A Lesson in Professionalism: Credit.
I'm working on a longer post, so I'm going to keep this one rather short and sweet. Opening a business is financially daunting, and finding the funds is often the hardest part. As the average entrepreneur gets younger and younger, it gets even harder. I still have yet to be able to get a bank loan for Amethyst, but I have been able to secure one 10k SBA (small business) loan.
I don't really have any credit history.
I've never been one to want to 'owe' anyone anything; therefore having credit cards was never high on my to-do list. I also never thought I would open a business so I never prepared for that moment. I'm REALLY fortunate to have financially savvy parents who encouraged me to get one when I was younger, but I made the mistake of closing it when I moved from Boston to Colorado. Anyway, I opened a new credit card when I moved to CO and that was that.
When I went to apply for my first business credit card, I couldn't get a 'real' one so I had to get a 'secured' card. That means I gave the bank $900, and they let me borrow against $1k. If I ever failed to pay the card, they already had my $900 so they were fine if I screwed them over with my poor money management. However, I put small purchases on that card, made all of my payments on time, and within a year I was able to get a $5k business credit card through that same bank, and get my $900 back. Not a giant limit, but certainly better.
As Amethyst is looking into other ventures, I've been looking into loans. Turns out, as the sole member of our LLC, my personal credit plays a HUGE role in whether or not we can get one (shocking!). Of course, there are other factors such as yearly revenue and length of time the business has been open, but a lot of it depends on me. All of this brings me to my point.
Want to open a coffee shop and don't know where to start? Still feel like you're a couple years out? Work on your credit! Take a small loan, pay it back aggressively. This can be a slippery slope, because you need to be realistic about what you can borrow. Start small, and move up; don't go right for the big money. Credit reports/banks like to see 3-4 lines of active credit that have been open and active for at least 6mo to a year (this is according to my banker, my word is not the authority here AT ALL). Go to your bank or credit union and talk to them about some options about bolstering your personal credit. Worst case scenario you decide not to open that coffee shop and you have great credit for when you want to buy a house, take a loan to travel, or do whatever it is you feel like doing with financial support.
Unfortunately, I can't really answer questions on this subject because I don't know much about it. I don't know much about different types of loans, lines of credit, credit cards, etc. However, there are people out there that do and it is their one job to help you through it. For me, thinking about it and talking through it with a professional has eased the frustration of being reduced to a yearly income on a piece of paper. I'm not saying that it makes sense, I'm saying that sometimes I have to be a cog in the wheel of society in order to be able to do the things I want to do (ie support the 7 people that I am currently financially responsible for, including myself).
That's all for now. You can still @ me with questions, I'm just not sure I'll be particularly helpful...
Photo by Tony Adams @senordelao