Available Credit Baseline

Available Credit Baseline:

Ok – so we’ve talked about what you owe, now we’re going to spend a little time discussing what you could owe.

Optimally we’re hoping that you won’t need or want to owe anything to get whatever project you want to start off the ground. It would not be realistic or comprehensive enough for me to address everything else in terms of what your strengths and weaknesses are if I didn’t also address this subject too.

You will probably need some kind of credit at some point in this process. Whether it is to facilitate cash flow, or to qualify for transaction processing services, or to rent facilities and offices, or for any other relevant business purposes, you’ll probably need some kind of credit.

Some people have unique access to large pools of credit regardless of their personal credit rating. Whether through family or social sources, this access to extraordinary credit is a resource that is available to some, and perhaps to you, and should not be discounted out of hand. Credit can be a very powerful resource if used correctly, so it deserves a lot of respect.

Others are in a credit trap where their personal credit sources are as dry as the desert or as maxed out as a Michael Bay movie is with big bangs.

Then there is the subject of having access to investors, the sale of shares, bonds, or other investment plans to address. The opportunity to raise funds from sources other than your personal bank account would give you access to resources beyond your current means, and allow you to reach ever higher for the brass ring.

The resource of personal credit sources and business investment sources all come with fundamentally the same problems – nothing is free.

By that I mean so much more than just whatever the credit terms are. Sure I believe banks and credit card companies deserve their profits, but that’s not what I mean.

Credit is a slippery slope. It is entirely too easy to have a level of credit debt that you can handle under normal circumstances but that suddenly and completely wipes you out when emergency or unusual circumstances strike.

More emphatically, these days it is becoming more and more regular for those circumstances to have nothing to do with you or your credit worthiness but on the lending institution to be able to stay in business themselves.

In an environment where banks and lending institutions are failing or receiving bailouts to cover off for appalling unparalleled mismanagement and extraordinarily poor risk management, basic credit can be a very dangerous thing as it can be recalled at any time should your institution sell off your account to another institution, be purchased by another bank, or go bankrupt, or in some cases, simply change policies.

Where even applying for credit can have an impact on your insurance rates, it’s critical to make sure that whatever credit you have you treat with unusual care and discretion.

Pay extraordinary attention to the fine print. Whatever it says will be used against you in the future, and you can count on that.

In reality, this particular piece isn’t going to tell you *how* to get credit or *what* to do with it, but it’s here to make you account for the total amount of credit you can reasonably call on if you need it.

Here are some of the areas of credit you can look at if needed. I am *absolutely NOT* recommending you to use any of them, but you should be aware of them and how to access them if needed.

In this baseline the rule of thumb will be like this: Rate how much money or purchasing power you believe you would be able raise from each source of credit on a rating of 1-100 where 1 represents the idea that just asking the question will result in a Bernie Madoff-like audit and investigation and a rating of 100 means you can get credit to purchase major brand name retail chains with a low down payment just on your good name.

Ready? Here we go:

Pay Day Loans:
Credit Cards:
Personal Loans:
Personal Line of Credit:
Business line of Credit:
Mortgages:
Home Equity Loans:
Car Title Loans:
Construction Loans:
Small Business Loans:
Regional Business Start-Up Loans:
Government Loans/Grants:
Other Business Grants:
Private Investment:
Public Investment:
Bonds:
Private Stock Sale:
Financial Advances:
Supplier Advances (Suppliers may be willing to let you have product on spec.):
Insurance Loans (Many insurance policies allow you to borrow against the policy):
Retirement Savings Loans (same as insurance loans):
Industry Specific Loans:
Family Loans:
Ability to get Co-Signed Loans:
Other Loans:
Total Credit Capacity:

Obviously that’s not an all-inclusive list, but it should remind you of a variety of credit and investment options that you can use to raise funding for your venture.

Again, I’m positively *not* recommending any of them – buying on credit is what we’re trying to get successful enough to avoid having to do, but you may encounter a need for it at some point on this project.

Sometimes credit offers you an opportunity to leverage a number of other bonuses if used correctly. Frequent flier miles, cash rebates, interest free periods, tax rebates/deductions, and numerous other incentives exist for various credit options. All of those bonuses exist on the statistical likelihood that you will sooner or later slip up and get charged an additional fee for something or to reward referral business. In other words, the credit companies are betting against you making your payments on time, and statistically they are proven right far more often than not. Just something to keep in mind.

I’ll get into credit strategies some other time, for now it’s just worth seeing what your credit strength is today and to compare it against your credit strength a year from now.

So take a good look at what your credit options are – see what the clauses are on your credit cards, what your interest rates are, what your service fees are, what your credit rating is, see copies of your credit reports from all of the major reporting agencies. Basically, get familiar with what your real ability to get credit is.

It also helps to know what’s on your credit file with the reporting agencies because this information is often looked up by prospective employers when you’re applying for a new job as part of a comprehensive background check. Take the time to fix any errors that you see, and keep an eye out for suspicious transactions that could be telltale signs of identity theft or erroneous reporting.

And when you’ve done all of that you’ll know exactly where you stand on your credit, and that’s a pretty good thing to know.

Until next time,

C./