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The Pros And Cons Of A Shelf Corporation

You have likely heard about shelf corporations being the way to go if you want to hurry up the process for obtaining corporate credit. In many cases this is going to work well for you because it shows the lender that you have been established instead of just starting out. Shelf corporations are legal but they aren't always the answer to your corporate credit situation. Make sure you are aware of the pros and cons of shelf corporations before you move forward.

In the eyes of the lender, it reduces the risk involved should they decide to issue you credit. Since at least 50% of all new businesses fail in the first year, the fact that you are a couple of years old significantly reduces the liability in their eyes. This could mean the difference between you getting the corporate credit you need or it being denied. It can also affect your credit limit and the amount of interest that you will pay on it.

Consumers love to make purchases but they don't like to get ripped off. They generally look for companies that have been in business long enough to establish some credibility with consumers. If your business appears to be brand new many consumers that have been burned in the past will shy away. However, if you have a shelf corporation they may feel confident enough to go ahead and complete that purchase.

Other businesses will feel this way as well so a shelf corporation can help you secure a very profitable deal with them. They want to make sure the items they purchase or the services they need will be fulfilled. If your business is new, they may feel that you don't have the skills yet to take care of such a large order or to meet their ongoing needs. They don't want to be among your first customers and your learning curve.

How honest is it to invest in a shelf corporation? Aren't you misleading lenders, consumers, and other businesses when you use this to promote your new business? There are plenty of ethical concerns with shelf corporations that individuals struggle with. While they are legal, many people aren't sure that they are ethical and they want no part of the process. You will also find those that say a shelf corporation is just another strategy for the benefit of your business.

There are plenty of factors you need to consider if you heading down the road towards a shelf corporation. Make sure it has a clean record with consumers as you don't want to be connected with complaints that have been filed against a business name. If it is a legitimate shelf corporation that has never been used this shouldn't be an issue, but make sure you look at it as well.

How much is a shelf corporation going to cost you? This depends on several factors including the age of it and who is selling it. Some shelf corporations are affordable while others will eat up all of your start up costs. You need to be able to afford the shelf corporation if you are going to proceed with it. Otherwise you risk very important parts of your business not getting the attention they need due to a lack of funding.

Only you can decide if a shelf corporation is going to be right for you or not. Make sure you take the time to consider both sides of the issue. You also need to think about the cost involved. A shelf corporation isn't always cheap but it can lead to more sales for your business. Your personal opinion about the process is going to influence your decision as well.

By: Robert Bain

Robert Bain - Discover the the difference between typical business credit and real corporate credit at this website.

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