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Small Business Financing“A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law”. If proper steps to establish and build an excellent credit history have not been taken, applicants for small business financing are in for a rude awakening. Unlike what many people think, it is not an easy process to obtain the business financing and capital most small businesses need. There are specific steps a small business, or individual, must take in order to have a realistic chance at gaining approval for an application of credit or financing. As you read on, the steps one needs to follow may seem deceptively simple on the surface; however, it is very important to note that the implementation of these steps can become complicated. Each step has to be carried out with a great deal of preparation. When considering whether or not to start a business, one must analyze the cash requirements of the enterprise for a minimum of the first six months, and preferably for the first one to two years. The results of this analysis will provide the business owner with estimates of how much cash is needed, and almost as importantly, when the cash is needed. Many business experts refer to cash as “the lifeblood of the business”. Regardless of the term or phrase used to describe cash, be perfectly clear; it is impossible to overestimate its importance. In order to start the cash analysis, the business owner must determine where the company’s cash will be spent. Common expenditures are listed below:
The expenses of your business will probably include the above, and possibly more. The business owner now needs to estimate the sales, and when they will occur. He or She then establishes the need for additional cash by subtracting the expenditures from the sales. Unfortunately, most business startups have, in their initial operations, expenditures that are greater than the sales. This situation creates an immediate need for cash, if the company is to remain viable. The entire preceding discussion was made assuming the business owner would use additional personal cash to support the company, until such time the company could support itself. What happens if the business owner has no more personal cash? One must look at the sources of cash to the business owner, and determine which sources, if any, are available to the company. There are three sources of cash to a company:
The cash requirements from the analysis have shown that neither operating, nor investment activities are supplying enough cash. In fact, it would be extremely unlikely for a business start up to even have an investment account. Therefore, cash must be generated from the third option, which is business financing, or obtaining credit. Small business financing, and the discussion of the various facets of business financing, then becomes the thrust and focus of this publication. Because business financing is one of the three sources of cash, and because during the beginning stages of a small business, financing is the most likely source of cash, the business owner must be conversant at a minimum, and preferably expert at the process of acquiring business financing. Remember, over the course of a business cycle, there is no substitute for cash. Many books and publications have been written on the subject of raising capital for your business. There are many sources of research on where to go to obtain the financing one might need in order to start out in a small business. However, if you have ever tried to go to any of these sources of financing you know it’s not that easy to get the money you’re requesting. The one source many experts fail to even talk about, obtaining business credit is in many cases what the majority of small businesses need to do to start out. Significant difficulties businesses face in obtaining business credit, financing, and capital are:
The bad news is, most small business have trouble with one or more of these. The good news is each of these reasons can be overcome. BEFORE STARTING OUT, every business owner needs to answer a group of relevant, credit oriented questions. These questions will help when you start reading the step-by-step process for obtaining the credit and financing your small business needs. Here are the questions:
Some crucial topics associated with business credit are:
These steps will provide the most logical means to obtain credit, get financing, and raise capital for legitimate business entities, controlled by legitimate business people. The above topics will also advise the business owner on the various business entities that offer the most asset protection, and provide resources that can immediately be used to start building credit, and raising capital that most businesses need. Just as with personal credit, business credit can be destroyed very quickly if the business does not make payments according to schedule. So do it right the first time. Source: David Gass, President & CEO, Business Credit Services, Inc. Business Credit Services, Inc. specializes in helping businesses build business credit and establish an excellent corporate credit history. Download their free booklet How to Build Business Credit at http://corporatecredit.biz ###
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