Whether your firm has been operating for years, or you decided over last night's coffee to start a new venture, you're sure to face the need for business credit. Entrepreneurs often ask friends and family to invest in their start-up businesses, and many draw on personal funds to launch new firms. But to address ongoing business needs – such as requirements for inventory, equipment, and real estate – most firms seek additional help from credit card companies and banks.
Unfortunately, today financial institutions are more wary than
they used to be about extending credit to small companies. And with many business
revenues faltering because of market pressures, even well-established companies
have found it difficult to obtain loans.
As a result, establishing good business credit has become more
important than ever. To convince a lender that your company represents a good
risk, you should first prepare a well-written business plan. It need not be as
long as a Tolstoy novel, but should lay out in some detail your products,
pricing, estimates, competition, and basis for cash flow projections. A clearly
defined business plan will convince potential lenders that you've addressed the
greatest obstacles to your firm's success. Before approaching lenders, consider
your business structure as well. For example, a limited liability company or
corporation may be seen as less risky than a sole proprietorship. The goal is
to present a professional image to convince the lender that your company will
prosper in good times and bad.
To establish good business credit, you'll also want to make sure
all required licenses are current and your firm is registered with the major
business credit reporting bureaus such as Experian and Equifax. Work with
vendors who report to these bureaus so that your on-time payments are tracked.
Of course, the key to building good business credit is making all
your payments on time. As with personal credit, your business credit score will
climb as managers prove their skill at monitoring the firm's cash flow and
their commitment to honoring the firm's obligations.
Also consider having our office review your financial statements before
you send them to the bank. If you need assistance with this or other business
concerns, give us a call at (518) 798-3330.
