The Business Credit Financing Ladder™ Steps For Your Business To Access More Cash!

How does your business get money (without an investor)?

Most small businesses are self financed. According to SCORE (Counselors to America’s Small Businesses) there are two groups of businesses that are looking for financing: start-up business owners, and business owners that have been in business for on average three years. SCORE and SBA (Small Business Administration) focus on helping the second group. Unfortunately, there is very little help for the first group… until now.

(Though in our recent meeting, SCORE expressed great excitement about our education program for small business owners and how banks lend money….)

Why is financing so crucial to small business success? The number one reason small business owners go out of business is lack of cash flow. There are many situations leading up to that failure, the main one being inadequate capitalization and access to additional capitalization — key access to cash.

What steps must you take to move your business up the business credit financial ladder™ in order to self finance your success?

Step 1: Incorporate your business from Week One. Do not wait to “see what happens,” thinking that in three months, when you have more money, you can incorporate (or form an LLC). This mistake may actually cost you access to additional capital to run your business. Why? Two words: revolving debt.

When many people start a business, they primarily use their personal credit cards to finance the business. Suppose you charge up your personal credit cards and your revolving debt (vs. installment debt, for example, the mortgage on your home). You then incorporate or form an LLC for your business 3-6 months later, and apply for a simple business credit in the name of that entity. It’s highly likely that you may be rejected, or be approved for a far lesser amount then you would have received had you incorporated in Week One.

The key is to keep your revolving debt below 30% and incorporate your business, apply for a business credit card, and start using that credit to finance your business. Yes, it is personally guaranteed… but the debt will not show up on your personal credit report (unless you miss a payment, so do not do that!). Now you’ve put your business in a position to get off to a fast start and you’ve protected your personal revolving debt, which is a key component in any other type of financing you do in the future!

Step 2: Set up a merchant account for your business. Very few businesses do not accept credit cards. They know that they must make it very, very easy for someone to do business with them. Why make it hard for your clients to buy from you? This will come into play in about 6 months as an important lending source for your business, if necessary.

Step 3: Do you need equipment for your business? Consider an equipment lease vs. using your cash to purchase.

Step 4: Do you have vendors where larger credit lines would be helpful? This is usually not the case with home-based businesses or online businesses, where the overhead is very low. Usually a brick-and-mortar-type business requires vendor trade lines of credit with business supply stores, gas cards, and other vendors. Again, a $40,000 line of credit at a supply store is not going to help a home-based business. They need cash. If this is the case, you will want to focus on a business credit program to develop your D & B and Experian Business Rating initially.

Step 5: Keep your revenues high, show a small profit each month if possible, control your personal spending, credit score (In other words don’t quit your day job before your business is up and running.) Get yourself in a position 6 months to 1 year ahead of time for a business line of credit. If your personal credit score has issues, that should be addressed as you start the business in anticipation of future financing needs, 3-6 months from now.

About The Author: Scott Letourneau is the CEO of Fast Business Credit, Inc. When it comes to securing cash and vendor lines of credit and avoiding costly mistakes his company is the authority. For further assistance regarding the development of business credit go to or call FBC at 1-888-313-6333 or 702-977-5246.