How to Determine the Fundability of Your Business

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 is CEO of the Business Credit Insiders Circle (www.businesscreditblogger.com), a step-by-step business credit building system providing lines of credit, trade credit and funding sources.