Here are the 5 critical steps to obtaining bank funding to build your business.

#1 Start With a Credible Foundation

The first thing you need to do when starting your business is to ensure you meet bank underwriting guidelines. This means having an appropriate business telephone number, business address, website and email to give your business a professional appearance.

Cell phones, residential addresses, and free gmail accounts are “red flags” that will result in your credit application’s denial.

#2 Know What Lenders Want

Lenders are typically looking at 5 main points of your business to determine your approval. These 5 points are commonly known in the lending industry as the 5 “C”s of lending. Some sources can approve you for funding if you have only one of these C’s while most conventional lenders will want to see all five are present in your business before approving you.

The first “C” is cash-flow. Lenders want to lend money to a business that has already proven it can succeed.

The second “C” is collateral. Lenders truly want to see your business has collateral equal to or more than the money you are asking to borrow. Your business can have many types of collateral including equipment, credit card sales, inventory, account receivables, purchase orders, commercial real estate, or other types of collateral that a lender will find acceptable.

The third “C” lenders are looking for to determine your approval is good personal Credit. Lenders will review your personal credit in many cases to determine your approval.

The fourth “C” is business Credit. Lenders will check with the business credit reporting agencies to see what information they have on you. They would like to see that you have good business credit scores and profiles built that show paid-as-agreed tradelines.

#3 Establish a Good Bank Rating

Most business owners never know that they their business has its own bank credit. This credit is how banks rate your business. This rating will determine how much money the business is approved for when applying for credit and loans.

To get the best rating you will need to insure you don’t have regular or common NSFs on your bank account, and try to keep your bank balance as high as possible over a 3 month time period. Banks really want to see that you have an average daily account balance of $10,000 or higher over the last 3 months.

#4 Build Your Business Credit

You want to insure you focus on building a business credit profile and score for your business. This will help you get approved, and help you get approved for even more money. With business credit built you can have double the borrowing power as you can obtain credit personally, and for your business.

#5 Apply for Lending Programs that Favor Your Business’ Strengths

When you apply at a conventional lender they want to review everything. They look at your business P&L statement, balance sheet, tax returns, business and personal financials, business and personal credit, revenue, collateral, and on, and on, and on.

What most business owners don’t know is that you can secure money for your business based on the strengths of your business, without having all these items reviewed.

Some businesses have collateral as their strengths including purchase orders, account receivables, credit card sales, equipment, inventory, commercial real estate, cash flow, or other business assets. Some business owners have 401ks, IRAs, or other securities they can use as their strength to secure funding.

Most types of legitimate business collateral can qualify a business for money. And this money can be secured more quickly than conventional financing, with less headaches, and a much greater chance of approval. Plus most of this type of financing is okay with you having no business credit built and challenged personal credit.

Work with a company who can offer you multitudes of financing options. And insure those options include collateral and asset based lending that lends you money based on your business strengths so you stand the best chance of being approved.

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1 Business Credit Is One Of The Easiest Ways To Get Funds To Grow Your Business

Businesses need money to operate. That money can be difficult to come by if you have damaged personal credit, no assets, and/or no cash flow. Business credit can provide a quick and easy way to get the funds needed and with minimal effort.

This can be helpful with addressing common cash flow problems and other issues that a person might encounter in the course of running a business provided you took the time to build your business credit while building your business.

2. Business Credit Is Cheaper Than Personal Credit

Business loan interest rates are cheaper than personal credit cards and about the same as home loans.

Personal credit cards may be easy to obtain, but your personal credit will suffer as you borrow more and more. Taking the extra time to build your business credit, which rewards you for borrowing, will isolate your personal credit from business liabilities.

When considering the cost of financing you should also consider the risk. The risk of losing your home makes business financing the obvious choice.

3. Established Business Credit Helps Separate Your Business Accounts From Your Personal Accounts

Business owners that freely use their personal credit to fund their business operations are more likely to attract an IRS audit. Without a clear distinction between your personal and business finances, a business owner is also subject to their business’ liabilities, since the law will view the business owner as one and the same as their business.

4. The Cost Of Doing Business Will Be Less in the Long Run

Building and maintaining a solid business credit profile will reduce the cost of operating your business in the long run, and the results can be dramatic.

Look at it this way…

With business credit a person might save:

• $50 per month in interest on a loan
• $15 per month on insurance
• $20 per month on lease payments

What does it all add up to? Look at the savings over the next 5 years:

$85 per month in savings x 12 months x 5 years = $5,100

That’s over $5,000 in savings, all for taking the time to establish business credit now.

The post 4 Reasons You Can’t Afford To Ignore Building Business Credit appeared first on Loans for Success.

• Being hounded by creditors?
• Declaring bankruptcy?
• Being denied a mortgage?
• Paying more than your fair share of interest on your loans?
• Losing your house?

If you answered “no” to one or more of these questions, the following is for you…

Because, if you’re like most entrepreneurs, investors, and business owners, then you’re in danger of facing all of these horrific problems.

And it’s all because of your business.

You see, entrepreneurs typically make one or more financially devastating mistakes when financing the launch, operation, and/or growth of their businesses. In most cases, they don’t realize that they’re making a mistake.

And to tell the truth, even when they do realize they’re making a mistake, they lull themselves into thinking that the consequences will be a minor annoyance.

Then all of a sudden, they can’t qualify for a mortgage…

Or they can’t get the to-die-for financing offered on the new car they’re buying…

Or they’re hounded by creditors and eventually have to declare bankruptcy…

To help you avoid these chilling and all-too-probable consequences, I’ve assembled a list of the nine most devastating financial mistakes entrepreneurs make.

These are critical errors that can bury your business, smother you in personal debt, and destroy your financial future.

Follow our time-tested ways of avoiding these nine entrepreneurial dream-killers, and you’ll be on your way to a more secure, satisfying, and financially rewarding future.

Devastating Mistake #9 – Using Personal Credit to Finance Your Business

The hands-down biggest and most common mistake entrepreneurs make is using personal credit to finance their businesses. Common examples include:

• Paying for business expenses with your personal credit cards
• Obtaining personal loans to finance your business expenses

If you’ve used one or more of these financing methods to fund your entrepreneurial ventures, I’m not surprised. Shockingly, many business-start-up experts recommend these methods for funding new businesses.

Their advice is well-intentioned … but nonetheless incredibly dangerous. The reason for not using your personal credit for business purposes is simple: You WILL destroy your personal credit. It’s inevitable.

By using your valuable personal credit for business expenses, you run the risk of:

Lowering your personal credit score. When you personally guarantee business-related financing, the lender will require a personal credit check. Every time an inquiry into your credit history is made, your personal credit score takes a hit. The lower your score drops, the harder it is to secure financing…especially financing with the most favorable terms.

Reducing the amount of credit available for personal use. The more credit you have personally guaranteed for your business, the higher your debt-to-income ratio soars … and the less that lenders will be willing to give you for personal use. Signing that loan for your business could prevent you from getting a mortgage on the new house you plan to buy a year from now.

Losing everything. When you use your personal resources or credit to finance a business, you chain your financial security to your company’s success. If the company fails, you’ll be left holding the bag … and your personal finances will sink along with your business. You’ll never recoup the “loan” you took from your retirement account to get your business launched. Creditors will be calling you for payment. And if things get bad enough, you may have to declare bankruptcy.

To protect your financial security, don’t use your personal credit to finance your business activities. Instead, take action to secure credit in your company’s name – WITHOUT Risking Your Personal Assets, Lowering Your Personal Credit Score, and eventually, without a personal guarantee.

Devastating Mistake #8 – Putting Personal Assets At Risk

Each time you pledge your personal assets for any type of credit extended to your business, you jeopardize your personal belongings, such as savings and investment accounts, your car, and even your home. If your business can’t pay off its debt, the bank will come looking for you to make good on the loan.

A business entity established as a sole proprietorship is most susceptible to this risk. Although you can build business credit as a sole proprietor, you will be completely liable for all personal and corporate debt.  Your credit history will be based solely on activity associated with your social security number because you will not have a corporate tax ID number.  As a sole proprietor, you also have no legal means for separating corporate and personal credit.

The best way to protect your personal assets is to incorporate your business. You’ll shield yourself from personal liability for the company’s debts and typically will also reduce your tax burden.

Devastating Mistake #7 – Contaminating Your Credit

When people marry, they vow to share their lives. For some good-hearted but financially naïve couples, this means sharing personal credit.

Unfortunately, adding your spouse to your credit isn’t a show of undying loyalty and devotion. It’s credit file contamination – an almost unforgivable sin if you’re a business owner.

When you initiate joint credit, your spouse’s credit history becomes part of your credit file. If your spouse misses a payment, the delinquency affects your credit.

The matter is complicated further if you haven’t taken steps to separate your personal credit from your company’s corporate credit.

Credit file contamination created by a spouse’s credit history could easily keep y0u from achieving your business goals – because it will prevent you from securing the financing necessary to grow your company.

To avoid credit file contamination, keep your credit history completely separate from your spouse’s history.

If your spouse ruins his or her credit, then you’ll still have a good credit history to support your family, as well as your business.

Check your personal credit quarterly to ensure your scores are protected.

Devastating Mistake #6 – Not Paying Your Bills On Time All The Time

You forgot to put a stamp on the envelope and made your payment a few days late as a result. It happens to the best of us, right?

Maybe so, but as an entrepreneur, you can’t afford even a single late payment, business or personal.

Not paying your bills on time can ruin your credit file. A single delinquency can be held against you for years and be used to constrict the extension of existing credit or deny new credit. This is a real problem since it affects your ability to finance the launch, operation or growth of your company.

There are two things you should do to protect yourself from this critical mistake.

1. Pay your bills promptly.
2. Keep your personal credit separate from your corporate credit.  That way, problems with your personal credit history will have no bearing on your corporate credit.

If you do not take all the necessary steps to separate your corporate and personal credit, problems with your personal credit file will likely affect your ability to build your corporate credit and your business.

Devastating Mistake #5 – Using Your Family’s Money

Many small business experts will tell you to persuade your spouse or other family members into loaning you money to finance your business.

Be forewarned: if you convince your family members to finance your business, you’re just digging a deeper hole for your family to crawl out of.

If your business fails – 95% of business fail in the first five years, according to the Small Business Administration – your family could be wiped out financially.

Don’t ask family members to use their personal credit to invest in your business. As we discussed in Mistake #9, using your personal credit to pay for business expenses is a strategic error.

And if it doesn’t make sense for you, the business owner, it makes even less sense for family members. Keep everyone’s personal credit strictly separated from your company’s corporate credit.

Devastating Mistake #4 – Not Setting Up A Corporation And Building Corporate Credit

Many business owners are unaware of the value of incorporation. Even fewer understand the essential steps necessary for building the kind of corporate credit that will enable them to take full advantage of their entrepreneurial status.

Incorporation makes your business entity separate from you, the business owner – a separate entity with its own liability.  Incorporation separates your business assets from your personal assets.

If someone decides to sue your company, they cannot touch your house, car, or anything else owned by you or your family.

But eliminating your personal liability for your company’s debts and actions isn’t the only reason to incorporate your business. Let’s face it. You are in business to make money. And to make a profit and sustain your business, you need capital –in the right place, at the right time – to help your business grow.

By incorporating your business, you enable your business to begin establishing corporate credit, which will ultimately provide the funds you need to grow your business and one day get to the point where your business can obtain funding without a personal guarantee.

Keep in mind, this takes time to accomplish.

Incorporating your business doesn’t automatically qualify you for all the corporate credit you need, much less the best type of corporate credit. Your goal should be to secure cash– not lines of credit that are tied to particular stores or vendors – for which you do not need to offer a personal guarantee.

To secure this “Holy Grail” of corporate credit, you need to follow a well-defined, step-by-step system to build your corporate credit history and business credit score.

Some of the preliminary steps every entrepreneur needs to take to secure excellent corporate credit include incorporating your business, maintaining a physical office, obtain a local phone number and a 411 listing, and get a business license and have a business that has real revenue.

These steps begin to pave the way for building your credit score with business credit bureaus.

After you follow those preliminary steps and provide the bureaus with the information they require, and go through our Business Credit Blueprint program, you will be prepared to approach the handful of lenders who will give you a cash line of credit with no personal guarantee.

In other words, those few lenders will help you keep your business and personal assets separate AND give you the cash you need to grow your business.

Devastating Mistake #3 – Rushing The Business Credit Building Process

Corporate credit can be an invaluable tool as you build your wealth; because it gives you the flexibility to invest money in ways that you have determined will help you build your business.

But just as it takes time and patience to build wealth, it takes time and patience to build the corporate credit that enables you to get cash from lenders without your personal guarantee. Incorporating your business is just the start of the process.

The industry standard for building corporate credit to the point where you can secure cash without a personal guarantee is two to three years.

LOANSFORSUCCESS.COM has streamlined the credit-building process so that you can get the corporate credit you need in as little as one month (as long as you meet the criteria, if you don’t qualify, don’t worry, we will help you understand what changes need to be made in order to help you qualify).

And then follow the steps to position your company to qualify for no personal guarantee forms of credit.

Devastating Mistake #2 – Not Following Through Building Your Business Credit File

Once they begin to follow the prescribed process for building corporate credit, many entrepreneurs simply don’t do enough follow-up work.

But if you don’t keep track of your progress during the process of building excellent corporate credit, you may miss key elements that could make the difference between getting the cash line of credit you need or being denied.

It’s a good idea to follow a step-by-step plan for building your business credit to minimize your investment of time and maximize your likelihood of success.

Devastating Mistake #1 – Not Recognizing Opportunity Costs

At the first sign of profits or the first influx of credit, many business owners spend more than they have – or even more than they will make – on material goods.

Lured by the luxury car or exotic vacation they’ve lusted after for years, they ignore long-term business goals in favor of temporary and immediate gratification.

But if you want to achieve your long-term business goals, recognize that corporate credit and profits should only be leveraged to create greater gains for your business.

Instead of figuring out how much profit you can take out of the business, seek ways to invest your earnings so that it will deliver greater returns for your business.

This is not, by any means, a comprehensive list of all the mistakes entrepreneurs make when it comes to building corporate credit.  But if you address these costly and dangerous errors, you will be on your way to building a safe, secure, and financially sound business—the business you always dreamed of!

The post 9 Devastating Business Financing Mistakes Entrepreneurs Make And How To Avoid Them appeared first on Loans for Success.

Most shelf corporations don’t come with established bank accounts. Some shelf corporations have actual credit problems making it harder to get funding, not easier.

Most lenders know what to look for to see if the corporation is a shelf corporation.

Things like your business Bank Rating could tip them off. Public records also show the change in ownership which raises red flags.

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In certain US states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but required to form a very similar entity called a Professional Limited Liability Company (PLLC).

A Limited Liability Company (LLC) is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation.

The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation, and it is well-suited for companies with a single owner.

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