Most people don’t start looking for capital for their business until it is too late. “Too late” can mean a lot of things: damaged credit, out-of-line ratios, too short of a time frame, etc. These oversights, plus the procrastinator’s itch for a quick fix, are two of the most common ailments we deal with. I wish every entrepreneur understood this truth: accessing capital is a process.

First, you start by setting up the right corporate structure. You need a corporation or LLC. Garrett was talking about the benefits of S Corporations, when to use a C Corporation, and the advantages of an LLC. To access capital under the best terms, you need to separate yourself from the business as much as possible. Having a corporation or LLC is a step you cannot afford to skip.

Once you have a corporation, you need to build a business credit profile. Building business credit is a process too many entrepreneurs want to skip or are so busy that they don’t have the time to dedicate to it. But, you need to find a way to establish a business credit score. In the past, banks relied exclusively on personal credit to approve business loans, business credit cards and unsecured lines of credit. The recent credit crunch is changing all of that. We are seeing business credit becoming a factor in most applications now. Even if the business credit score isn’t used, building business credit will help ensure your business is compliant with the numerous legitimacy checks that banks and vendors will use before granting credit. It’s unfortunate to see business owners skip this critical step.

With a business entity and a business credit profile in place, you’re now ready to start acquiring a mix of financing products. Every business owner needs a couple of business credit cards (a form of cash credit). The right business credit card will give you working capital that won’t report your balances on your personal credit report – this is key to keeping your credit ratios in line for future financing.

It is also important to start accessing vendor credit. Just about everything manufactured or sold by a business can be obtained with business credit. Vendor credit comes in many forms, with net terms (30-90 days to pay invoices) and revolving lines being the most popular. You need to get in the habit of preserving your cash and your cash credit.

Once you have a good mix of cash and vendor credit you’ll be better prepared for bank financing: loans, unsecured lines of credit, and equipment leases. You’ll be prepared because you’ll have strong business credit – multiple lines with a positive payment history and with sufficiently high credit – to warrant larger loan limits from the banks.

If you follow the process, you’ll be rewarded; if you wait until the last minute, you’ll get what you deserve.

• Peer-to-Peer Lending
• Factoring
• Accounts Receivable Financing
• Equipment Leasing
• Trade Credit

You may just find that you can get all the money you need from one or more of these solutions. Feel free to speak with one of our associates if you have any questions or need help with one of these solutions.

When it comes to financing your business, the name of the game is preserving your cash and limiting your personal exposure. I’m surprised at how many people come to us seeking cash to purchase equipment, vehicles, or machinery for their business. If you have access to cash, the last think you want to do is spend it on equipment. Cash is king, and without it a company can not operate and pay its bills. Just about any piece of equipment can be leased (most of the time with little or no money down!). In most cases, it is the equipment that generates revenue for the business – so the equipment literally pays for itself. All the while, you are still holding your cash and enjoying the tax benefit associated with the lease.

Another advantage to leasing is that it is much easier to obtain approvals than with a bank small business loan or line of credit – because there is a secured asset involved. This also leads to more lenient approval criteria, which means you don’t need perfect personal credit to qualify. In fact, if you’ve properly built your personal credit, you can obtain corporation-only leases with no personal guarantees! There is also a lot of flexibility in payment terms and buyout options. Take advantage of this by customizing the lease to best match your situation and business needs. The process is quick, usually consisting of a one page application and a fast turnaround.

As you consider the capital requirements for your business, keep leasing in mind. Not only can you save money, but you can preserve precious cash for growing your business.