Author: Catherine Tardy
Building business credit is a key component of the creation of any business. So when first starting out, entrepreneurs often ask their friends and family to invest in their businesses, and they also will draw heavily on their personal funds. That kind of investment might be the easiest to get, but it’s also usually a limited pool (unless your uncle is Bill Gates or Warren Buffet). Eventually, you’ll need to get banks and other credit companies involved.
This is what you’ll need to do to convince someone that you’re a good investment:
- Write a business plan. There are websites and apps out there that will help you do this and make it look professional, but you’ll still need to make sure that it’s well written. Get one of your friends that was an English major to help you out by reading it over (and maybe give them a couple of bucks for their trouble). It should be more than a few pages but less than a slew. It needs to include some detail and thought about:
- Have your paperwork up to date. If there are licenses or registration that your business requires, you absolutely need to make sure that everything is up-to-date before you seek additional funding. If you don’t have the licenses and other paperwork current, that’s a huge red flag to a lender that you may not be responsible with their money either.
- Pay on time. Another thing that lenders are going to look at when making decisions about your business credit is your previous history. As you pay your bills on time and monitor your cash flow properly, your credit score will rise.
- Product(s) or services
- Competition and other obstacles
- Basis for your cash flow projections
- Your business structure
There is something that we can directly help you with on this score. We will review our client’s financial statements before they send them to the bank or lender. We make sure that they give an accurate view of the financial health of your company. If you need additional advice or just assistance with business credit or finances in general, you should consider calling us at (505)255-1617.
Catherine Tardy, is a CPA at Tardy & Co., PC. As a consulting accountant, she helps startups, small and midsize businesses plan out and establish or expand their companies.