For many Americans starting out their own businesses, the key to startup business financing is to “bootstrap”; to use their own personal finances
(PRWEB) April 9, 2008 -- Corporate business solution companies like Business-Tradelines.Com are warning against bootstrapping. Managing Director Adam Stevens warns that using personal assets as a source of small business financing could jeopardize those personal finances.
“I will never advise new business owners to dip into their personal savings or credit cards for startup business financing. A company should have its own legal personality and it should pay for its own obligations,” Stevens, a leading expert on corporate business solutions, said.
Stevens has seen potential clients coming to him for credit help – most of them were queasy about advancing funds on their credit cards and withdrawing from their savings account for startup business financing. He said that there are definitely solutions, but sometimes business owners can get desperate and don’t clearly look at all the options.
Business Credit: The Solution
Stevens advises business owners to use business credit to provide startup business finance. When a businessman uses his own credit line to pay business expenses, the debt shows up on his credit report.
Even if he repays his debts on time each month, it could create a poor debt-to-income ratio, negatively affecting his personal credit scores. Since business debts are usually for amounts larger than personal debts, this can strain the person’s credit.
Business credit is required for a business to establish credibility. Lenders will only lend so much to new business, and they normally do not grant loans to start-up enterprises that do not seem to be good risks. Some lenders will lend small amounts to businesses with low business credit scores, but it would be nearly impossible for them to grant loans to businesses with no business credit score at all.
How To Establish Business Credit
To establish business credit, Stevens said new businesses must first establish business credentials, and they can do two things to achieve this:
- Paying their vendors on time, and
- Permanently raise their credit ratings by establishing good business tradelines from established businesses.
For businessmen who are currently bootstrapping, or sustaining business operations with personal lines of credit, Corporate business solution provider Stevens vouches for the wisdom in switching to business loans and business credit lines; using business credit invariably limits the liability of the owner should the business fail. Besides that, business credit also comes at a lower interest rate.
Startup business financing, however, requires the business to be a separate entity from the owner, at least from a legal standpoint, by turning it into a corporation or a Limited Liability Company.
About Business-Tradelines.Com
Business Tradelines provides corporate business solutions, including startup business financing, to beginning and expanding companies in the United States. Visit the site http://business-tradelines.com/.
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The Corporate Business Solution
from www.360degreesolutions.org on Jun 12, 2008
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