Every business owners understand the fact that whether you’re a start up or an established business, access to financing is a must. The lesser is the cost the more cash-flow friendly and better it is. The reason is many of you don’t have the needed cash flow in the initial business stages.
At Merchant Advisors, we’ve helped thousands of small business owners who were in their initial business stages with their cash flow needs and seen some frequent business financing mistakes they have made.
Forming Business Percentages
Many small business owners make percentages mistakes while forming business ownership. Meaning they never do think of credit profiles before forming an ownership or percentages of ownership in case they have a business partner, a spouse, or both. Most businesses don’t require millions of dollars. But, there are chances that most owners have bad credit ratings and their business partner or spouse has better credit. So, while forming a business discussing this aspect is important with your attorney.
Did you really know if one among the partner or spouse is willing to use their good credit to help the business started? Well, If you’re in need of little capital to get started, it can be done by using a few credit cards with 0 interest rates and low monthly payments. Most credit card lenders only need you to have a little business ownership percentage or to have the authority to borrow on behalf of the business. If you can separate your business credit form your personal credit, you can be much better off.
Keep in mind, one scenario doesn’t always work for you so do your homework first and ask questions before starting a business unless you can’t get funding later.
No Planning On Usage Credit Card
Using credit card for funding can be good or bad, like many other funding solutions. Many credit cards lenders offer zero interest intro rates, no collateral and also provide protection to borrowers. Many smart businesses has cashed in nicely by paying little or no interest rate on credit card financing.
Deciding on how to utilize is them is important else unplanned spending can hurt your business. You should decide first on how to use them. Many research studies have shown that use of small amounts in credit card by start-ups resulted in a big increase in business income. It’s obviously not a bad return. Therefore, you should plan ahead on using cards wisely and separate your personal and business credit.
Doing Nothing About Your Credit Score
You started a business, hire professional workforce, decide whether to have an LLC or a C-Corp, create a solid business plan, found the best lender for your business, and when it comes to your credit score nothing was really done. So, how did you planned to get your business loan application approved?
As a start-up, your credit and professional background are among the important factors lenders consider when lending. If your credit is bad– believe it you won’t get a penny. Take your credit as your asset. Understanding credit is daunting but not a rocket science. Learning the basics and distinctions between FICO scores and FAKO scores can put on the right track!
Ignorant Of Your Start-up Funding Options
Everything starts with identifying your options. Once you know them making decisions and proceeding with the confidence will go hand in hand. While searching for your financing options, look around and search the internet for startup funding options, ask friends and family members, visit a local bank or discuss your requirements with the local lending agencies.
It’s never too late to take action. If you didn’t understand some of these business aspects – start learning them. Learning and taking action accordingly is what makes a business succeed. Best of luck to all the inspiring start-up businesses out there and let us know what we missed.