Real World experience with Business Funding

Regardless of what people will try to sell you, there some simple basic fundamentals to obtaining business credit in the general sense. The main ones are good personal and business credit profile or good strong history in business. Lets break this down.

1. Good Credit Rating – If you have good credit ratings today, you could get some degree of business credit or what is called unsecured credit. Normally this is in the region of maximum $100K per bank as above that would probably need other documentation. Now a provider could offer the good personal credit piece to ensure that you get credit but you would also need to build up the Paydex score to 80 or so.

2. Good Business History – This is the area that I think gets confusing. If you have an older company and some good trade lines showing high amounts with good payment history, you maybe able to avoid the personal guarantee requirement. The requirements for this is very strict as then you may need to supply tax returns showing that the business actually was doing stuff for some years. This is where some providers tend to offer services but then again, they need to know what they are doing to pull it off. In any case, they need to provide some guarantor to get large credit lines for the business anyway.

3. Small Loans – Looking back at #1, you may be able to get smaller amounts without any personal guarantee per institution. This could be in the region of $50000 or less. Again, you have to pick banks that are friendly with this stuff.

In terms of personal guarantee, its always good to avoid this as when the business fail, they will come after you for the money and not just the business. However, you may need to work with a reputable provider to get the guarantee in order to get a descent loan otherwise, you will not get much from each bank.

This is going to be a fairly short posting on the world of shelf Corporation funding. Whenever you search the Internet, you get conflicting views on what you could obtain with a shelf corporation in terms of business funding.

The issue to me here is to make sure whomever offer you this service can explain why this would help getting the bank to fund your business. For example, will the transfer of ownership at this point negate the age of the company? Is it a case that the bank may not have ask about this but when they do, it would change their view on the company’s age?

Some quick pointers to approach all these providers with out there.

1. Make sure your payment for service is secured. Make sure Credit cards are your preferred way of payment at all times. Lots of promises out there and not many can deliver.

2. Make sure the provider can explain why they can provide you the service that would get funding. Please note that they can’t guarantee the funds but they should be able to explain that their approach has gotten funding in the past and the chances are good in the future.

3. Research the providers and their names. Lots of time they may already have some bad reputation out there on the Internet so this would help to eliminate those repeat offenders. Of course they may use an alias to offer the business so look out for that. Who knows tell them you want to do a background check and see how they react.

4. The issue of secrecy to me can be tricky. Many of these providers will not provide any information to you during the process as they claim you will circumvent the process. Most times this does not make sense as if you could do that then why would you pay them in the first place. There are legal ways for them to protect themselves in this arena, so stick with first principle, know what is going on, we are all adults.

5. Make sure they explain the time lines on these properly. What I have seen is that most of them do miss their own deadlines so often. Let them explain to you each step and what is the time allowed realistically. Also make sure that they present risk at each step of the process.

The more I experience these companies, the more I realize that they refuse to abide by conventional terms mostly because they have no intention to deliver as promised. In other words its to get your money and drag things out while they try to scam others.

This method of shelf corporation funding could help to satisfy your funding needs but its not an easy maze to navigate in todays credit market.

Well, you know, everyone could have a business literally if they had the business funds to satisfy the scale that they want. In other words the more funding you have, the more freedom you have to pursue your business goals more effectively.

On the flip side funding does not help if your plan is flawed but if the plan is well positioned then funding would help you to propel yourself forward very fast. The key is that you need to think through what you want to achieve before you pursue money to get the venture going. What value are you bringing to customers/clients or the shareholders of your business.

In saying that, there are several ways to achieve funding for your business venture. I will try to present them based on the effort levels required to do this.

1. Bootstrapping – This is the case where you have no assets or money in the bank to pursue your dreams. Most times in this case, the best option is to look at providing services or information as your initial product to generate cash to expand your business. Whether you have cash upfront or not, cash flow is the important driver of a successful business.

2. The Business Plan and Idea – This is the case where you have a good idea that you can tap friends and family to help with your business funding. The next level to this is either angel or venture capital funding. The idea that you present and how it offers a good long term business opportunity is the main selling point here. Now in this model, you could lose control of the business so its a tight rope to walk.

3. Bank Financing – This is the case where you focus on getting a loan from the bank. In todays market, it’s very tight so you would need to have very good credit history and your business plan in case needed. Alternatively, along this line, you could look at the many services out there that could help you to obtain business financing. You will need to be careful as they could take your money instead of getting you funded. However, it is possible and could save you the trouble of using your name to guarantee the loan directly.

4. Private Investors – This is kind of similar to #2 but this is the case where you get rich investors to buy into your idea and fund the business over the specified period of time. Most times they want to get out by about 5 years and this gives you the option to buy out their share of the business.

5. US Regulation D – This allows you to offer shares in your company in a limited sense but could get you more than enough to start out plus will not have to lose control of the business.

In the end my view is that you can approach funding in two ways, 1. raise money yourself directly and build on that or 2. Bring others on board to push things faster along. Both of these have upsides and downsides but don’t create constraints by having too much bias on how you get the cash, focus on getting your idea out there and working.