Getting venture capitalists to invest in a startup is easier said than done. If statistics are to be believed, only 1% of the startups manage to get their finances from venture capitalists. Rest of the people dip into their personal savings, borrow from friends and loved ones, go the crowd funding way or get a bank loan.
Of course, getting a bank to loan for your startup is one of the best ideas. With banks these days open to offer loans to startups, this seems to be the easiest way to procure finances. However, minus a good credit record, there is hardly any chance that you can get a loan from a bank.
Whether you need a bank loan right away or not, it is always a good idea to build some credit for your business, just in case. Wondering how you can do this?
Here is how you can get some credit for your startup.
Create an Entity
Before you start building some credit for your startup, what you need is to incorporate your business. Banks would not trust any business which has no backup of a legal entity. Getting help from a legal professional would help you to do this in the right way.
Getting an Employee Identification Number
As the owner of the startup, it is not just your company that needs credibility. You too need it and this can be done by getting an employee identification number from the tax department of your country. In case you have used the help of a professional for getting your company incorporated, you can go ahead and ask for further advice from the same person in this regard.
Get an Address and Phone Number
As a startup, you may be operating from the confines from your home, which means you might not have a dedicated address for your business. However, this would mean lesser credibility for your business. What you can do is to get a virtual address for your organization. Instead of using a mobile phone, making use of a VoIP service would get you more credit among the customers and the bank.
Open an Exclusive Bank Account for Business
Placing all your finances in one bank account may seem to be an easier option for you. But, as a business owner, it is always wiser to open a bank account that takes care of all the financial transactions of your business. With an employee identification number in place, you can easily get this done.
Get a Secured Credit Card just for Business
Applying for a credit card seems easy. However, since your company is a startup and has no financial history to show, banks might not be very forthcoming to give you a credit card. However, getting a secured credit card by paying cash would work just as fine. The credit balance of this card would be similar to the amount that you paid to secure it. You can always increase the credit limit by paying additional amount. With your monthly credit reports in place, your business would get the much required credit in the financial sector.
Securing a PAYDEX Score
Did you know that getting a PAYDEX score can actually increase your credibility in the financial market? All you need is a 9 digit number that identifies your business on a global level. There are several organizations like Duns & Bradstreet, who can help you in getting this number. Most of these organizations do not charge any fee for allocating the number.
Making yourself Identifiable
There are several credit bureaus getting your name into which can help you build more credit for your business. These bureaus compile a detailed list of all the companies that are registered with them. This list contains all the details of the company, including the reports of its financial position in the market. Making yourself known to these bureaus will ensure that your name is present on their list, which is what banks generally look for.
Creating a Credit Line
Find out if your business vendors have a facility to offer a credit line. This means they will offer you a credit line and would then send a report about you to their respective credit bureaus. This is another great way of building on some credit for your business.
Don’t Apply Full Throttle
Just because securing a credit card or a loan would help you build a credit does not mean you go ahead and apply for these in every given bank. This could actually have an adverse effect on your credibility and may even present a false picture about your business condition to the banks.
Pay Bills on Time
Did you know that even a single delay in a bill payment is all that you need to mar your business credit? In order to build on your credit, make sure you always pay your bills in time.
By following the above pointers, you can surely build up on some business credit and that too, quickly.
Running a successful start-up is no cake walk (and those of us who are in this business, know it). There’s a fair amount of discipline, drive and dedication involved that propels individuals into action, gives them the confidence to find their way around hurdles, and catapults them towards victory. We are a team of Startup Enthusiast who are always around to help you succeed.