE. That hope is in building strong business credit for your company. There are over 18 million small businesses in the United States and over 90% don’t know about “TRUE” business credit.
As I work with small business owners on a daily basis we use business credit as our secret weapon. The business credit profile allows us to take any business and give it the extra life it needs to survive and prosper during economic uncertainty! So over the next several weeks I will blog about the top 10 costly business credit mistakes to avoid.