How To Get Started - Entrepreneurs With No Credit History

For an entrepreneur with no credit history, getting needed financing can be a challenge. But there are steps you can take, even while building your business, that can get you access to borrowed funds and build your credit history.

Know the Five ‘C’s’

For the small business person seeking financing, even those with no credit history, it’s vital to know what lenders look for when considering loaning money to you. Beyond the statistics, be aware of the five “C’s”:

  • Capacity. Do you have ability to repay a loan through your business’ profits?

  • Capital. This your personal investment in your business.

  • Collateral. This can be other valuable property you have to secure a loan or even a co-signer who will pledge to repay if you can’t.

  • Conditions. Are you using the loan to build your business or on unnecessary (at the time) expenses?

  • Character. Don’t underestimate the importance of your personal history in your community and your reputation.

Even if you are not in a position to borrow immediately because of no credit history you can begin preparing yourself now by taking positive action in each of the fives “C’s.”

Personal History

As an entrepreneur starting your business with no credit history, you might have to rely on your personal financial history to get financing. While this will not build your business credit history, it is an important component of your overall financial picture that business lenders will take into account when evaluating you.

This means that it is imperative you build and maintain good financial habits, paying your personal debts on time, building your personal credit history and score.

Business Credit Cards

Business credit cards can be a great way to begin building business credit history when you have no credit history. Make sure the business card is not and add-on to your personal credit cards. Get the business credit card in the name of your company apart from your personal cards.

Maintaining Your Accounts

If credit options are limited for you as an entrepreneur with no credit history, begin by establishing business checking and savings accounts with a local lender. Develop a relationship. Move your accounts to an automatic overdraft, which is a form of lending.

Standard checking and savings accounts will not build your credit history, but they will establish a track record of reliability (“character” in the five “C’s”) and develop a relationship with a lender.

Your Credit Profile

A credit profile with a company such as Dunn & Bradstreet will cost about $700 but most companies with which you will try to establish business borrowing relationships, to include office product or equipment companies, will expect you to have a credit profile.

The majority of small business profiles are for businesses with fewer than 50 employees, so don’t think you’re too small to get a profile. You only want to start building this after taking the above steps and beginning to build your business credit history apart from your personal credit history.

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