Start Up Financing

Jeff Yoskowitz is a co-owner of Food Start Up Help and a business financing expert.

Interview by Kathryn Gordon.

Kathryn:  Jeff, I know there are a variety of possible ways to fund a startup business. Can you discuss one for our readers?

Jeff: Sure. For business startups, one of the first things I suggest is to get a business line of credit. This helps to separate business and personal credit and expenses. It also helps build business credit while protecting personal credit.

There are unsecured business lines of credit that don’t require any collateral and are really useful to startup companies that have no established revenue. A business where an owner or a partner has very good credit can expect to receive between a $25,000 and $75,000 business credit line.

Kathryn: So, is good credit the most important aspect in obtaining an unsecured business line of credit?

Jeff: As a startup, you should be concerned about your consumer credit score because if you are looking for unsecured business credit, a business credit card, or some other form of business funding, like equipment leasing, your personal credit profile will be reviewed as part of the pre-approval and approval processes.

Kathryn: Are there ways to maintain a good credit score?

Jeff: Of course. There are basically five categories that make up your credit score.  The most important is your payment history. This looks at your payment information on all different types of accounts and if you are paying on time. It also includes negative records such as bankruptcies, collections and judgments against you.

The second most important category, which most don’t realize, is your credit utilization.  This is the amount of money you owe compared to your available credit. It is best to keep your utilization below 25 percent. For example, if you have $10,000 of available credit, it is best to keep your balance below $2500.

Third is the length of your credit history. Simply put, the longer you have had credit (good credit), the better off you are.

Inquiries and new credit are the fourth category. Inquiries are checks into your credit history by financial institutions, car dealers, credit card companies, etc. Too many in a recent or short period will reflect negatively on your score.

The final category evaluates the types of credit you use. Credit scoring companies like to see a mix of different types of credit to show that you can qualify for them.

Kathryn: Do you recommend a place where people can check their scores?

Jeff: I usually recommend MyFico.com. They offer a free trial and it doesn’t cost you anything if you cancel before the trial period ends.

Kathryn:  So what if someone has poor credit? Should they try to fix their credit to get financing?

Jeff: First of all, they should start repairing and taking the steps to fix their credit, regardless. It’s just too important not to. Honestly, sometimes it is very expensive or just takes a very long time to repair. Some people “borrow” good credit from someone else who can act like a personal guarantor and that enables them to get the lines of credit that way.

Kathryn: Thanks Jeff, we look forward to the next interview.

Jeff: Anytime!