Finance: How to Establish Business Credit Despite Your Personal Credit

How to Establish Business Credit Despite Your Personal Credit

Written by Karen L. Hardy, MSBA

Business credit is more of a science than an art. The first rule for this science is that it is not repparttar

same as personal credit.

Many would-be and aspiring business owners are not aware that establishing credit for a business is just as important as establishing personal credit. They also do not realize that a business can have a credit score separate from their personal credit score.

There is a world out there designed specifically for repparttar 112220 business entity with a whole set of different rules.

Many entrepreneurs start out accumulating excessive personal debt to finance a business. Within a few months or even years, they find that repparttar 112221 business is a monster and needs more food, also known as financing.

With credit cards maxxed to repparttar 112222 limit, business owners find themselves in a crunch and searching for ways to raise capital. This is difficult to do when repparttar 112223 time is not taken to establish business credit first. Business credit is a crucial first step and foundation to build upon.

First, a business is not real. It really doesn't exist until legal steps and processes are completed to say that it does exist. PEOPLE create businesses that have not been tested, employed or ever earned a paycheck. So, when you start a business and begin looking for financing, repparttar 112224 bank WILL ALWAYS look at your credit because they can touch you (and your job, and your car, and your house...). You have a history. Your business does not.

Reverse Merger Suicide

Written by William Cate

Reverse Merger Suicide By William Cate Published December 2004 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]

Chief Financial Officers (CFOs) are between a rock and a hard place. To attract risk capital investors, repparttar CFO's company must be public. But repparttar 112219 average cost of taking a company public in repparttar 112220 United States is over $1,500,000. If repparttar 112221 CFO decides to raise money as a private company from venture capitalists, repparttar 112222 odds of success are less than one-in-ten thousand.

For too many CFOs, repparttar 112223 solution is to find a Corporate Dr. Kevorkian and take their private company public via a reverse merger. While repparttar 112224 immediate costs of doing a reverse merger are anywhere from a few thousand dollars to a few hundred thousand dollars, repparttar 112225 long-term costs are measured in tens of millions of dollars. A reverse merger is a suicide machine where repparttar 112226 costs are almost always certain to kill repparttar 112227 patient.

The formula for doing a reverse merger is simple. The publicly trading company issues sufficient shares to acquire a private company. The issued shares give repparttar 112228 private company insiders repparttar 112229 majority of shares in repparttar 112230 public company. As repparttar 112231 majority shareholders, repparttar 112232 private company insiders appoint their own Board of Directors and officers. The public company's name is usually changed to that of repparttar 112233 private company. The result is repparttar 112234 private company is now a public company.

A reverse merger example would be a bankrupt company trading on repparttar 112235 Over-the-Counter Bulletin Board (OTCBB) with five million shares issued. The company is called a 'shell."

Public investors own 500,000 shares of this shell. This is repparttar 112236 shell company's "float." The shell company's insiders own 4.5 million shares. The shell company issues 6 million shares to buy repparttar 112237 private company. The reverse merger has 11 million shares issued with 500,000 shares in repparttar 112238 float.

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