SIC code and starting a business

SIC code and starting a business

I guess this is a new home business. Understand that lending institutions look at home businesses a little more carefully than usual. So you want to make your case (file) very strong.

Consider this if you have a home consulting business and a bank lends you money. How easy it would be for you to just pack up and leave – defaulting on the loan. So it makes sense to choose a business that is considered low-risk by lending institutions. This brings me to the subject of SIC codes. SIC stands for Standard Industrial Classification. Basically, any type of business can be classified with these codes so that different businesses reflect a different SIC code.

The key point is to choose a business that has a low-risk SIC code. By the way, this advice is worth its weight in gold. Many business credit counseling gurus will tell you to classify your business as “General Management” or “Business Management”, a generic name. I truly believe this will hurt your efforts in the long run. The nature of the business – the relevant SIC is a big part of developing a solid foundation for business credit development. Your goal should be to develop your business record so that you can get CASH lines of credit without any personal guarantees. No personal guarantees means that you should not use your personal credit for the purpose of obtaining a business loan. Many will tell you that is impossible in this economy. Well, it’s rare, but not impossible. This is only rare because most people approach business credit the same way they approach personal credit. Also, remember that just because you’ve requested your SS# doesn’t automatically mean your credit has been pulled. SS# is required for security reasons, especially if the amount borrowed is large.

Having said that, if you have a “high risk” SIC code business like real estate investing, but you still have enough cash flow coming from that business (and/or enough assets in the name of the business) then it will have more little matter since business is so strong. For the rest of us, a good SIC code is a must.

So what is a low risk SIC. Try to find out what types of business your state provides grants/aid to. Follow the cash incentives. If the government is willing to help a certain type of business, you know the business has a “good” SIC code. Healthcare, medical supplies are good examples (many more good examples). Visit the site for many more tips.

Make no mistake, a good SIC code can make all the difference if you want great business credit.

Always remember that a good website designer does not automatically become a business credit expert/guru.

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