If you are just starting out as a small business owner, you need to understand that your credit is important for getting a loan or line of credit. A business credit history is something that most lenders consider when approving loans, but a startup business will not have this. Fortunately, there are several ways you can monitor your credit and keep your score high. One of the easiest ways to do this is by checking your credit score with a free service such as Nav. This service checks your credit for business accounts with all three major bureaus. While checking your score will not harm your credit, it will give you an idea of how your business looks to potential lenders.
One of the first steps in securing small business financing is to determine your startup’s growth intent. Growth intent has a direct correlation to the goals and objectives of the business. Startup founders are seeking to disrupt the market, grow quickly, and beat their competition. Oftentimes, this means taking out a loan to raise the money needed to grow the company. But if you do not have any cash, you can use an equity line of credit to cover the costs of starting a small business.
The next step is to determine the costs of operating your small business. These costs can attract investors and help you calculate when you can start making profits. You should list the one-time and ongoing costs of your small business startup, allowing you to compare them against various vendors. Some of the most common costs include rent, equipment leases, office supplies, and contractors’ salaries. You should also consider any taxes that you will incur. Once you have a clear picture of your startup costs, you can begin searching for small business financing.
Another alternative to traditional financing is applying for a business credit card. This is a great source of startup funding, and is an excellent way to build credit for your new business. However, if your personal credit score isn’t great, it will be difficult to qualify for a small business credit card. It’s important to note that the amount you need to borrow will depend on the credit score of the business owners. You may also have to provide a personal guarantee for the loan.
Another source of small business startup funding is a personal loan. Personal loans are issued to individuals, and are based on a borrower’s personal credit history. They can range anywhere from $1,000 to $50,000. The amount of the loan depends on the applicant’s income and credit history. Better credit scores are associated with lower interest rates. While a personal loan may be a good choice for a small business startup, be sure to look into the interest rate and repayment terms for the loan.
As with any other business, cash flow is critical for startup companies. Even if you do not anticipate a profit in the early days, startup costs can quickly break the cash flow. Properly managing accounts payable and receivable can help you handle any shortfalls. Therefore, make sure to keep two to three months of operating expenses in the bank for emergencies. This way, if you need to take time off from work to cover unexpected expenses, you’ll be able to keep operating until your cash flow starts building.