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CREDIT BASED VS NON-CREDIT BASED FINANCING

Written by: Ilya Bodner

Article Overview: When it comes to non-credit based small business financing, the benefits are evident. There is a very good chance you will be able to take advantage of great interest rates as long as your established business credit is favorable. Non-credit based small business financing comes in many different forms and is an excellent way to begin building your relationships with vendors. Many vendors will extend credit without a credit check if you have your Tax-ID number and a few other solidifying factors.

CREDIT BASED VS NON-CREDIT BASED FINANCING

When it comes to non-credit based small business financing, the benefits are evident. There is a very good chance you will be able to take advantage of great interest rates as long as your established business credit is favorable. Non-credit based small business financing comes in many different forms and is an excellent way to begin building your relationships with vendors. Many vendors will extend credit without a credit check if you have your Tax-ID number and a few other solidifying factors. In turn, when you make your payments to these particular vendors, they'll report favorably to the credit bureaus-and you'll be well on your way to building strong business credit. This can be true for the reverse situation as well. If you are unable to make your payments on time, these vendors may report late or slow payments to the credit bureaus and damage your small business credit before you ever get it off the ground. Be careful with non-credit based financing, because it's not a loophole for lending terms. Many businesses have come to StrongBusinessCredit because they have been crippled through mischievous actions taken by owners on non-credit based payments. GETTING RID OF BUSINESS DEBT

To ensure that your business continues to be successful and profitable, it may be advantageous to get rid of short term debt. Below are some helpful hints for staying most productive:

ü Focus on one debt at a time. If you can afford to put more money into one debt than any others without incurring late fees or bad marks on your business credit, it will be easier to rid the business of debt.

ü Avoid new debt. Taking out a new loan, for example, is counterproductive to paying off business debts-it only creates more.

ü Increase your Business Profit Margin. Higher profits should first be spent on reducing debt. If higher profits are maintained, they will soon end up in the owner's pockets.

ü Strategize on YOUR plan. As discussed throughout this book, thorough planning is essential. Paying down a debt is no different. Have a plan that works for you, and follow your own directions relentlessly.

The bottom line: these tips are merely guideposts; your success relies on your business plan. Always plan for the worst! StrongBusinessCredit suggests referring back to the chapter 1, dealing with business plans and proper projection planning. Within your original business plan, the bad times you may encounter should be predicted and mitigated. Without such precautions, your business is vulnerable to failure.

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Article Tags: business debt, business debts, business profit, credit bureaus, credit check, good chance, helpful hints, interest rates, late fees, loophole, pockets, profit margin, profits, reducing debt, reverse situation, slow payments, small business credit, strategize, tax id number, term debt



Related Forum Posts
Re: Interrealtionship between financial statements - Hi there, It is not necessary to post each transaction in all of the separate financial statements. In any given transaction, you will post an equal amount of debits and credits to the associated accounts. An example would be if you were to write a check for $500 to office depot for office supplies. The posted transaction would be: DEBIT Office Supplies $500.00 CREDIT Bank Account $500.00 Once the transaction is posted, it will automatically show up on the appropriate financial statement report. In the above example, you would find the Bank Account transaction on the balance sheet and the office supplies transaction on the profit and loss statement. I hope this is clear! Please let me know if you have any other bookkeeping questions. I would be happy to help, Stephanie Horne
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Definitely have a thorough and accurate business plan. In the US, you can get help at SCORE - their website is full of great information and you can check for local chapters. If you would like a book that has all kinds of great information about financing options - this one is very good --- HOW TO GET THE FINANCING FOR YOUR NEW SMALL BUSINESS: INNOVATIVE SOLUTIONS FROM THE EXPERTS WHO DO IT EVERY DAY—WITH CD-ROM This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book’s real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout. Item # 9780910627559 $39.95 Shri


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