You might just have learned that owning a shelf company would open the particular credit floodgates for your own new enterprise in order to increase the odds of securing funding for your startup. Is not it too amazing to be true? Since there are far other aspects that influence a company’s creditworthiness than merely its era. Although the era of your own corporation does weigh into the overall picture, it can never be viewed as the “key to credit.” After providing more insight into shelf companies and the core market credit benefits, you would be best prepared to decide if this is a tactic worth considering. Let us start with the fundamentals.
What exactly is a shelf corporation?
A Shelf Corporation, which is also often known as an “Aged Corporation” or otherwise “Aged Business” whenever referring to a particular LLC, is a corporation which has already been created but is not in operation and is available for “purchase” by particularly a new owner. People buy shelf companies for a number of reasons, and then there are several things to watch out for while buying a few of these “fully prepared” companies. One of the concerns I am sure you have is, “Why should I buy a shelf corporation?” Shelf companies allow you to enter into business, loan, or otherwise real estate arrangements as an existing entity without needing to go through the lengthy process of forming a new one.
Any prospective borrowers or otherwise business capital are unable to offer credit or lend to small or emerging businesses. By treating them as a well-established firm or enterprise, the company is far more likely to gain access to the credit lines, banking partnerships, rentals, and so forth. For an example, during the early stages of establishing business credit, some suppliers will only offer credit to businesses that have been in operation for at least 2 years. If the company is less than just a year old, they will even need a personal guarantee.
What else can shelf companies offer your company?
Buying a three- or even ten-year-old shelf company will help you in drastically increasing the total number of opportunities for credit which are available for you. Do not panic if the current company is less than 2 years old; you will always be able to easily get business loans, but your options for banks will be restricted. If you want to create a company or establish another corporation, this could be an alternative to consider.
Shelf companies will also have a significant boost in borrowing capacity as well as increased prestige for the company when dealing with consumers and lenders. Keep in mind that the age of the owner does not always equate to the age of the business. Whenever a company promotes that it was founded in 1869, it should not imply that any of the owners are above the age of 100. It basically means that the corporation was established in that particular year.
When selling to consumers, you will reap equal reputation advantages. Customers as well as lenders may view your own company’s age as more credible than a newly founded firm. As a result, buying businesses with proven credit and available credit lines will offer a substantial financial boost to the organization. Here are now the Top 5 Benefits of Purchasing a Shelf Corporation:
- Avoiding the time and cost of creating a new company.
- Obtain immediate access to contract and otherwise government contract bidding. Most of the states mandate that the organization be in operation for a certain amount of time.
- Immediately establish reputation and the appearance of organizational history.
- More appealing to future buyers and money.
- Obtaining lending connections and corporate lines of credit more quickly and easily.
In terms of buying a shelf business in order to secure a bank loan or perhaps line of credit, with the present economic circumstances, banks need far more than merely the age of your firm. There are bank scores, credit records, NSF background, as well as other considerations to remember, particularly if you seek a line of credit in excess of $50,000. So, if you want to apply for bank lending, bear in mind that shelf companies have no corporate background, tax returns, financials, or actual income.
Another thing to keep in mind is that there are certain businesses that market shelf firms that have established business in the past; DO NOT BUY Those! If you buy a shelf firm which has performed business in the past years, you will bear all of the company’s past debts.