Hello! David J here again bringing you more of the steps on my journey toward financial independence.
While doing a search on Yahoo! recently, one of the articles on the front page was about "Self-Made" millionaires.
Now, you may have noticed that so far in this blog, I've avoided using such words as "wealth", "riches", "millionaire", and so on. I'm not into hype at all since those words don't move me the way most marketing people wish they would. So, I avoid using such words here since I prefer to take a more practical approach to motivation. I know those words do move some people to take action. They just don't do much for me.
...but, I digress.
I was thinking about the phrase, "self made".
I wonder just how true that is: "self" made?
In previous posts, we've discussed building our team, every one from attorneys, accountants, and real estate agents, to title companies, banks and other lenders, inspectors, and so on.
So, if we find success dealing with real property, can we truthfully say we are "self made"?
It is perhaps more accurate to think about the old saying, "It's not what you know, it's WHO you know", though perhaps not in the sense of important, influential and/or affluent people.
In this case, it is perhaps more accurate to consider that the greatest contributors to our success will be the team we build around ourselves.
In our business endeavors, we need certain services that we are ourselves are not qualified to perform. This includes many services or functions which require special knowledge, certification or licensing.
To facilitate our own success, we need to meet and connect with the best professional people we can find.
Sometimes, that takes an effort not unlike interviewing prospective employees. Just as an employer looks for the most experienced and knowledgeable people, so we must "employ" the best professional and clerical people we can find to help us in our business pursuits.
In an earlier post about Delegating, we spoke about the importance of having people around us to "multiply" ourselves, people who can do what needs to be done while we personally attend to more productive business pursuits. In that way, we leverage their time rather than taking our own to get things done.
The quality of the team, in addition to our own ability to provide leadership and guidance to the team will be the most powerful determinant of the success we achieve.
So, in that sense, at least, we are "self made" as a team leader. We might enlist the services of a coach or a counselor to help us build and improve our leadership abilities. Yet even in that, we are still adding members to our team.
Our success is dependent upon us to make the key decisions that keep our team productive and profitable. The members of our team are the tools we use to build our success.
We are the key that unlocks our success.
We'll talk again soon!
Take care - be well!
Much Success!
Friday, May 28, 2010
Tuesday, May 25, 2010
Crooked Furrows Vs. A Field Unplowed
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
If you've been following this blog from the early posts, you've probably noticed that I'm getting a little better at it. The early posts ramble a bit and the focus often changes from the title subject to something related and back again, sometimes more than once in the same post.
That's really just a manifestation of one of my personal challenges. I'm a bit ADD, and as I'm writing, my focus tends to drift off onto tangents. Sometimes, I end writing multiple posts in one day, but actually publish very few of them.
One of my adopted mentors, Robert G. Allen, once said this about perfectionism and waiting until everything is just right: "I'd rather see a crooked furrow than a field unplowed".
That's from Robert Allen's "Wealth Training" cassettes, circa. the late 1980s, early 1990s.
Crooked furrows are a specialty with me. I think that drove my ex-wife nuts because I'm not hesitant to try something and have it not work. That's rather a good bit outside her paradigm.
As I'm going through this financial independence experience, I'm finding that I often end up proceeding on actions even though I would like to be better prepared to take those actions. Rather than feeling the confidence of preparedness, I end up falling back on the confidence of my own ability to pull things together, even if the actions taken earlier perhaps weren't done the best way to facilitate success later on.
In my former career - Information Technology - I was often called upon to find creative solutions to difficult situations, sometimes because earlier actions were taken that either could have been done better or perhaps should not have been taken at all.
In my pursuit of financial independence, there are indeed many decision points, and they arise every day, in every set of actions that need to be taken. As I'm going through this, I find myself going less on experience, being new at this, and more on gut feel and what seems to be logical to me.
So, to continue the titular metaphor, I end up cutting many crooked furrows in the effort to plow this field.
Yes, I'd like very much to be better prepared. Still, forward progress brings the new experiences from which I learn.
So, just as the quality of my blog posts improves as I gain experience writing, so the quality of my decision making improves as I gain experience making these decisions.
My dear readers, give yourself permission to learn, permission to make mistakes, and permission to learn from those mistakes and do better as you go along.
The way some of us were raised, that is perhaps a bit challenging. I understand - I live with that, also. Seek advice from some one you trust to help you get through the challenges of the past and break out forward, into your future - a better, brighter future with fewer worries about finances and income.
Let's do it together!
We'll talk again soon!
Take care - be well!
Much Success!
If you've been following this blog from the early posts, you've probably noticed that I'm getting a little better at it. The early posts ramble a bit and the focus often changes from the title subject to something related and back again, sometimes more than once in the same post.
That's really just a manifestation of one of my personal challenges. I'm a bit ADD, and as I'm writing, my focus tends to drift off onto tangents. Sometimes, I end writing multiple posts in one day, but actually publish very few of them.
One of my adopted mentors, Robert G. Allen, once said this about perfectionism and waiting until everything is just right: "I'd rather see a crooked furrow than a field unplowed".
That's from Robert Allen's "Wealth Training" cassettes, circa. the late 1980s, early 1990s.
Crooked furrows are a specialty with me. I think that drove my ex-wife nuts because I'm not hesitant to try something and have it not work. That's rather a good bit outside her paradigm.
As I'm going through this financial independence experience, I'm finding that I often end up proceeding on actions even though I would like to be better prepared to take those actions. Rather than feeling the confidence of preparedness, I end up falling back on the confidence of my own ability to pull things together, even if the actions taken earlier perhaps weren't done the best way to facilitate success later on.
In my former career - Information Technology - I was often called upon to find creative solutions to difficult situations, sometimes because earlier actions were taken that either could have been done better or perhaps should not have been taken at all.
In my pursuit of financial independence, there are indeed many decision points, and they arise every day, in every set of actions that need to be taken. As I'm going through this, I find myself going less on experience, being new at this, and more on gut feel and what seems to be logical to me.
So, to continue the titular metaphor, I end up cutting many crooked furrows in the effort to plow this field.
Yes, I'd like very much to be better prepared. Still, forward progress brings the new experiences from which I learn.
So, just as the quality of my blog posts improves as I gain experience writing, so the quality of my decision making improves as I gain experience making these decisions.
My dear readers, give yourself permission to learn, permission to make mistakes, and permission to learn from those mistakes and do better as you go along.
The way some of us were raised, that is perhaps a bit challenging. I understand - I live with that, also. Seek advice from some one you trust to help you get through the challenges of the past and break out forward, into your future - a better, brighter future with fewer worries about finances and income.
Let's do it together!
We'll talk again soon!
Take care - be well!
Much Success!
Saturday, May 22, 2010
A Point of Decision
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
Now that we've discussed some of the first building blocks to put in place in your business, we've probably already passed the point where we need to decide what our business will do, what business we'll actually be in - specifically.
Still, it's worth another look just to make sure we've set the right direction and chosen a good path.
I'll still stay within the concept of using real property to build income and net worth. So, let's see what kinds of choices we may have within that domain.
One choice might be to generate cash by doing deals. This might be wholesaling, short saling or just about any "flip" strategy. One approach to that choice might be to do a few wholesale or short sale flips to build up some cash, then take on a rehab or two while still doing flips.
That specific strategy is for generating cash and, since we don't necessarily hang on to the properties long enough to incur any major liability, we don't necessarily need to establish a business structure or entity. Flipping as a sole proprietor may be sufficient.
Again, let me interject here that I am -NOT- an attorney, accountant, etc. and do not offer any legal, financial or investment advice. I merely offer suggestions of topics to discuss with your professional people. It is up to -YOU- to select and develop your own strategies.
That said, let us continue...
Generating cash requires constant activity. You do a deal, you generate cash. Lather, rinse, repeat, ... but when you stop doing deals your cash stops coming in.
Generating cash FLOW is another matter and rather a different strategy. Instead of flipping properties, you're actually taking physical possession of them and holding them for the cash flow they generate.
As a wholesaler or short saler, you're flipping properties and deals and not actually taking physical possession of the subject property before you pass it - or the contract on it - on to the next buyer. You can probably do very well using only transactional funding and needing little to no cash or credit of your own.
As a holder of property your financial needs change a good bit. Instead of transactional funding, you may need equity or joint venture partners to provide the funding you may not be able to come up with to acquire and hold the property. Thus, you may be sharing the monthly cash income with your co-investors and partners.
Some of the webinars currently going around talk about "commercial" multi-family properties, meaning multi-unit properties of 6 units or more. One point made there is that many of those deals can be done with owner carry-back; that is, the current owner carries a note on the property in lieu of a cash down payment. So, as the buyer, you - or your business entity - may only need to come up with enough cash to cover closing costs, inspections, fees, and other miscellaneous charges involved in the actual closing. So, it's possible to acquire cash flow without shelling out big money up front.
When holding properties for cash flow, new questions of liability arise - questions that do not come up in the course of flips.
Here again, I'll caution that what follows here are suggestions. I do not and can not give legal, financial, or other advice myself as I am not a licensed professional in those areas.
To limit your liabilities, discuss with your legal and other professionals possible strategies to protect your properties from claims against each other. You want to devise a strategy such that one property being the subject of a claim of liability does not negatively impact the others you may control, directly or indirectly.
Since that strategy typically includes one or more business entities, it makes sense to use the credit building strategy for each one of them, as discussed in the previous post, "The First Thing".
To summarize the decision points, then, these are the choices:
Sole Proprietor
The sole proprietor is essentially you "doing business as" yourself or another name. You bear all the liabilities, the business's credit is your personal credit, and the business's finances are your personal finances. Sole proprietor may be good for a business which, for example, generates cash as we discussed earlier. No assets are held for any appreciable time; thus, only a little liability is typically encountered.
Business Entity - LLC, Corporation, etc.
The business entity is essentially a virtual legal "person", separate from its owner. The company's liabilities can be separated from the owner. The company's finances and credit stand alone, and do not reflect the credit or finances of the owner, nor do they effect the credit or finances of the owner. Thus, someone with terrible credit can set up an entity and establish very good credit for it while still rebuilding their own credit at a different pace.
The choice we make depends on the goals and function of our business.
We'll talk again soon!
Take care - be well!
Much Success!
Now that we've discussed some of the first building blocks to put in place in your business, we've probably already passed the point where we need to decide what our business will do, what business we'll actually be in - specifically.
Still, it's worth another look just to make sure we've set the right direction and chosen a good path.
I'll still stay within the concept of using real property to build income and net worth. So, let's see what kinds of choices we may have within that domain.
One choice might be to generate cash by doing deals. This might be wholesaling, short saling or just about any "flip" strategy. One approach to that choice might be to do a few wholesale or short sale flips to build up some cash, then take on a rehab or two while still doing flips.
That specific strategy is for generating cash and, since we don't necessarily hang on to the properties long enough to incur any major liability, we don't necessarily need to establish a business structure or entity. Flipping as a sole proprietor may be sufficient.
Again, let me interject here that I am -NOT- an attorney, accountant, etc. and do not offer any legal, financial or investment advice. I merely offer suggestions of topics to discuss with your professional people. It is up to -YOU- to select and develop your own strategies.
That said, let us continue...
Generating cash requires constant activity. You do a deal, you generate cash. Lather, rinse, repeat, ... but when you stop doing deals your cash stops coming in.
Generating cash FLOW is another matter and rather a different strategy. Instead of flipping properties, you're actually taking physical possession of them and holding them for the cash flow they generate.
As a wholesaler or short saler, you're flipping properties and deals and not actually taking physical possession of the subject property before you pass it - or the contract on it - on to the next buyer. You can probably do very well using only transactional funding and needing little to no cash or credit of your own.
As a holder of property your financial needs change a good bit. Instead of transactional funding, you may need equity or joint venture partners to provide the funding you may not be able to come up with to acquire and hold the property. Thus, you may be sharing the monthly cash income with your co-investors and partners.
Some of the webinars currently going around talk about "commercial" multi-family properties, meaning multi-unit properties of 6 units or more. One point made there is that many of those deals can be done with owner carry-back; that is, the current owner carries a note on the property in lieu of a cash down payment. So, as the buyer, you - or your business entity - may only need to come up with enough cash to cover closing costs, inspections, fees, and other miscellaneous charges involved in the actual closing. So, it's possible to acquire cash flow without shelling out big money up front.
When holding properties for cash flow, new questions of liability arise - questions that do not come up in the course of flips.
Here again, I'll caution that what follows here are suggestions. I do not and can not give legal, financial, or other advice myself as I am not a licensed professional in those areas.
To limit your liabilities, discuss with your legal and other professionals possible strategies to protect your properties from claims against each other. You want to devise a strategy such that one property being the subject of a claim of liability does not negatively impact the others you may control, directly or indirectly.
Since that strategy typically includes one or more business entities, it makes sense to use the credit building strategy for each one of them, as discussed in the previous post, "The First Thing".
To summarize the decision points, then, these are the choices:
Sole Proprietor
The sole proprietor is essentially you "doing business as" yourself or another name. You bear all the liabilities, the business's credit is your personal credit, and the business's finances are your personal finances. Sole proprietor may be good for a business which, for example, generates cash as we discussed earlier. No assets are held for any appreciable time; thus, only a little liability is typically encountered.
Business Entity - LLC, Corporation, etc.
The business entity is essentially a virtual legal "person", separate from its owner. The company's liabilities can be separated from the owner. The company's finances and credit stand alone, and do not reflect the credit or finances of the owner, nor do they effect the credit or finances of the owner. Thus, someone with terrible credit can set up an entity and establish very good credit for it while still rebuilding their own credit at a different pace.
The choice we make depends on the goals and function of our business.
We'll talk again soon!
Take care - be well!
Much Success!
Tuesday, May 18, 2010
The First Thing
Hello! David J here again bringing you more of the steps on my journey toward financial independence.
First off, apologies for the extended absence. "Life happens", and lately there's been a lot happening, including the background work and research which made this post possible.
Since you're reading this post, I'm assuming you've read the previous post, "Before The First Thing". If you haven't read it yet, read that one first, then come back to this one.
O.K. You've set up your business entity structure. My recommendation is to have a structure of multiple entities as Darius Barazandeh recommends.
If you used my recomendations from the previous post on how to raise money to build your business entity structure, then you already have some experience in the business, and probably have some cash left from that experience. Getting your business entity structure established doesn't take a lot of cash, but for some of us, even the little it takes is more than we have that we can spend on anything other than food, shelter and other basics.
If you are fortunate to still be "above water", then you may be thinking that the next step is to start doing deals and start raising some cash.
Well, that would be one way to proceed, and if your needs dictate, then go ahead on to the next post in the blog (which as of the moment, I haven't written yet) and start doing your deals. Then, come back here and continue reading.
On the other hand, if you can afford to take some more time to prepare and continue building your foundation, there is still another series of steps to take to bring your businesses "to life": infuse them with some cash.
Statistically, 95% of new businesses fail in the first five years, and in some 80% of cases, this is due to lack of capital or funding. You can beat those odds by taking the time up front to allow the business to capitalize itself rather than using your personal assets and credit lines. We've all heard stories about folks who, not knowing that these strategies exist, maxed out their credit cards and mortgaged their homes up to hilt and beyond to get start up money for a business rather than allow the business to capitalize itself.
Now as I see it, there are at least two ways to do that:
1. Line up some cash investors
2. Acquire business credit.
WHAT??!! Business Credit??!! What'ya talkin' there DJ?
Well, stated plainly, I'm talking about your businesses lining up credit for themselves. Rather than use your personal savings or credit to provide the startup capital for your business entities, each one acquires its own lines of business credit.
When you established your business entities, each one was given a tax identification number, better known as an "EIN" or "Employer Identification Number". This number identifies the entity just as your own social security number identifies you. However, your business and its EIN are entirely separate from you and your social security number. So, any credit the business establishes is not reflected in your personal credit history. Of course, the reverse is also true: each business entity's credit history is entirely separate and your personal credit history does not reflect on that of your business.
That means each business entity must establish its own credit and its own credit history.
So, how do we establish credit for a business entity?
This comes in several phases.
In the first phase, we establish each entity with the business "credit bureaus".
In the world of personal credit, there are three major credit reporting agencies:
- Trans Union
- Experian
- Equifax
In the world of business credit, there are these major credit reporting agencies:
- Dun and Bradstreet
- Equifax Commercial
- Experian Business
For a business entity, you want to establish each entity with Dun and Bradstreet as well as Equifax Commercial and Experian Business.
When you register your business with Dun and Bradstreet, it gets a "DUNS" number which is the identification number used by Dun and Bradstreet to track your business's credit history. D and B then gives your business a "Paydex" score based on how well your business manages its credit history. Paydex scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of five reporting sources over the course of four consecutive months.
When you register your business with Equifax, it gets an Equifax identification number. Equifax then gives your business an "Intelliscore" credit score based on how well your business manages its credit history. Likewise, Intelliscore scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of two reporting sources over the course of four consecutive months.
In the second phase, we leverage the credit history of each business entity and begin to acquire lines of credit for each business entity.
Once your business is registered, the next step is to go out and start building some business credit in a small way. For example, establish a store account with some business supply companies. You'll see terms like "Net 30", which means the net amount owed is due within 30 days. Then use that credit to acquire the business basics, such as telephones, calculators, desks, chairs, cases of printer paper, ... whatever your business needs, without getting silly or frivolous. Remember: you're still using your own money! In-store services may be useful as well, such as having letterhead or business cards printed, getting promotional items such as pens with your company name and logo on them which you can use as "leave behinds" when meeting personally with buyers, sellers, real estate agents and the like.
Be sensible, and don't go overboard.
Once your businesses have begun to use those small store credit accounts, and have built up a bit of history - even before the full four months have elapsed - then you'll be in a position to begin approaching lenders.
Here's where we discover another reason to have multiple business entities in our structure.
See, each business can acquire its own lines of business credit. As an individual, we usually only have one Social Security Number. So, we only have one credit history. Likewise, each business has its own single credit history. However, each of us can have any number of businesses. The best part is that by keeping our personal and business credit separate, our businesses can have excellent credit, even if we don't.
Now, at the time I am writing his, I do not have access to a list of lenders who are receptive to businesses with little or no history. So, the remainder of this will be entirely based on what I have learned from others.
When your business applies for its lines of credit, you may be wondering about the income of your business. If you've been doing deals while establishing a credit history for your business, then you already have some performance history upon which to base your projections for the future. On the other hand, if you haven't closed any deals by the time you go out and apply for business credit, you can base your income projections on the expected income from deals which have not yet closed, or possibly even on your projections for what you feel is reasonably expectable for your business to be able to do for the periods being requested by the lenders. In either case, this may be referred to as either "stated" or "projected" income.
Now - all that said, there -IS- an easier way to do all of this if you can come up with some cash or credit to pay for business credit services.
Servicers exist who can help your company(-ies) establish their lines of credit.
On such servicer is Nevada Corporate Headquarters, Inc.. As their name implies, they provide services for establishing coporations and LLCs in the State of Nevada. Nevada has laws regarding LLCs and corporations which make it a very advantageous state in which to form your business entity. Again, I cannot provide any form of legal advice, so take this as my personal opinion and treat it accordingly - your mileage may differ, perhaps greatly. Discuss this with your legal and accounting professionals and work with them to develop your business credit strategy.
...or, if you want help with everything along the way, enlist such services by way of one of their affiliates, such as Tom Kish and his CashFlowExperts organization. Apologies for not having a link to his site. Google him, or view one of his weekly web "broadcasts" at Tom's TV Show. He usually does it live on Saturday mornings at 12:00 noon Eastern, 11:00am Central, 10:00am Mountain or 9:00am Pacific. Tom is based in Nevada (Las Vegas); so, he's on Mountain time.
Try as I might, I could not find a way to do all this with "no cash, no credit". The services mentioned here do have costs associated with them. There's just no getting around that. Apologies.
If you've been doing flips to raise cash, do one or two more to come up with the cash you'll need to acquire these business credit services. That may take some patience while the deal flips happen, but it will be well worth the wait in the long run.
The good news is this: for less than $5,000 you may be able to obtain access to cash lines of business credit which will allow you to grab that super-steal-of-a-deal income property without using your own credit or getting a mortgage loan in your own name. Build credit for a business entity, then use the entity's credit to buy the property in the entity's name. Then, the cash flow can go toward the debt service -AND- your "salary" (again, talk to your legal and accounting professionals about business entities and their cash flow).
Worth thinking about, eh?
We'll talk again soon!
Take care - be well!
Much Success!
First off, apologies for the extended absence. "Life happens", and lately there's been a lot happening, including the background work and research which made this post possible.
Since you're reading this post, I'm assuming you've read the previous post, "Before The First Thing". If you haven't read it yet, read that one first, then come back to this one.
O.K. You've set up your business entity structure. My recommendation is to have a structure of multiple entities as Darius Barazandeh recommends.
If you used my recomendations from the previous post on how to raise money to build your business entity structure, then you already have some experience in the business, and probably have some cash left from that experience. Getting your business entity structure established doesn't take a lot of cash, but for some of us, even the little it takes is more than we have that we can spend on anything other than food, shelter and other basics.
If you are fortunate to still be "above water", then you may be thinking that the next step is to start doing deals and start raising some cash.
Well, that would be one way to proceed, and if your needs dictate, then go ahead on to the next post in the blog (which as of the moment, I haven't written yet) and start doing your deals. Then, come back here and continue reading.
On the other hand, if you can afford to take some more time to prepare and continue building your foundation, there is still another series of steps to take to bring your businesses "to life": infuse them with some cash.
Statistically, 95% of new businesses fail in the first five years, and in some 80% of cases, this is due to lack of capital or funding. You can beat those odds by taking the time up front to allow the business to capitalize itself rather than using your personal assets and credit lines. We've all heard stories about folks who, not knowing that these strategies exist, maxed out their credit cards and mortgaged their homes up to hilt and beyond to get start up money for a business rather than allow the business to capitalize itself.
Now as I see it, there are at least two ways to do that:
1. Line up some cash investors
2. Acquire business credit.
WHAT??!! Business Credit??!! What'ya talkin' there DJ?
Well, stated plainly, I'm talking about your businesses lining up credit for themselves. Rather than use your personal savings or credit to provide the startup capital for your business entities, each one acquires its own lines of business credit.
When you established your business entities, each one was given a tax identification number, better known as an "EIN" or "Employer Identification Number". This number identifies the entity just as your own social security number identifies you. However, your business and its EIN are entirely separate from you and your social security number. So, any credit the business establishes is not reflected in your personal credit history. Of course, the reverse is also true: each business entity's credit history is entirely separate and your personal credit history does not reflect on that of your business.
That means each business entity must establish its own credit and its own credit history.
So, how do we establish credit for a business entity?
This comes in several phases.
In the first phase, we establish each entity with the business "credit bureaus".
In the world of personal credit, there are three major credit reporting agencies:
- Trans Union
- Experian
- Equifax
In the world of business credit, there are these major credit reporting agencies:
- Dun and Bradstreet
- Equifax Commercial
- Experian Business
For a business entity, you want to establish each entity with Dun and Bradstreet as well as Equifax Commercial and Experian Business.
When you register your business with Dun and Bradstreet, it gets a "DUNS" number which is the identification number used by Dun and Bradstreet to track your business's credit history. D and B then gives your business a "Paydex" score based on how well your business manages its credit history. Paydex scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of five reporting sources over the course of four consecutive months.
When you register your business with Equifax, it gets an Equifax identification number. Equifax then gives your business an "Intelliscore" credit score based on how well your business manages its credit history. Likewise, Intelliscore scores range from 1 to 100, with 80 or better being considered good. The score is based on reports from a minimum of two reporting sources over the course of four consecutive months.
In the second phase, we leverage the credit history of each business entity and begin to acquire lines of credit for each business entity.
Once your business is registered, the next step is to go out and start building some business credit in a small way. For example, establish a store account with some business supply companies. You'll see terms like "Net 30", which means the net amount owed is due within 30 days. Then use that credit to acquire the business basics, such as telephones, calculators, desks, chairs, cases of printer paper, ... whatever your business needs, without getting silly or frivolous. Remember: you're still using your own money! In-store services may be useful as well, such as having letterhead or business cards printed, getting promotional items such as pens with your company name and logo on them which you can use as "leave behinds" when meeting personally with buyers, sellers, real estate agents and the like.
Be sensible, and don't go overboard.
Once your businesses have begun to use those small store credit accounts, and have built up a bit of history - even before the full four months have elapsed - then you'll be in a position to begin approaching lenders.
Here's where we discover another reason to have multiple business entities in our structure.
See, each business can acquire its own lines of business credit. As an individual, we usually only have one Social Security Number. So, we only have one credit history. Likewise, each business has its own single credit history. However, each of us can have any number of businesses. The best part is that by keeping our personal and business credit separate, our businesses can have excellent credit, even if we don't.
Now, at the time I am writing his, I do not have access to a list of lenders who are receptive to businesses with little or no history. So, the remainder of this will be entirely based on what I have learned from others.
When your business applies for its lines of credit, you may be wondering about the income of your business. If you've been doing deals while establishing a credit history for your business, then you already have some performance history upon which to base your projections for the future. On the other hand, if you haven't closed any deals by the time you go out and apply for business credit, you can base your income projections on the expected income from deals which have not yet closed, or possibly even on your projections for what you feel is reasonably expectable for your business to be able to do for the periods being requested by the lenders. In either case, this may be referred to as either "stated" or "projected" income.
Now - all that said, there -IS- an easier way to do all of this if you can come up with some cash or credit to pay for business credit services.
Servicers exist who can help your company(-ies) establish their lines of credit.
On such servicer is Nevada Corporate Headquarters, Inc.. As their name implies, they provide services for establishing coporations and LLCs in the State of Nevada. Nevada has laws regarding LLCs and corporations which make it a very advantageous state in which to form your business entity. Again, I cannot provide any form of legal advice, so take this as my personal opinion and treat it accordingly - your mileage may differ, perhaps greatly. Discuss this with your legal and accounting professionals and work with them to develop your business credit strategy.
...or, if you want help with everything along the way, enlist such services by way of one of their affiliates, such as Tom Kish and his CashFlowExperts organization. Apologies for not having a link to his site. Google him, or view one of his weekly web "broadcasts" at Tom's TV Show. He usually does it live on Saturday mornings at 12:00 noon Eastern, 11:00am Central, 10:00am Mountain or 9:00am Pacific. Tom is based in Nevada (Las Vegas); so, he's on Mountain time.
Try as I might, I could not find a way to do all this with "no cash, no credit". The services mentioned here do have costs associated with them. There's just no getting around that. Apologies.
If you've been doing flips to raise cash, do one or two more to come up with the cash you'll need to acquire these business credit services. That may take some patience while the deal flips happen, but it will be well worth the wait in the long run.
The good news is this: for less than $5,000 you may be able to obtain access to cash lines of business credit which will allow you to grab that super-steal-of-a-deal income property without using your own credit or getting a mortgage loan in your own name. Build credit for a business entity, then use the entity's credit to buy the property in the entity's name. Then, the cash flow can go toward the debt service -AND- your "salary" (again, talk to your legal and accounting professionals about business entities and their cash flow).
Worth thinking about, eh?
We'll talk again soon!
Take care - be well!
Much Success!
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