- Posted by Jeff Vacek
- On April 12, 2016
- 0 Comments
- Jeff Vacek, Small Business Funding
Finding small business funding might seem challenging, but it’s much easier than you might think.
We’ve all got to start somewhere when we want to grow our business.
Take for example, business mogul Sir Richard Branson.
He didn’t have good credit when he started Virgin Records!
In fact, he didn’t even have a good deal of money either. He started like many entrepreneur’s using his savings, borrowing money from friend and family and most likely burned up a credit card or two to carry him from month-to-month. You might even be currently doing the same.
Since the financial meltdown of 2008, it’s much harder than ever before for individuals, even those with decent credit scores, to get loans. The layoffs and unemployment have weakened numerous individuals’ financial situations. Add to that foreclosures, bankruptcies, judgments and divorces and you may assume that there is ‘no hope.’ Or is there?
Having Less than Perfect Credit Is Not the End Of The World.
Even if you have an existing company or a great idea for a start-up business, but have a poor or nonexistent credit history, there are options available for you to get your business funded. Here are a few options that may help:
1. Forget big banks as sources of funding.
Due to the 2008 economic crisis, many lenders either failed or consolidated with other larger banks. New governmental regulations and bank consolidations in have driven banks to cut cost by automating their credit decision processes. This has led to strict adherence to lender guidelines and impersonal lending experience. You don’t have what the lenders are looking for then you be denied a loan. Trouble is they most often do not tell you their lending criteria.
2. Home Equity and Personal Credit
Some business owners will use a home equity loan or personal credit to get started. If you have a decent amount of personal credit or equity built up in your home, you could use either for collateral. This can be extremely risky, however, as you are mixing personal and business accounts, putting all of assets at as you will be personally liable for the debt. Also, this makes is easy to the piercing of the corporate veil, if you have incorporated your business.
Remember, you are risking your home and personal credit for any late payments or defaults. When running an existing business or starting up a new one, you may have no idea what your cash flow will look like, so it’s probably not a good idea to use either.
3. Get Business Credit!
According to the U.S. Small Business Administration, “Building business credit truly provides remarkable benefits for a business and gives unique financial advantages in the market place.”
In conclusion, by establishing true Business Credit your company can secure lines of credit, lease equipment, finance a company vehicle and obtain business loans without putting your personal credit at risk.