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How to Determine the Fundability of Your Business

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How to Determine the Fundability of Your Business

By Marco Carbajo, Guest Blogger
Published: December 12, 2012

The definition of fundable is the capability of being funded or being bankable. A company’s fundability is crucial to obtaining the necessary funds needed to operate, develop and grow a business.

Unfortunately, the most common mistake business owners make is applying for financing before their company is even ready.

Why not know in advance if you qualify for funding before actually applying?

Instead of relying on personal credit, why not establish a fundable company that can get the financing it needs based on its own creditworthiness.

There are several different areas that contribute to how fundable a business will be for short-term or long-term financing.  The three main areas that impact a company’s fundability include:

1. Compliance – Lenders have specific guidelines that credit applicants must adhere to as part of the underwriting process. Meeting these standards is mandatory if you expect to qualify for credit. This includes, but is not limited to: corporate structure, business listing, commercial address, state filings, licenses, etc.

2. Business Credit Reports – Getting listed with the major business credit agencies such as Dun and Bradstreet, Experian and Small Business Equifax allows lenders to review your company’s credit profiles. Creditors rely on these particular agencies to assess the credit worthiness of a company. If you apply for credit with a lender or supplier and your company is not listed, then you may get denied credit or be required to allow a personal credit check and/or personal guarantee.

3. Business Bank Account – Another factor is a company’s bank account history. Bank credit consists of three main components a business owner should familiarize him or herself with prior to applying for funding. This includes, but is not limited to: account age, account history, balance rating, etc. In some instances, a lender may contact a business owner for bank references, so maintaining a positive banking relationship is vital to a company’s fundability.

4. Company Assets – Turning paper into cash is not a new strategy, but it is definitely an option worth considering if you have access to the types of paper that can be converted. This includes, but is not limited to: letters of credit, financial contracts, accounts receivable, inventory, real estate, promissory notes, etc.

All of these factors play an integral part in determining how fundable a business is. Lenders also take into consideration the age of a business and the type of industry involved.

These are just a few of the items that are regularly used by lenders, credit providers and even insurers to approve or decline an application. Now is the time to find out where your business stands.

About the Author:

Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

Comments:

Having a good bank account history and credit history is always necessary to keep our self in a good standing.
I still don't understand why small businesses are responsible for setting up their profiles with credit reporting agencies. This doesn't happen to consumers, so why SB's?
I am always looking to learn new and interesting tips. Thanks Marco, it looks like we share the same point of view on different matters. Targeting the most of your business is the best you can do.
Techniques are very intelligent. This article is very easy to digest. thank you for sharing with us. as a beginner, we are helped by this article. hopefully we can implement these techniques in  This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you. as Grosir Kaos Kaki Kanik Soka Amani
This includes, but is not limited to: letters of credit, financial contracts, accounts receivable, inventory, real estate, promissory notes, etc.
Thanks for sharing this marvelous post with us. Every company needs fund to run. It can’t keep moving without a continuous flow of funds. Now I know where my company stands.
I think establishing a good bank account history is probably one of the most important things
I would just like to say you always have good informative information, Regardless of whether they pertain to my business or not I enjoy reading your articles.
Working on the fundability of your business will help you reduce the dependency on your personal credit when trying to obtain funding for your business.
I wasn't aware of the business credit reports. I haven't gotten to that level yet. Thanks for the article.

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