It is estimated that approximately 250,000 people start businesses every year in the United States. Financing is often thought of as the real stumbling block for many entrepreneurs.
So the million dollar question becomes: How will I get the money to start my business?Awareness is the key to start you off on your journey toward a solution. Knowing the questions you will be asked, understanding the obstacles that will be thrown down like gauntlets, challenging your every move, and being armed with information will provide you with the ammunition to succeed. I will “walk” you through the process I’ve learned from others and a few courses I charted myself.
I’ve read many interesting stories about people bootstrapping their business by using their personal credit cards. I’m sure you have heard or know someone who has done the same thing as well.
Using only your personal credit to finance a business can be risky business. If you max out your credit cards and some unforeseen event take place which requires obtaining additional finances, you will be rejected everywhere you go. You’re considered high risk and banks don’t lend to high risk Entrepreneurs, period. In addition, you don't want to have to ask Vito, Luigi's cousin, for a loan!
Short of having an armed associate accompanying me, the protective shield of a corporation was necessary. Without the benefits of a corporation, business owners are literally saying to their creditors, “If my business cannot pay its bills, please come after my home, bank accounts, car, jewelry, furniture, and all other personal assets to satisfy the debt.”
The legal services for arranging my corporation was relatively inexpensive. The tax ID and corporation registration cost less than $300.00. Indeed, it was also preferable to hiring someone named “Luigi”.
I had never heard of business credit and once I did I began to take baby steps toward building a powerful business credit score. While working on my business idea I also worked full time consulting. It was challenging, the road filled with potholes and blind alleys, so fortunately I made the decision to keep a salary coming in as I pursued my business dream.
Don’t quit your day job just yet! After all, building business credit requires you to spend money, and depending upon your business model, perhaps lots of it. You will need to make purchases that your business needs and the vendors will report your payment history to the business bureaus, thereby establishing your business credit history.
It is important to start strong, pay invoices on time, and develop good relationships right from the get go.Finally, if you have someone named “Luigi” in your entourage, I would strongly suggest a corporation for protection.