How Internet Start-Ups Build Business Credit

For budding entrepreneurs, the main focus is usually on the product or service they are providing. Invention or innovation, new and better processes and customer service, infiltrating a niche (or creating a brand new niche) are all key elements in a successful start up. Usually what isn’t thought of until after the fact is how to get proper financing to get the idea or innovation off the ground in the first place.

For tech start-ups, even the young geniuses face road blocks in this regard. They are often not well versed in the art of finance and not used to the rarefied air of venture capitalist meeting rooms. It’s not without great trepidation and hesitation that most step out and try to get some financing for their project. Most often they make mistakes, get taken advantage of, or simply don’t get enough capital to start with. This can be crippling to a budding project, and can lead to many start-ups failing before they even get a proper chance to succeed.

Innovator and entrepreneur James Altucher says regularly on his daily podcast that it takes a minimum of 6 months to get financing from venture capitalists. If you are looking for money and only have 1-5 months of working capital at your disposal, it is probably already too late. Many start-ups run into this same issue and it is the reason they fail.

The rise of the popularity of shows like “Shark Tank” has made venture capital a trendy topic. However this isn’t always the best way for a business to go about maintaining it’s finances. More often it is more important to ensure a proper working flow of capital to make sure vendors are paid off, employee payroll is met, and monthly bills are paid. This usually doesn’t call for a portion of equity to be sold off.

finances While some may take to an “angel investor” to bail out the needs of the company, not everyone has that chance or opportunity. Venture capitalists are often very strict and want at least double-digit percentage stakes in a product or company. Selling off pieces of equity can soon leave a new CEO “high and dry” with very little equity left to himself and his employees. So for this reason it’s best to build strong business credit early and often. No one wants to remain in debt, but having access to business credit is a safety net which allows a business to get through some rough patches without resorting to selling equity (or folding entirely, as is sadly often the case).

There are services out there that focus on reviewing your business, getting you the credit you need and ultimately getting you funded. They specialize in these sorts of things, so don’t simply open a random credit card offer you get in the mail, but go to a more specialized service that can accommodate your needs as a business.

So don’t automatically take to selling off parts of your business, and don’t apply to appear on Shark Tank! Get your company a regular working flow of capital and then worry about the real problem, building your business and attacking your niche! Innovation can only take off once the little problems are taken care of!

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