The Four Stages of Building Business Credit
By Michael Rosenthal
It has often been stated that building business credit is a four stage process. In the area of financing, this is probably a very accurate statement. A good approach to take with financing is if you were building a home. What is the first stage of the construction process once the land is cleared and the basic utility feed lines are in place? It is the slab that the home will be built on, more specifically, its foundation. Nothing is more critical than ensuring the stability and strength of a home than its foundation.
This is also the case where your business is concerned when you are considering any type of financing as a part of the business credit building process. Once the foundation is in place, you frame the house. Next you take care of the electrical, gas, plumbing, and then the drywall. Then you put the roof on, finish with interior amenities, move in, and start the party. Okay, so it’s not that much fun with your business, but I guarantee you that it is that much work and then some.
The first stage with financing is the Initial Credit Building Stage. You have laid the foundation and done the due diligence, so now you start off taking those baby steps. Apply for some credit, make sure you have decided to incorporate (or not), get all your paperwork and documents done, etc. And yes, there is an order in which to pursue the various levels. The benefit to you is that for every level you achieve, your presence in the market and your credit worthiness get better as well.
The second stage is the Advanced Credit Building Stage and comes with better (if not bigger) benefits than the first stage. Typically, your existing credit limits increase, or you are offered larger credit lines when applying for new credit, financing, and loans. Although you may want to start off with a $50,000 line of credit, nobody wants to be the first one to step up to the plate. The first one is always the toughest one to get, but they get easier each ensuing time if you hold up your end of the equation.
Advanced business credit is normally the capital that is extended from another business (not a bank or lender) to you. These companies will conduct that all important credit check, so having established business credit positively in the first stage is critical to achieving your goals and needs that the second stage provides. Equipment can be financed, and you are normally granted larger credit limits, and longer terms. Chances are now pretty good that you will be able to finance an item that is distributed, manufactured, or sold by another business.
Stage three involves Alternative Financing and Bank Lending. Some financing at this level may require excellent personal credit and personal guarantees, but it isn’t always the case. Bank lending is considered to be the most typical form of financing with unsecured lines of business credit being the norm here at this level. The normal credentials, credit scores, and credit profiles are standard practice, but for larger financing limits and loans, be prepared to have all the ammunition — namely business plans and financial statements.
Also available are the many forms of alternative financing wherein you are not required to furnish a great deal of personal information, usually get approved more readily, and then get slammed with higher interest and shorter terms. I recently helped a Real Estate client rewrite a textbook for one of her online Real Estate CE (continuing education) courses on financing. And even though, it was focused strictly on the Real Estate industry, you would be absolutely amazed at the types of financing and lending that happens in this entity. Here’s some advice. Avoid alternative financing like the plague unless you are literally guaranteed that there will be a quick turnaround in profits and that you are able to pay that off within the schedule terms.
Stage four is all about Banks, Investors, and Venture Capital. This is not for the small business owner because you are in the big leagues now alongside all the business magnates and the more powerful lending sources. I’m not saying this negatively, so don’t rule out the possibilities. That injection of venture capital may be just what your business needs in order to expand, move up to the next level, promote a healthier cash flow, and ensures longevity for your business.
At this level, you are venturing out from the realm of commercial credit and institutional lending and entering the community of angel investors, private investors, and venture capitalists. There is a great deal more sophistication required at this level. Your business needs to either be out-performing the competition or capable of doing so with the infusion of extra funds. Detailed financial statements, explicit growth strategies, and a minimum of two or more years in business are a must — NO exceptions!
Also a good friendly business advice is don’t forget your life insurance we do recomend trying lifeinsurancex.com.au, as we do see many business people that tell us they have regret not getting a life insurance. If you’re looking for a guide to health insurance you can read more here.
How important are trending topics to your business? Business has become social and more transparent to the consumer. Consumers now have friends on their social networks, but also include corporate presences as well. Brand loyalty is now tied into how a company conducts itself on the internet and especially so when it comes to social networking sites such as Facebook and Twitter. How then can a large corporation or small business utilize trending topics to a business advantage?
Businesses are creating trending topics by using funny or shocking commercials either on television or on the internet. Using a hashtag in those commercials has been found to be an effective way to generate buzz on social networks such as Twitter. This buzz then multiplies as it becomes a trending topic.
Knowing how to manage topics and how to generate trending topics is becoming an essential tool in the marketers bag of tricks.
There are good business tools one can use, you can see the best iPhone Business Apps here
Busines Hosting One of the reasons that a company would seek out business credit is for the building of their website. Website can be highly expensive in today’s market because there are so many components and service providers that are required to develop a great website. Besides the design, graphics, web content and SEO, most of the cost will be focused on the area of business hosting. This type of web hosting is imperative for corporations of all sizes to be able to compete in the web market. Business Hosting is an area where your company should not try to cut corners as this can be detrimental in the future when it is necessary to upscale.
Businesses need to start planning their insurance needs before they are hit with massive premium changes from the US insurance companies.
Businesses can start saving on insurance by re-examining their current policies, especially property insurance and health insurance. By being proactive about saving insurance, businesses in the United States can stave off a massive economic problem before it ever comes to light. Saving on insurance now is the responsibility of businesses in every city and state and one of the best ways to manage this is with a professional insurance examiner in the role of a consultant.