What’s in a Company Name?
Why is picking the right company name so important? What if I told you picking the wrong company name could make or break a deal when it comes to obtaining business financing?
Choosing the Wrong Company Name
Initials in Your Company Name?
From time to time we’ll come across a business name that use initials in the name of the company. That typically means those are the initials of the business owners. But there are some cases where this might not be true. We’ve had cases where there is one business owner and one of the initials has nothing to do with their name, and come to find out it’s either a spouse’s initial or even one of their children’s initials.
For an example, let’s look at this company name: “J & S Construction Company”. As a finance company reviewing this company’s credit package for financing, we’d assume there are two owners for the business. But after investigating there is only one owner listed on the application and we’ll pretend his name is “Jimmy”.
You may be asking yourself, “What does it matter?”
Well, when it comes to obtaining business financing, the funding source will always want to know all principals of the business. If they think there is another owner or partner for the business they will also want to see their credit history, possibly their income and financial history. So in this example, Jimmy would need to explain to us why and who is that other initial “S”, and are they part owner of the business? If they are indeed a partner in the business, they will also need to be on the application with Jimmy. If they are not part owner of the business, we’ll go into more detail on how to prove that later in this article.
Too Many Names in Your Company Name?
There have also been times where a company name would make anyone believe there are other owners. For an example, “David & Son’s Transportation”. Again, this company name does seem like there’s a possibility the sons are also part of this business. Again, we’ll need to clarify all owners before we can properly provide business financing.
Be Prepared to Prove Name & Ownership
What can you do if you already have your company started and you are the only owner of the business?
Well, if you’ve already been in business and your company name is one that might be of concern to underwriting, the finance company will want proof that you’re the only owner. This will not always be accepted, but if you can provide K1’s that show you’re the sole owner of the Corporation or LLC, then this will help. If you can show your Articles of Organization, this may also help satisfy this issue. The finance company will also try to verify this information themselves by going on Secretary of State for the state your company was formed to verify the owners on the Corporation or LLC.
The Importance of Choosing the Right Company Name
Hopefully this will shed some light on the reason how your company name can directly effect your business financing. This is why lenders look at your company name, and why it is so important that the business owner(s) choose the name wisely.
We understand it might be a nice gesture to recognize your spouse, but taking them to dinner would be an easier route.
Your First Choice in Business Financing
Whether you’ve chosen the perfect name for your company or not, we want to your first choice for business financing. Call 888-565-6692 to speak to the experts at First Capital Business Finance. We help you learn more about the advantages of our business loans, equipment financing, business line of credit, cash advance, and other finance programs. We look forward to helping you grow your business.
Choosing the Wrong Company Name for Business Financing | First Capital Business Finance