Thursday, February 26, 2009

The Essential Checklist for Business Financing: Part 1

Every year, thousands, if not millions, of businesses are declined when trying to secure different types of business financing. Many times, the business owner is unaware of why they were declined in the first place. Banks and other lenders can be very finical at times. If your business is not set up exactly the right way, you may be declined over something seemingly inconsequential, even before the lender takes the time to determine whether or not your company is creditworthy. The following 8 step checklist will make sure your company is set up the right way, the way lenders like to see it.

Step 1: Form a separate legal entity.

A sole proprietor can get approved for a "business loan", but it will not be a true business loan. Since there is no separate legal entity apart from the owner, the loan will be in the personal name of the owner and based on their personal credit scores.

It is highly recommended that a business gets incorporated if they want to maximize their chances of getting approved for financing, as well as to protect the assets and credit scores of the owner(s). An LLC, S-Corp, and C-Corp are all forms of separate legal entities. To choose the right one for you business, you should consult a professional. There are easy and inexpensive services online you can use to incorporate your company (http://bizfilings.com.)

Step 2: Check for name conflicts
This is a more common occurrence than some may think. If your company has an identical, or even similar, name as another company, it is easy for a lender to get confused and mix up the two. It is possible that when trying to pull your company's credit history, or look at other company information, your business may get confused with another.

To prevent this, you should first check the business credit agencies (Experian, Dun and Bradstreet, and Equifax) to see if there are any companies listed that could get confused with yours. Next, you should do a search at the US Trademark Office http://www.uspto.gov/main/trademarks.htm to see if your company, or another, is in violation of trademark laws.

Finally, if you do not currently have a website, or are in the process of setting one up, make sure you secure a domain name that matches the name of your business. If somebody else has a website that is the same name as your business you could have problems. If there are any conflicts above, you should change your legal business name with the Secretary of State, or seek to reprimand another company that is using your name or image illegally.

Step 3: Get a separate business address
Funding sources prefer not to lend to home based businesses. This is not necessarily fair or just, but that's the way it is. If you are currently working from home, or do not have a physical location for your business, we recommend getting a virtual address with a place like Mailboxes Etc. or UPS Stores and use it in all business filings. Sometimes you will have to modify the address they give you and use "Suite" instead of "PMB."

Sometimes these addresses will be flagged, so a better way to go may be to find local executive suites that will forward mail to you. This way you can have a business location without having to lease office space.

Step 4: Get a 411 listing and business phone number

Almost all lenders will verify that you are listed in your 411 directory before they consider lending to your business. You should never use your home number for this listing and your phone should always be answered professionally with the company name. If a lender calls your business and you answer with, "Hello," this does not bode well for your chances of getting approved.

Following this checklist will greatly increase the chance of getting approved for business financing. It will also get your business set up the right way to start building a strong business credit profile. Stay tuned for part 2 of The Essential Checklist for Business Financing.

Jarrett Pflieger holds a BA in Entrepreneurship and is a featured writer for BusinessFinance.com. Jarrett specializes in helping small businesses establish business credit and obtain business financing.

Visit http://www.businessfinance.com to run a free search for business capital. To build business credit and manage funding sources for free, access your free Business Funding Management Center today at http://businessfinance.com/business-funding-management.aspx

Article Source: http://EzineArticles.com/?expert=Jarrett_R._Pflieger

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