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Discover Secured Business Credit Card For Your Start-up
Every aspiring business owner has ideas they want to turn into a business. Sadly, few have a firm financial foundation to boost or scale up their ideas into a business.
So where should they turn to for financial assistance? Chances of receiving assistance or funding are often slim. Investors and banks alike are not willing to fund an idea. In reality, therefore, you will need to dig deeper into your pocket to bootstrap your business to success.
Securing financing to start and grow your business is not easy, though. But it’s possible. This post looks into seven ways to help acquire funding for your business.
Grow your own credit
The fastest way to secure business credit is to ensure your personal credit is well-maintained and rock solid. This is a fundamental step to get your foot in the bank doors. Banks will look into this. Things will even be better for you if you’re just starting up.
So this is your chance to prove to them you’re credit-worthy and can maintain a healthy business. In the future, you’re likelier to get fast loan approvals. See here, how to increase credit lines.
If it is not in order, dedicate time to improve it. This helps increase your chances of securing credit to start or skyrocket your business, especially if your business credit is new.
Spend some time learning and internalizing principles of business credit
Intricately learn how it works before you secure it.
For instance, business credit uses a PAYDEX scoring system (works almost similarly to FICO for personal credit). Several factors determine your PAYDEX scores, including usage of payments, repayment history, and trade lines.
- These scores range between 1 and 100. In the case of a new business, you’ll need to report at least 4 trade lines before a PAYDEX score is issued.
- Typically, like personal credit scores, the higher scores mean better financing for your business.
Point to note: You must first register for a D-U-N-S number prior to getting your PAYDEX score calculated. Read more about the D-U-N-S number here.
Build excellent rapport with lending institutions
To better access credit, it is imperative to keep things healthy between you and your lender or better yet, a personal banker.
The latter can go out of their way to ensure you get the right financing to scale your business. This is mostly true if they understand your business, how it works, and who’s running it.
If your relationship with a particular bank is solid, and in good terms, this will help speed up access to financing. This is how you create a strong relationship with your bank.
If on a personal level you are in good terms with a bank, it proves you’re a great client. The same relationship can extend to a business level, too. So ensure your personal history is worthwhile.
Consider smaller banks and credit unions
Sometimes it is difficult to convince a bank to fund your business. However, credit unions and smaller banks are more willing to sit and review your business plans. So take any meet up with them seriously, and make sure they understand how your business generates income.
If you do this, it’s easier to get credit to scale your business – and at favorable terms as well. Small banks are easier to build a strong relationship with. Why? Because they’re more flexible to how they fund businesses.
While you can equally work with larger bank institutions, it is important to create a relationship with these smaller banks as well.
Closely monitor business credit
Almost everyone or a few people monitor their personal credit. This helps you understand your spending habits, and how much credit you’ve utilized over a given period of time. There are so many factors that come into play when monitoring personal credit including the age of accounts.
The same applies to credit for your business. On the business side, you have a system that closely monitors and builds credit for your business as well. Monitor your credit history, ensure to understand how it works, and pull up reports every month.
Have primary contact details
How does this establish credit, you ask? Contact details are important for your business, but you need to have separate contact information for both your private and business activities. In other words, have a separate email, physical address, and phone number for each.
Quite an insignificant step, but really essential. See, when you give out your contact details, you can have your business registered on a business directory. Most agencies comb every business directory to collect businesses information.
To verify that your contact details are relevant and accurate. Your business exudes legitimacy and reliability when you create primary contact details for your business for easy reach.
Don’t borrow from those who don’t report to business credit bureaus
Having a stellar payment history is perhaps the goal of any new business. But is your stellar performance recognized by relevant authorities? Not every lender reports your good repayment behavior to credit bureaus.
This affects your borrowing behavior in future as no credit score is established. To counter this, ensure to look for a lender who routinely reports borrower’s credit history.
There are other tips and strategies to secure credit for your start-up. But the above seven will help provide a solid financial foundation to spur your businesses growth.
Remember, always maintain your own credit. Understand credit, and what benefits it brings to the table for your business.
It is also important to build great rapport with your lenders. What if the banks don’t offer much assistance for your new business? You have the option to consider smaller banks and credit unions.
Monitor your credit as well. Keep your business and personal contacts different. Don’t forget to avoid borrowing from lenders who don’t report to credit bureaus.