| By :
Marco Carbajo
Did you finance your startup using money from your personal savings? How about your personal credit cards? Or did you have to borrow money from friends or family members? No matter what way you chose to get the cash needed to launch your business you're not the only one. Many of the most successful businesses you see today got started the very same way. Did you know that billionaire Richard Branson, founder of Virgin Records, borrowed money from his mom to start his mail order record company? Or did you know that filmmaker Spike Lee had to use his personal credit and savings to produce his first movie? While using personal funds is quite common among startups it should never be the long term strategy for supporting the growth of your business. Careful planning with a sound business credit building strategy right from the onset will help prevent you from putting your personal credit and assets at risk. Too many startups rely on traditional sources of funding instead of taking advantage of alternative options such as social lending, micro loans, vendor lines of credit, and crowd funding to name a few. Do you think some of these ultra successful entrepreneurs are still relying on their personal credit or personal funds to grow their businesses today? Of course not. While their companies continued to grow during its infancy they took advantage of additional sources of capital that businesses like yours can also take advantage of today. For example, Sam Walton received a loan from his father-in-law to start Wal-Mart Stores in 1962 which today now serves more than 100 million shoppers each and every week and had sales exceeding $400 billion last year. Did you know that trade credit is the second largest source of capital for Wal-Mart? It's used trade credit as its largest source of capital than even its bank borrowings. Even though your business may not be a Wal-Mart it's pretty exciting that you have the same opportunity to acquire trade credit for your company as well. If you find that using your personal funds to finance your startup is absolutely necessary then make sure all the records are kept so you can make the proper transfers or adjustments in the future. For example, let's suppose you had to use your personal credit cards to finance several busines purchases totaling $5k. Several months later you decide to open a business credit card with a $10k limit. As a result you decide to transfer the $5k balance from your personal credit card which was previously used for business purchases to your new business credit card. This transfer would remove the personal liability you have on your company's business debt and improve your personal debt to credit limit ratios at the same time. By building business credit right from the onset you can minimize your dependence on personal funds to continue financing the operation and growth of your business. While it does take a considerable amount of time to establish a solid company credit file it's better to start digging your well before your business gets thirsty. Don't wait until your personal resources are dried up to start establishing company credit.
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