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How to Build Business Credit Now and Later

People are always asking me for tips on how to build business credit. The joy of building credit for your business is there is no exact steps that need to be followed. Don’t get it twisted, though, because obtaining proper credit does require a process. Some steps need to be completed as soon as possible as others can be done at any time. You should be building credit at all times because you never know when you are going to need it.

Let’s take a look at how to build business credit now and later!

Create A Plan

The first thing I tell people when they ask me how to build credit is to make a marketing plan for credit for your business. That plan should be reviewed and revised on a monthly basis.

If monthly time frames do not work for you, try having a weekly plan instead. A good goal per week is to find one avenue in business that will build you credit. How to build business credit starts with an organized plan and finishes with you completing the plan.

Find Lines Of Credit That Work For You

You may feel that you are asking how to build business credit because of all the stories you heard. You are not sure what is right, wrong, legit, etc. My best piece of advice is to consider what you want you business to be about and go from there.

Let’s say you have a bad credit score for your business, you will probably want to look for credit specifically for people with poor credit. Obviously, regular credit cards will not work if lenders will not grant you one in fear you are not going to pay them back.

There are many types of credit lines that can work for your specific situation; take advantage of them. Do not be afraid to ask your lender for help in choosing the right type of credit for your business. It really will help you in the future.

How To Build Business Credit After Your Business Is Established

I have talked about how to build business credit from the beginning of your business. The most important thing is to register your business, and create a business address and phone number. However, you may be wondering how to build business credit after your business is established.

The easy answer, again, is talk to a lender. A lender will be able to tell you your business score, credit cards that are right for your business, loans that are right for your business, refer you to credible vendors, etc. They work with individualizing credit for business owners everyday. You can trust their suggestions.

The basic thing I tell business owners on how to build business credit is to never stop building it! You may read in a business magazine a year from now about a new topic in credit for a business. Give it a try! You may earn a little bit of credit from it, but isn’t it worth it?

So, instead of wondering how to build business credit, you should wonder how to always have enough credit in the case that you need it to keep your business going!

Main Street Vs Middle Market – Business Sales

When preparing to sell a privately held business, it is important to determine which category the business falls in – Main Street or Middle Market. The classification of a business will determine several important strategic decisions including: How it should be valued, how to market the enterprise for sale, the type of buyer likely to be interested, and the business intermediary firm appropriate to engage for assistance. The goal of this article is to highlight the distinguishing features of Main Street and Middle Market businesses and to review the major differences in the sales methodology.

Main Street & Middle Market transactions are most often delineated by the size of the business either in terms of revenue or earnings. There is not a universally accepted definition of size and, most often, a business intermediary firm will adopt a specialty formula. The majority of lower middle market companies fall in an area where they are too small for investment banks and too large for the average business broker. Engaging a business intermediary firm who has the capabilities to properly represent your company will be critical. Often the business size is not the only distinguishing characteristic defining Main Street from Middle Market businesses. The industry, the complexity of the transaction, the depth & breadth of management, the presence of intellectual propriety or private brands, as well as the type of buyer that is targeted will also have an impact on the methods used to package the business for sale. The chart below details some of the typical differences in how the two types of businesses are defined, valued, packaged for sale, and confidentially marketed. It is important to note that the chart is only a guideline as many businesses will reflect similar attributes. Please consult with your local business intermediary to determine how your business should be treated.

Main Street:

•Business Revenue: Less than $3,000,000
•Business Earnings: Less than $1,000,000
•Type of Sale: Asset Sale
•Buyers: Entrepreneurs or Displaced Corporate Executives
•Business Valuation: Based on Sellers Discretionary Earnings (SDE)
•Financial Statements: Owner, CPA Compiled
•Business Management: Acquirer is buying a job. Existing management is less critical.
•Complexity: Transaction can often be accomplished with less complicated “boiler plate” agreements.
•Confidential Marketing: Marketing to a very broad buyer base.
•Marketing Package: Confidential Business Review
•Pricing: Marketed with a specific asking price.
•Broker/M&A Fee Structure: 10-12%
•Retainers: Minimal Retainer

Lower Middle Market:

•Business Revenue: $3,000,000 – $75,000,000
•Business Earnings: Greater than $1,000,000
•Type of Sale: Asset Sale or Stock Sale
•Buyers: Corporate Buyer or Private Equity Group (PEG)
•Business Valuation: Based on EBITDA
•Financial Statements: Reviewed or Audited Financials
•Business Management: Current management is often a key driver to the acquisition
•Complexity: Deal structure can be very complex requiring customized legal documents.
•Confidential Marketing: Highly targeted direct marketing to strategic & financial buyers.
•Marketing Package: Comprehensive Offering Memorandum
•Pricing: Asking price is rarely listed in the Offering Memorandum
•Broker/M&A Fee Structure: Double Lehman/Negotiated
•Retainers: Monthly Fee

Professionals That Your Business Would Most Likely Need

If you have a business, hiring professionals is something that equals to success. There is no need for you to run your business alone. There are a lot of processes in your operation that would require a professional to get it done. Don’t expect to do things alone. Whether you are starting a business or continuing your business operations, there are some business professionals that can really help you. If you don’t have enough capital, you can hire them as a consultant and not full time. As a business owner, it is a bad idea to do it on your own.

Professionals can provide their expertise that you can apply to your business. Having a team is something that can ensure the success of your business venture. One of the most important professional to be part of your team is an accountant. There are a lot of ways an accountant can help you. One is they can determine the proper financial structure of your business. They can help you file documents with the government. They can give you advice on tax and account management. An account can also explain revenue and expenses of your business. They would also know if there is a need for additional capital.

Other tasks of accountant include payroll, bookkeeping, financial management and more. Aside from accountant, a business attorney is a person that you need. He or she can help you when it comes to creating contracts with the companies that you deal with. A lawyer can also teach you on the legal aspect of starting a company. There are also regulations involving taxes, zoning and legal stuff that your business should adhere to. It all depends on the business that you have if you need a specialized attorney. You can hire the attorney as part time or full time associate in your company.

If you have a real estate business, then you need to be affiliated with a real estate attorney. Every business needs insurance no matter what of business that you have and where you are located. You will need a trusted agent that would give the right insurance for your business. He or she would determine the coverage that is available for the business that you are in. This policy can help you just in case there are events and disaster that comes in your way. An insurance agent would also help you in choosing the right insurance provider which is important.

Medium sized to large business needs a business banker. If your business is currently applying for a loan, a business banker is somebody that you can trust. You need to develop the right kind of relationship with the banker. This would make things easier in case you would obtain loan in the future. Aside from loans, you can also apply for business credit cards and checking accounts. There are financial products that your business might need in the future. If you have a website, you would need a webmaster to sustain it. Online presence is important for a lot of businesses out there.