In the previous post, we’ve outlined some of the basic financial fundamentals that you need to inculcate in order to boost your shelf corporation’s creditworthiness. In this post, we’ll give you some more financial mantras through which you can maximize the efficiency of your aged corporations in achieving your personal and business goals. Implementing these fundamentals is easier said than done, and it may require you to change your lifestyle and way of living, as millions of successful entrepreneurs have done before you. As it is rightly said, no gain can be achieved without some pain and a whole lot of effort. Becoming successful in business also requires immense hard work and a lot of sacrifices.
The financial principles we have elaborated till now, if observed in full, will help you throughout your life and not only in the good times but also in the bad times, when you need extra financial help, they will help you create buffers that help you fight it out. Every business, as well as every person, faces difficulties, and not all survive. One of the common points in survivors in all spheres of life is that they had planned for these issues and were ready. While not every bad situation can be planned for, what you can do is to be financially as well as emotionally ready to fight as hard as you can, and hope luck runs your way. As they say, fortune favors the brave, and that is true for the world of business as well. We’re repeatedly harping on this point because every capitalistic market is characterized by booms and downturns, and the only way to survive the downturns is to build buffers during the good times. The way to build this buffer is to put a pre-decided amount in an emergency fund every month and keep that amount aside. You should only use this amount in crisis situations. The definition of a crisis depends on your particular sphere of business, and you should define it yourself. The emergency fund should be maintained with a lot of discipline, as it will prove to be a lifesaver at times of need. In addition to the emergency fund, you can utilize the unused limits of your credit card, and thus you can have quite a big amount at your disposal. Thus your chances of handling stress increase dramatically. It is for emergency situations such as demand downturns, slowdowns, or hospital expenses, that you should keep your powder dry.
Another way of ensuring your preparedness in an emergency situation is to buy insurance for your home, health, and also for the goods and services that your business buys or sells. This will keep you free of stress and ensure that you don’t have to make huge payouts in times of emergency such as fire or theft or even health issues for you or your employees. You can also deduct these expenses from your income and pay lesser taxes, thus making insurance a very desirable proposition from the financial perspective. This brings us to the next essential point in financial planning that we want to discuss in a bit of depth.
Ensure your Recent Credit History is Clean- Always repay your debts, on time!
When you fill out an application for a credit facility for your shelf corp, then you will find that the bank asks for a lot of personal details. This is because they need to understand the financial capabilities of the people behind the corporate, which in this case will be you. This is the exact reason why we focussed so much on planning your finances, building an emergency buffer and other steps to ensure that your credit history is clean. People default on their commitments either when they are profligate in their lifestyle or when they have to face an extraordinary situation for which they were not prepared. You need to be in such a financial position that you are able to repay your debts well on time, whatever the situation. You must aim to be like the Lannisters from the Game of Thrones series, and always pay your debts!
A clean recent credit history means that you haven’t missed out on any repayment for the past 3 years. These repayments consist of the interest, the principal, and any other fees that the financial institution may charge. It is really important to pay all of these on time, otherwise, these institutions charge really usurious penal interest rates and high fees, every time you default. They also ensure that these defaults are reported to the credit bureaus and impact your credit scores negatively. Their aim is to make a default a highly painful experience for the defaulter so that people never even think of missing payments. They also make a lot of money from these fines and penal interest amounts. Thus, you need to think about whether you need to become that person from which these banks make their extra profits.
Don’t apply for credit too many times
This is one practice that you should take care to avoid. There should not be more than 6 inquiries of your credit score per bureau in the last 6 months, otherwise, your personal credit score will start getting impacted. Every time you apply for a credit instrument, the bank or financial institution makes an inquiry with the credit bureau to which it has subscribed, and that inquiry is reflected in your report. Thus, you should plan your applications for credit before you apply to too many places in too short a time.
A note of caution
Here we would like to caution you from looking at a shelf corporation as just a way to get credit, instead, you should use these innovations of corporate finance to achieve business goals. Otherwise, you really should have second thoughts and reconsider your course of action because buying shelf companies will not be a good idea for you. The only way to ensure that you are able to get a shelf corporation with credit facilities is by being patient and planning your next steps in advance
With this, we come to an end of this extended blog post. Thank you for being our faithful readers, and like all of you know, we’re always available for you, when you want any assistance!