An Entrepreneur’s Guide to Start-Up Funding

Here at Veitengruber Law, we are big fans of entrepreneurship. After all, that’s how our firm came into being! Taking the leap from a traditional job with a regular paycheck (not to mention health insurance benefits and potentially more perks) is an intimidating move, for sure. However, if you have a true entrepreneurial spirit and know you would be happier working for yourself, getting start-up capital is one of the biggest hurdles you’ll have to clear. Today, we present you with a guide to finding the right funding for your new business.

Where to start:

Be sure that you have a service or product that will be profitable, as well as funding sources.


How to avoid failure:

Be able to finance your product or service, in order to bridge the gap between concept and product/service.


Three ways in which most entrepreneurs are negatively impacted:

1) Bad concept/idea: This leads to a lack of funding from outside sources. Marketing is key.

2) Lack of plan/strategy: In this case, the idea can be superb, but the entrepreneur has not completely researched the concept and has not created a proper rationale for profitability for potential investors.

3) Not understanding the financial aspects: In this case, the entrepreneur may have created an excellent idea and strategy for the product/service; however, he or she doe not have a full grasp on locating funding.


There are six major strategies for locating funding options:

1) Venture capitalists: This person is an individual who invests directly with a company, while earning a stake in the shares of the company in return. This is the most typically misunderstood, yet best options of these six funding avenues.

2) Angel investors: This type of investor is similar to a venture capitalist, but he or she has a more hands-on approach. Angel investors can be located through one’s community; particularly through local investing and entrepreneur groups, as well as the Small Business Association (SBA).

3) Bank loans: This is a popular avenue for investment with local banks providing small loans to local businesses. This should be one of the primary options to either accept or exhaust, depending upon the outcome. However, keep in mind that in the past decade many of the policies for lending have become increasingly strict.

4) Private funding: This source of funding typically comes from family and friends of the entrepreneur, which makes this option one of the most feasible. Typically, family and friends will invest directly with the person they know before an angel investor or a venture capitalist would readily invest in the company/service. However, always be aware of the fact that borrowing money from close relatives and/or friends could have a major impact on your relationship.

5) Self-funding: This option involves using personal property to fund one’s company or service; for instance, liquidating assets to utilize the money directly, taking out an extra mortgage on one’s home, or utilizing credit cards. This is the highest risk option, due to the potential ramifications of investing poorly.

6) Crowd funding: This method of funding is one of the newest and most popular ways to invest in one’s company/service. The websites Kickstarter and Indiegogo, for instance, provide a platform by which entrepreneurs can showcase their product/service without having to provide the investor with equity of the company.



How to Start a NJ Business When You Have a Poor Credit Rating


If getting out of corporate America by becoming your own boss is your main goal as we roll into 2017, there are a lot of steps you’ll need to take to make it a reality. Starting your own business is without a doubt a challenging undertaking, but it has been done by many before you, so take heed that it can be done! However, if you’re starting the process with a low credit score, you’re already a bit behind the eight ball. Rest assured, though, that this does not mean entrepreneurship can’t happen for you.

Facing the fact that your credit score is less than ideal can be difficult, especially if you’ve managed to “get by” for years without giving it too much thought. By taking no action at all and simply burying your head in the proverbial sand, your score will never improve. Since starting a business is important to you, you’ll have to make smart borrowing choices that will enable you to launch while increasing your credit score simultaneously. In turn, you’ll have access to more financial resources later when your business expands, because your score will have gone up. It is more important to have a good credit score as your business grows, so you have that on your side. You’ve got nowhere to go but up!

In order to get your business off the ground, try these approaches to getting the start-up cash you’ll need:

  • Phone a friend. If you’ve ever watched an episode of Shark Tank, you’ve probably noticed that many of the entrepreneurs on the show report getting a large percentage of their start up costs by asking friends and family for loans (or investment in the company). While it may be difficult to ask loved ones for financial help before you have established your new company, this is one way you can avoid your low credit score prevent you from borrowing money.
  • Apply for grants. Although it can be very challenging to find a grant program that is willing to donate money to your new start-up, it is possible. This is especially true if your company is in the healthcare field or is a retail business in a struggling geographical location. Downtrodden areas with lower-income residents are frequently looking for new businesses to give a boost to their current economic status.
  • Look for a microloan. It is what it sounds like – a tiny loan, but if you have exhausted all other options, something is better than nothing. Lenders that are not affiliated with a bank do exist, and for many of them, their main purpose is helping entrepreneurs with low credit scores. Not only are they more likely to lend you money than a traditional bank or lender, but borrowing from them will also cause your score to rise! Naturally, that will only occur if you’re making your required payments on time, but with microloans the payments will be much more manageable.

The most important thing to remember if you dream of starting your own business is this: don’t give up just because of a low credit score. Today’s society revolves around the buying and selling of goods and services – now more than ever before!

Additionally, for those who are contemplating starting a business in New Jersey – our state welcomes you and wants to help you find the resources you need to succeed. More business in the Garden State means a better NJ economy! To learn more about special financing and incentives available to you, visit The Cornerstone of Financial Justice, where you’ll receive full service solutions to your credit score and business loan challenges.


Image credit: CCPixs

Can a Low Credit Score Affect My Success as an Entrepreneur?

Your credit score is an extremely important measure of your credit worthiness. Along with the details included in your credit report, your credit score will be used by any lender, creditor or bank in determining whether or not to grant you a loan. As an entrepreneur, you may be even more concerned about your credit score, as it may fluctuate quite dramatically as you start your business. Entrepreneurs often need to borrow large amounts of money to get their business up and running.

One of the biggest influences on your credit score is how you manage your business expenses and monthly bills. If you’re starting up a new business and have taken out large loans, focus on making timely payments on your business rent and utility bills. Your personal credit rating will gradually become less important to lenders, because as your business takes shape it will take on its own credit score and report.

Business credit scores are formulated differently and using different number scales than personal credit scores, so it’s important to become familiar with the business credit scoring system so you know what to look for. You can request your business credit score without running the risk of damaging your score in any way. Stay on top of your business credit rating at all times. As your company grows, lenders and investors will look at how well you’re managing your business’ money before deciding whether to partner with you.

By analyzing your business credit report(s), you will be able to quickly recognize anything that might be dragging your score down. Some things to look for include: reporting errors, outdated information, and signs that someone has stolen your business information to use fraudulently.

If you start to see signs of your business credit score plummeting, you should act swiftly to reverse any damage that has been done. However, if you are busy running a start-up company, you likely don’t have a lot of time to devote to improving your credit score, especially if fraud is involved.

This is when it’s a good idea to seek professional help from a certified credit repair attorney near you. Avoid credit repair companies, as they often attempt to up-sell you on services you don’t need that won’t help you, and many of them have fraudulent practices.

Look for an experienced credit repair attorney with a high success rate helping clients with things like debt relief, bankruptcy and foreclosure defense. Veitengruber Law takes a holistic approach to NJ credit repair and debt negotiations so that you will have a team walking with you through the entire process. We care very much about your end result!

Like you, George Veitengruber, Esq. is also a business owner and understands the high value of building a strong business credit score. Our services are personalized so that your specific credit issues can be resolved in the most effective and efficient way possible. Initial phone or office consultations with our team are free. Give us a call (732)852-7295 to see how we can help you begin to rebuild your business credit, giving you the best chance at entrepreneurial success.

Can I Discharge Business Loans in a Bankruptcy?

store closing

Knowing that a large percentage of your personal debts can be discharged or forgiven by filing for bankruptcy, many business owners  wonder if the same would be true for loans they took out to start a small business.

Unfortunately, nearly all loans taken out by any small business will have been guaranteed by the owner(s) of the business. Lenders do not typically grant loans to new small businesses without the personal guarantee of the company’s owner(s). Therefore, even if you do file for bankruptcy for the loans you took in order to get your business off the ground, you will still be held personally responsible for the repayment of the debt(s). Because of this, filing for small business bankruptcy in order to recoup your initial business loans will not be very effective.

Another faulty belief held by many new business owners is that an incorporated business will mean protection for the owner(s) if the business fails. The reason why this belief is faulty is because, as previously mentioned, most small business owners are required to guarantee any loans they take out for their start-up. Anyone who has personally guaranteed the loan(s) s/he took in order to specifically start their business will not find any protection in incorporation.

Filing for bankruptcy for a failing business usually does not offer a whole lot of help to the business itself. Bankruptcy discharges aren’t even granted for businesses that are closing their doors. Therefore, if your business just isn’t going to make it, don’t waste your time filing bankruptcy paperwork for the business itself. YOU are the person/entity who will need protection, so you should consider filing a personal bankruptcy and attempting to discharge debts related to your business. These kind of debts can typically be discharged in an individual bankruptcy matter.

On the other hand, if you think that your business is going to survive and (at some point in the future) thrive, but you are just having some temporary trouble keeping it afloat, a business bankruptcy may help protect it from going under. It should be noted here, though, that most small business that file for bankruptcy do not make it through to the other side with their doors still open.

Filing for bankruptcy for your small business can give you time to reorganize your business finances and debts. As a business owner who would be able to stay in business with a reconfigured budget and restructured debts, there are two bankruptcy options. Both Chapter 11 and Chapter 13 bankruptcies allow businesses to stay open by organizing a more realistic financial plan for the business owner(s).

Both Chapter 11 and 13 bankruptcies offer you the ability to maintain ownership of any business properties. In order to do so, you’ll be required to sell any unnecessary assets for profit, to help you pay down your existing debts. Additionally, your secured business debts will be modified to make the payments more realistic for your budget.

Where possible, it is advised to file for Chapter 13 bankruptcy if you are the sole owner of your business and if you meet the debt limitations required under Chapter 13 bankruptcy law. It is a less expensive and usually much faster option to file Chapter 13 instead of Chapter 11. However, if you do not meet the eligibility requirements for Chapter 13, you can file under Chapter 11. No debt or income requirements/limits exist regarding filing for Chapter 11 bankruptcy, but as mentioned, it can be expensive and time consuming.

You can learn detailed information about your particular bankruptcy needs by working with a NJ bankruptcy lawyer near you. Each case is unique, and your attorney will review all specifications relating to your business and debts in order to best advise you about your options.

Image credit: Bradley Gordon

Paying Taxes When You’re Self-Employed

5856711413_87c9410f46Image Credit: Images of Money

It can definitely be confusing when tax season rolls around if you are currently working as a 1099 contractor, or in other words, if you are self-employed. If you have been working from home – either on your own business or as an independent contractor, you do still have to pay income tax, as long as you’re actually generating an income. The tricky part is, now you are considered to be the employer and the employee.

Most 1099 contractors love the flexible work schedule and increased amount of independence that comes with being self-employed. However, one of the negatives that unfortunately also comes with the package deal, is figuring out and managing to pay your own income taxes properly and on time.

After all, no one wants to get in trouble with the IRS.

Just like a W-2 employee, your income taxes as a 1099 contractor will be determined by how much you earn per year. You can pay your taxes electronically or the good old-fashioned way: by mail.

The first thing you’ll need to do when determining how much of your wages to fork over to the government, is to add up all of your yearly income. Be sure to include all payments you have received from any and all clients throughout the entire preceding calendar year. The nice thing about working independently, is that you can then deduct business expenses and tax credits from your gross earnings. You can deduct virtually anything that you use to help run your business, ranging from the supplies you use on a daily basis and office furniture in your home to any expenses related to traveling for your business. Another nice bonus of working for yourself, is that you can actually deduct part of your mortgage payment if you have a home-based office.

Next, you should also know that as an independent contractor, you will be required to pay something called a Self-Employment tax, or SE tax. This is because you no longer have an employer taking money out of your paycheck to go toward Social Security and Medicare.

By using form 1040-ES, you will be able to determine whether or not you are required to pay your SE taxes, as well as your income taxes, quarterly, or if you can simply pay them once per year.

After filling out the worksheet attached to form 1040-ES, you will know your estimated quarterly tax payments. Included with form 1040-ES are blank vouchers that independent contractors can use when sending in quarterly tax payments to the IRS. Remember, you can also pay quarterly using the IRS’s electronic payment system.

Even if you pay your SE and income taxes on a quarterly basis, you will still be required to file an annual return every year. This is because most sole proprietors estimate their quarterly income. Your annual report will show the IRS your actual earnings for the entire year so that any corrections may be made to the quarterly payments that you have submitted.. To file your annual return, you can use the Schedule C form, found on the IRS website.

Filing your taxes as a sole proprietor or 1099 contractor can be confusing, especially if this is your first year in business for yourself. By using the tips in this article, you should be able to successfully handle filing the appropriate forms and making the correct payments.

Should you need further assistance, we can easily direct you to a trusted tax preparer within our vast professional network. It’s as simple as leaving a comment after this post, sending us a quick note using our Contact Us form, or calling/dropping by our office. As always, we’re happy to help!

Mortgage Help for the Self-Employed

There is no doubt that it is infinitely easier to qualify for a loan if you are employed in the traditional sense and trek into an office everyday.  However, many self-employed individuals need to apply and be approved for mortgage loans. Although you will have to jump through a significant number of hoops, mortgage approval can be obtained as a self-employed entrepreneur, as long as you are working regularly and you can prove that your debt/asset ratio is low.

The most important thing we advise you to do is make sure that your credit score is as high as humanly possible.  Many lenders will take one look at the fact that you are self-employed and decide that you are not worth the hassle of all the added paperwork and time that will be involved in getting you approved. That being said, if your credit score makes their eyes pop out of their heads, they will be likely to give you a second look. Stay up to date on all of your obligations and bills AT ALL TIMES. Talk to your credit repair attorney for the best ways to boost your credit score quickly.

Expect a longer application process than the standard applicant. Lenders will need you to prove that you can afford the loan and that you are not involved in anything shady, like drug deals or fraud.  Your bank accounts, credit reports, past taxes, birth certificate, and many other documents will be scrutinized carefully and by a number of people.  Be sure that you have enough money in your bank account to pay for closing costs, because lenders may require you to pay a higher down payment due to the fact that you are considered a riskier borrower.

Traditional employees simply need to provide lenders with the previous year’s W-2 form to show proof of income.  Since self-employed individuals do not have W-2s, be prepared to be able to show significant proof of the financial success of your business, which may include previous tax returns, business licenses, written statements from your accountant, profit/loss statements, and balance sheets.

If you’re a relatively new entrepreneur and are having difficulty providing many of the above forms of documentation but are still in need of a mortgage loan (in situations like divorce or relocation), consider having a co-borrower who is a W-2 employee join you on the loan documentation so the lender feels more confident about approving you. This could be a spouse or close relative who is positive this is something that they are willing to do.  You must BE SURE that you are not going to default on the loan in this case.  To do so would leave your cosigner with full responsibility and could ruin an important relationship.

For more helpful information about getting approved for a mortgage when you are not the ideal candidate, contact an attorney who is knowledgeable in credit counseling. Whatever you do, don’t give up on owning a home simply because you don’t work a traditional job! You are already used to putting forth a greater effort to accomplish most things, since you’re an entrepreneur. Don’t let this be the hurdle that makes you fall.  Get a running start, and you’ll fly over this obstacle too.

Photo credit: Philip Taylor PT