Are you a budding entrepreneur with a great business idea? Have you made the decision to move forward with starting a business and now want to understand what steps to take to get the ball rolling? Yes? Great! No doubt you want factual how-to information on turning your business idea into a reality. One thing that can make or break your new business is lack of technical and professional advice. So, find an accountant and/or attorney that you trust. And, no doubt you need funding. That old adage of “you have to spend money to make money” rings true.
The following links will help in starting your own business:
In a nutshell, the basics of starting a business include:
A Business Plan. Do not underestimate the power of putting your plan down on paper. It will help you work out the details of your business. Describe your product or service and what gives it an advantage over similar businesses. For example: do you have a patent or copyright? Visit StartUpNation.com.
A Business Structure. Will your company be a sole proprietorship, partnership, corporation, or limited liability company? It’s a good idea to have a code of regulations. The Small Business Administration will require it for funding. An attorney will help you understand what the best option for your business.
Financial Footing. Get a professional perspective on the federal, state, and local tax responsibilities. You will be required to have a federal Employer Identification Number before even opening a business checking account! This is where a certified public accountant comes in handy. www.irs.gov
Financial Need. You will need financing. Do you need funding for a building? Or maybe for machinery? Other costs such as telephones, computers, payroll, office supplies, and more. There are several ways to fund your start-up business. Non-profit Development Corporations such as County Corp and County Corp Development work with you to secure low-interest, longer terms loans in conjunction with traditional bank lending. One caveat: for small businesses, lenders will insist on a personal guarantee. If you do not have enough confidence in the business to guarantee the loan, then the lender likely will not either.
Capacity. Lenders will look for personal and business capacity in determining whether they will extend funding. So pull together personal resumes for you and other key management including as much information on the depth of experience you collectively have in business. You will need to provide federal income tax returns. Foreclosures and bankruptcies need to be disclosed.
Let’s take a closer look at the issue of personal credit. Yes, it’s a sore subject for many people, but if you are just starting a business, lenders will be looking at your personal credit, character, and capability in determining whether to lend you money. Trans-Union, Equifax, and Experian are the three major consumer credit bureaus who track your payment history. They know how well you pay — or not — your bills to banks, credit unions, retailers, etc. They track this information and sell reports to lenders.
When you apply for credit the institution requests at least one credit report. The report is used in making the decision on whether to give you credit and what dollar amount. The credit reporting companies do not make the decision whether or not a credit card, mortgage, car loan, or other financing is given. Credit reports have the following information in them:
- Your name & current and previous address
- Your social security number
- Current & former employers
- Your spouse’s name Account information from banks, credit card issuers, etc.
- Bankruptcies, tax liens, and monetary judgments
- Credit risk score
Your credit risk score is a number assigned to you that helps lenders decide your credit worthiness. The higher the score the better for you! Credit scores change and are affected by numerous factors. The number of late payments affects your score. So does the type, number and age of open accounts. How large your total debt is can also affect the credit score. Lastly, inquiries on your credit can affect your score as they are seen by potential lenders as a signal that you may be overextending your credit limits. Credit reports DO NOT contain information on you like race, color, gender, age, or religion. The internet is full of “free credit reports.” Buyer beware! Visit www.annualcreditreport.com to confirm for free that your information has been reported correctly.
Ready to Go? Visit the U.S. Small Business Administration’s website for more detailed basic information about starting a business.