How to Establish Business Credit Despite Your Personal CreditWritten by Karen L. Hardy, MSBA
Business credit is more of a science than an art. The first rule for this science is that it is not same as personal credit.Many would-be and aspiring business owners are not aware that establishing credit for a business is just as important as establishing personal credit. They also do not realize that a business can have a credit score separate from their personal credit score. There is a world out there designed specifically for business entity with a whole set of different rules. Many entrepreneurs start out accumulating excessive personal debt to finance a business. Within a few months or even years, they find that business is a monster and needs more food, also known as financing. With credit cards maxxed to limit, business owners find themselves in a crunch and searching for ways to raise capital. This is difficult to do when time is not taken to establish business credit first. Business credit is a crucial first step and foundation to build upon. First, a business is not real. It really doesn't exist until legal steps and processes are completed to say that it does exist. PEOPLE create businesses that have not been tested, employed or ever earned a paycheck. So, when you start a business and begin looking for financing, bank WILL ALWAYS look at your credit because they can touch you (and your job, and your car, and your house...). You have a history. Your business does not.
| | Reverse Merger SuicideWritten by William Cate
Reverse Merger Suicide By William Cate Published December 2004 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]Chief Financial Officers (CFOs) are between a rock and a hard place. To attract risk capital investors, CFO's company must be public. But average cost of taking a company public in United States is over $1,500,000. If CFO decides to raise money as a private company from venture capitalists, odds of success are less than one-in-ten thousand. For too many CFOs, solution is to find a Corporate Dr. Kevorkian and take their private company public via a reverse merger. While immediate costs of doing a reverse merger are anywhere from a few thousand dollars to a few hundred thousand dollars, long-term costs are measured in tens of millions of dollars. A reverse merger is a suicide machine where costs are almost always certain to kill patient. The formula for doing a reverse merger is simple. The publicly trading company issues sufficient shares to acquire a private company. The issued shares give private company insiders majority of shares in public company. As majority shareholders, private company insiders appoint their own Board of Directors and officers. The public company's name is usually changed to that of private company. The result is private company is now a public company. A reverse merger example would be a bankrupt company trading on Over-the-Counter Bulletin Board (OTCBB) with five million shares issued. The company is called a 'shell." Public investors own 500,000 shares of this shell. This is shell company's "float." The shell company's insiders own 4.5 million shares. The shell company issues 6 million shares to buy private company. The reverse merger has 11 million shares issued with 500,000 shares in float.
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