#39 Unlocking Bank Secrets: What C-Corps Need to Know About Aged Shelf Corporations and Securing Bank Funding

An aged shelf corporation is a legal entity that has been incorporated but has not conducted any business. These entities are often several years old and were created to sit on the "shelf" until they are purchased by a company or individual seeking the advantages of an established corporation without the time and effort of starting a new one.

Aged shelf corporations can offer several benefits:

• Increased credibility: Lenders often view older corporations as more stable and trustworthy than new entities.
• Faster access to credit: An aged corporation might bypass some of the initial "new business" challenges when applying for loans or business credit.
• Perception of stability: Banks and other business partners may perceive the corporation as well-established, which can be advantageous when building business relationships.

However, banks are savvy to this tactic, and simply owning an aged corporation won't guarantee a loan. The corporation needs to be structured correctly and demonstrate financial health to win approval.

To successfully obtain funding from banks using an aged shelf corporation, the structure of the corporation must be in alignment with what lenders expect. Here are some key structural elements that can enhance your corporation’s chances of securing funding:

• Updated Business Filings: Ensure that all corporate filings with the state are current. This includes filing annual reports, renewing licenses, and making sure there are no lapsed compliance issues.

• Active Operations: While the corporation may have been dormant before purchase, it needs to show activity and a legitimate business presence once acquired. This includes having:

  • An active business address and phone number.
  • Corporate banking accounts that have been active for several months.
  • Website and online presence to demonstrate that the business is legitimate.

• Board and Officers: Appoint a strong board of directors and officers who can add credibility to the corporation. This demonstrates to the bank that the company is professionally managed.

• Corporate Resolutions and Minutes: Keep corporate records up to date, including minutes from board meetings and shareholder resolutions. Banks prefer to see companies with strong corporate governance.

• Financial Statements: Ensure that financial statements are properly maintained. Even if the corporation was previously dormant, once it’s activated, you need to have current financials, such as income statements, balance sheets, and cash flow statements, to present to banks.

The Standard Industrial Classification (SIC) code assigned to a corporation plays a significant role in how banks evaluate the risk associated with the business. Certain industries are considered high-risk, and banks may be reluctant to lend to businesses with codes associated with those industries.

SIC Codes Banks Like:

• Low-Risk Industries: Banks are generally more willing to lend to businesses in stable, low-risk industries, such as:These industries are viewed as stable and less prone to financial volatility, making them more attractive to lenders.

SIC Codes Banks Avoid: Banks tend to shy away from high-risk industries that have a greater chance of default.

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