Give a Dog a Bone…

If you’ve ever been late on a payment for anything in your life, the reoccurring phone calls from relentless bill collectors are enough to drive you mad…

But if it’s not you personally and it’s the company you own, who does the “Old Man” call? Unfortunately, he still calls you.

So how do you get the funding you need to start your own business? Or get the loans to make improvements to your current store? And how does a bank or VC decide if you’re worth it to begin with…

Before you begin to build your dream business, consider these four key elements that creditors will look at to determine if you’re worthy of giving money to:

They will look at your character and see if you appear to be an honest person with integrity. While these traits are difficult to asses, some firms will look at your past credit history to determine if you paid it back on time. They don’t want to just see that you have credit history; they want to see a good credit history.

They will look at your capacity – do they expect you to pay this money back on time. It’s here they will look at your other expenses such as other outstanding loans, credit cards, and other financial obligations. It’s also at this step that they will look at the stability of your employment up till now. If you’ve had a job here or there and the income has not been stable, what assurance does this firm have that you will indeed have the money to return to them one day?

In addition to your other bills, they will look at your capital: your debt to income ratio. This gives them an idea if you’ll be easy to collect on should the time ever come.

Finally, they look at any other conditions that might affect your ability to re-pay this debt such as the current sales of your company, the unemployment rate, trends in your particular industry, etc. This will give them an idea if you’ll be able to make payments in the future. There’s not much difference between banks looking your credit history as an individual versus a business owner. The business’s management team will be the ones whose credit history is examined and instead of a credit report from Equifax, the bank would use firms such as Dun & Bradstreet to review your financial statements.

The way you run your own company should easily align with how your run your own life: with honesty and integrity. When your buddy asks you to spot him $10 for lunch, you think about it for a moment…will he pay me back tomorrow or next week or not at all? And you judge this by if he’s borrowed from you in the past. The bank will treat you no differently. So do whatever you can to have good credit history and always be mindful of your current debts and upcoming industry trends before even asking for start-up loan. Or else the “Old Man” will be playing knick-knack-paddy- whack on your phone, disguised as a bill collector, until you repay.