Raise Capital For Your Online Startup Ecommerce Business

How can you possibly think about raising capital for your internet e-commerce business this day and age? With the economy faltering and no sign of relief in sight, it is unlikely that anyone would want to invest, right? Wrong.

There are more opportunities out there waiting for you to discover. Just because the economy is in bad shape, that doesn't mean that you should give up on your dreams. If you are not well versed on raising capital, here are a little things that you will need before you start the journey: a business plan, a smooth presentation in place, and a passion for what you are doing. Once you need all three, it's time to start approaching the right people for raising money. But just who are the right people? Here are a few ideas:

Relatives

Don’t dismiss it. If you need a big family and the three things above in place, then what is to stop you from approaching a little of the wealthier people in your family, either individually or as a group, and showing them that you need your stuff together. Often times, this avenue gets overlooked because people mistakenly think it would feel too awkward to present to their relatives like they would a enterprise capitalist. But that just isn't the case. If you treat your wealthier relatives with respect by showing them a fully developed idea and business plan, you may just be surprised by their reaction. But if not, consider:

Enterprise capitalists

These are wealthy companies or individuals, who are specifically looking for companies like yours to invest in. They expect a rate of return on their hard cash over the long term. In return for that, they will give you the stake of hard cash that you need to looking up and running and develop a business to the terms of their return on investment. While there are no guarantees over the long term of your success - that would be up to you anyway - you at least looking a chunk of change upfront and little to no risk for doing something you love.

Government grants

There are billions and billions of dollars available in grant money. Oh sure, the cash may not all be for your industry, but there is still a significant amount. Why is it there? Because most upstarts either don’t qualify or don’t bother writing a grant. How do you take advantage? Find a little aspect of your business that you can use to the benefit of your business.

There are many out of the ordinary people and entities out there for you to capitalize on. All you need is a well thought out idea and the means for inspiring investor confidence. Once those are in place, the sky is the limit.

Bad Credit And The Costs Of Financing

Bad credit has usually terrible consequences for the finances of those that suffer it. Particularly, when it comes to obtaining funding for any purpose, the costs associated with financing for those with a bad credit score or history are significantly higher than that of those with a regular credit for similar financial products. The costs are also affected by other variables like the type of product under consideration but the credit score issue is probably the most important factor.

Knowing how credit score affects the costs of financing will not solve the problem. Yet, it will let us analyze and find the tools available for counteracting the consequences of a bad credit score on the costs of financing. These tools are available to most applicants and imply certain sacrifices but they will provide the necessary remedies against this problem and eventually let the applicant to repair credit and obtain more advantageous conditions on financial products.

How Credit Score Affects The Costs Of Financing

The main variable that affects the costs of a certain loan type is the default ratio of that loans. It may sound unfair since you are an individual and you do not plan on defaulting on your loan. However, lenders do not know that for sure and there is absolutely no reason for them to have faith. The business rests on probability and statistics. Thus, bad credit loans which have a higher default ratio imply higher costs for financing.

The variable is risk and higher risks imply higher costs. That is the reason why lenders require higher returns. It is the only way to compensate for these risks. Fortunately it is possible to counteract this risk with measures that compensate the higher costs associated with a higher default ratio by reducing the risk of the transaction. These measures are mainly: securing the loan with an asset, improving the credit score or providing a co-signer.

Reducing The Risks, Reducing The Costs

As explained above, the risks of the transaction determine its costs and thus, reducing the risks implies reducing the costs. Providing security can significantly reduce the interest rate charged for the financial transaction. Sometimes, secured loans when compared with unsecured loans feature an interest rate that can be as low as half the rate. Thus, the costs can be reduced by 50% and sometimes even more.

Improving the credit of the applicant prior to applying is also a way of reducing the costs of financing. However, there is not always enough time to do so if you are going through an emergency and you need the funds fast. If that is the case, there is an alternative that you may want to consider: To avoid this being an obstacle, the bad credit applicant can use the aid of a cosigner. The co-signer will apply too and his credit score (that must obviously be better) will be taken into account too thus reducing the risk implied because in order for the lender to lose the investment both the main applicant and the co-signer would have to default on the loan.

Having Your Own Business Credit Has So Many Benefits!!!

When you have business credit you DOUBLE your borrowing ability! Not only will you have access to the consumer credit you have now, but you will also have an entire other credit profile for your business that you can easily use to get the same credit and more all in your business name.

And per the Small Business Administration (SBA), approval limits on business credit accounts are 10-100 times that of consumer credit! Forget doubling your available credit, how about increasing it by 10-100 times!

And speaking of SBA it’s very important to mention that if you even think about applying for any business funding you will need to have an established, positive business credit profile. It’s a must, and something so essential that SBA says right on their website that you should “be prepared to submit a credit report for your business” with any SBA financing.

SBA requires that you have good personal credit, good business credit, and good bank credit to get approved. And in the Business Credit Building Course you will not only build your business credit but you’ll also get insight on how your bank credit works, something only TOP entrepreneurs even know about.

With the Business Credit Course you will be able to build your business credit, this is credit that has NOTHING to do with your personal credit.

Did you know that 30% of your consumer credit score is dedicated to utilization, the percentage of your available credit that you are actually using?

That means if you have a $1,000 credit card and owe more than $300 on that card your credit scores will actually be lowered. I have personally seen credit scores lowered by over 100 points just because the consumer was over-utilizing their revolving accounts. Any balance you owe over 30% of the limit will hurt your scores. Plus new inquiries affect 10% of your scores, so even applying for the new credit can hurt you!

These are just more reasons smart entrepreneurs build business credit and don’t use their personal credit for business purposes.