Experience is the Difference®

Whether your firm has been operating for years, or you decided over last night's coffee to start a new venture, you're sure to face the need for business credit. Entrepreneurs often ask friends and family to invest in their start-up businesses, and many draw on personal funds to launch new firms. But to address ongoing business needs – such as requirements for inventory, equipment, and real estate – most firms seek additional help from credit card companies and banks.

Unfortunately, today financial institutions are more wary than they used to be about extending credit to small companies. And with many business revenues faltering because of market pressures, even well-established companies have found it difficult to obtain loans.

As a result, establishing good business credit has become more important than ever. To convince a lender that your company represents a good risk, you should first prepare a well-written business plan. It need not be as long as a Tolstoy novel, but should lay out in some detail your products, pricing, estimates, competition, and basis for cash flow projections. A clearly defined business plan will convince potential lenders that you've addressed the greatest obstacles to your firm's success. Before approaching lenders, consider your business structure as well. For example, a limited liability company or corporation may be seen as less risky than a sole proprietorship. The goal is to present a professional image to convince the lender that your company will prosper in good times and bad.

To establish good business credit, you'll also want to make sure all required licenses are current and your firm is registered with the major business credit reporting bureaus such as Experian and Equifax. Work with vendors who report to these bureaus so that your on-time payments are tracked.

Of course, the key to building good business credit is making all your payments on time. As with personal credit, your business credit score will climb as managers prove their skill at monitoring the firm's cash flow and their commitment to honoring the firm's obligations.

Also consider having our office review your financial statements before you send them to the bank. If you need assistance with this or other business concerns, give us a call.

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Business Loan Application - Delaware Business Accountant, Corporate Tax CPAFrom afar, the commercial lending process may appear comical. On one side of the desk you have the lenders, who want to manage their risk by loaning money to only successful business owners. On the other side of the desk, you have the business owners — many of whom believe they can’t truly become successful until they get the money!

To avoid this disconnect, you have to approach business financing as a partnership rather than a provider-customer relationship. If you were going into business with someone, you’d want to clearly understand his or her vision for your venture. It’s the same with lenders.

What’s the plan?

For example, say you’re asking for money because your company is so far behind on vendor payments that it needs the working capital to catch up. In this scenario, you’ll need to make a case for how catching up on payments will allow you to get the raw materials needed to make a big push forward on sales.

Or, as another example, you need money to open a new location in a city nearby. Here, you’ll have to produce some solid market analysis that explains to the lender why your business stands a good chance of succeeding in a new locale.

How shall you put it?

Before you ask for a loan, devise a clear plan for what you want to do with the money and how you’ll repay it. You and your top managers should be able to verbally articulate your plan, of course. But craft a written statement as well.

The written statement doesn’t need to be a 50-page proposal bound in embossed leather. It can be one page as long as it clearly describes your strategic challenge, your plan for overcoming it, and where and how the lender’s money plays into this solution.

Need some help?

The lending process can be daunting and, at times, frustrating. We can assist you in gathering and presenting the right financial information to secure the working capital you’re looking for. Call us at 302.225.5000 or email at info@gunnip.com

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Experience is the Difference®

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