One of the first steps in starting a business is to create a business plan. But before you do so, it's crucial to repair your personal credit.
How to Repair Your Credit
Personal credit repair is essential before you open your new business. After all, the business will need to borrow money to get off the ground, either by raising capital or by getting loans. Before you can establish business credit, you must guarantee loans based on your personal credit. Having poor personal credit history could make it difficult to get a business loan or make your interest rates higher than if you had good credit.
There are several ways to repair your credit. Some of the more common methods involve using one or more of the following resources and tactics:
- Contacting a credit card company directly to negotiate a better interest rate
- Debt management and debt consolidation by using credit counselors or trustworthy credit repair companies
- Debt settlement, which involves negotiating a lower amount of what you owe
- Paying on time by using payment reminders and setting up automatic payments
- Reviewing your credit reports from all three major credit bureaus (Experian, TransUnion, Equifax) and disputing any errors you find
- Preventing your accounts from going into collection
- Paying off your balances
- Not opening new accounts
How well credit repair works depends on your current financial status and what methods you use. Having poor credit or bankruptcies in your credit history could prevent you from ever starting your business.
The Importance of a Business Plan
Once you've decided to move ahead with your venture, you'll need a business plan for several reasons. Think of the document as a road map for:
- What you expect to achieve in your business
- What services or goods you'll be offering
- Convincing banks and people to lend money or invest in the company
- Explaining the challenges the business will likely face
- How the business can be expected to perform in the first few years
A business plan only works if you've first repaired any poor personal credit, otherwise lenders are likely to view you as a substantial credit risk. Fixing your credit and developing a viable business plan go hand-in-hand with getting your company ready to open its doors.
What to Include in Your Business Plan
When writing your business plan, make sure to include the following:
- Title page. Using a title page is optional, but it makes your report look more official. Include the name of the company, the company colors and logos, the company address and contact information, and the owner or president's name. Date the title page and give it the title "XYZ Company Business Plan."
- Executive summary. This section shows what your company does, who will be running it, who or what type of employees you'll have, and an economic overview.
- Company overview, including products and services. Describe the purpose of your company, what it will provide, how it will succeed, and how it will differ from the competition. This section is more in-depth than the summary above.
- Marketing analysis. Detail what the current market looks like and what marketing research reveals about the business climate for your type of company.
- Customer analysis. Indicate the company's target customers and how the company plans to attract them.
- Competitive analysis. Here you describe the weaknesses and strengths of the competition, and how your company can surpass it. This part is more detailed than the company overview and often includes graphs and charts.
- Management and organization. Define the type of business entity the company will be, such as an LLC, corporation, or sole proprietorship, and introduce the key people and their roles in the company.
- Sales and marketing. Specify how you'll get your goods or services to the public or target customers, different types of advertising you'll use, and other ways you'll promote your brand.
- Financial plan and projections. Use this section to request loans or investments, reveal how much money you need to get started and keep operating, and detail the company's economic projections. This is also where your good personal credit shows that you can obtain business credit.
- Appendix. Include charts, graphs, data, financial statements, legal documents, licenses, and anything else to reinforce the business plan.
Establishing good personal credit demonstrates to potential lenders and investors that your business isn't a risky investment, while your business plan shows how you can start and run a viable company. After you've created a solid and easily understandable business plan, you can present it to lenders and investors to get your company off to a running start.