Business Credit is credit that is obtained in a Business Name, with business credit the Business builds its own credit profile and credit score and with an established credit profile and score, the business will then qualify for credit.
This credit is in the business name and based on the business’s ability to pay, not the business owners since the business qualifies for the credit, in some cases there is no personal credit check required from the business owner.
The business can use its credit to qualify for revolving store credit cards like Staples, Lowes, Sam’s Club, Costco, BP, Wal-Mart, even MasterCard, Visa, and AMEX. The business can also qualify for credit lines and loans.
A credit profile can be built for a business that is completely separate from the business owner’s personal credit profile. This gives business owners DOUBLE the borrowing power as they have both Personal and Business credit profiles built.
Business credit scores are based only on whether the business pays its bills on time. A business owner can obtain credit much faster using their business credit profile versus their personal credit profile.
Personal Credit Scores are based on 5 factors :
Payment History 35%
Length of Credit History 15%
Accumulation of New Credit 10%
Credit Mix 10%
Dun & Bradstreet’s Business Paydex Score are based on Payment History:
Expect payment may come early 100
Payment is prompt 80
Payment comes 14 days beyond terms 70
Payment comes 21 days beyond terms 60
Payment comes 30 days beyond terms 50
Payment comes 60 days beyond terms 40
Payment comes 90 days beyond terms 30
Payment comes 120 days beyond terms 20
Approval limits are much higher on business accounts versus personal accounts. Per SBA, credit limits on business cards are usually 10-100 times higher than consumer credit.
When done correctly Business Credit can be built without a personal credit check . Business credit can quickly be obtained regardless of personal credit quality and there is no personal credit reporting of business accounts.
Most business credit can be obtained without the owner taking on personal liability, or a personal guarantee. This means in case of default, the business owner’s personal assets can’t be pursued.
When a business owner applies for financing, their business credit IS reviewed. Not having business credit established will get an owner DECLINED for financing. There are no regulations that require the lenders notify the business owner for their reason for denial, so most never know.
ANYONE can pull your business credit reports without your permission. Clients, prospects, potential buyers, even competitors can see YOUR business info. This means they can see payment history, high credit limits, employees and revenue, past payment performance and much more.
Almost any business can get business credit as long as it has an EIN number and entity setup. You don’t need collateral, you don’t need financials, you can be a startup and you just need to know the proper building steps.
ALL highly-successful businesses have business credit, it’s a “right of passage” to ever reach TRUE success
A business starts building a brand new credit profile much the same as a consumer does. The business starts with no credit profile. The business gets approved for new credit that reports to the business credit reporting agencies.
The business uses the credit and pays the bill timely. A positive business credit profile is established. As the business continues using the credit and pays bills timely it will qualify for more credit.
The perception lenders, vendors, and creditors have of your business is critical to your ability to build strong business credit. Before applying for business credit a business must insure it meets or exceeds all lender credibility standards. There are over 20 credibility points that are necessary for a business to have a strong, credible foundation.
It is very important that you use your exact business legal name . Your full business name should include any recorded DBA filing you will be using. Insure your business name is exactly the same on your corporation papers, licenses, and bank statements.
You can build business credit with almost any corporate entity type. If you truly want to separate business credit from personal credit your business must be a separate legal entity not a sole proprietor or partnership
Unless you have a separate business entity (Corporation or LLC) you might be “doing business” but you are not truly “a business“. You need to be a Corporation or an LLC in order to separate personal from business +.
Whether you have employees or not, your business entity must have a Federal Tax ID number (EIN). Just like you have a Social Security Number, your business has an EIN
Your Tax ID number is used to open your bank account and to build your business credit profile. Take the time to verify that all agencies, banks, and trade credit vendors have your business listed with the same Tax ID number.
Business Address must be a real brick-and-mortar building deliverable physical address. It cannot be a home address, cannot be a PO Box and cannot be a UPS address. Some lenders will not approve and fund unless this criteria is met.
Address only, receive mail and packages at your dedicated business address.
Virtual office, professional business address, dedicated phone and fax numbers, receptionist services, and part-time use of fully furnished offices and meeting rooms.
True Office, your own full-time private office with receptionist services, dedicated phone and fax, internet, full furnishings, meeting rooms, and more.
You must have a dedicated business phone number that is listed with 411 directory assistance, under the business name. Lenders, vendors, creditors, and even insurance providers will verify that your business is listed with 411. A toll-free number will give your business credibility, but you must have a LOCAL business number for the listing with 411 directory assistance.
Lenders perceive 800 Number or toll-free phone numbers as a sign of business credibility. Even if you’re a single owner with a home-based business, a toll-free number provides the perception that you are an even bigger company. It’s incredibly easy and inexpensive to set-up a virtual local phone number or a toll free 800 number.
A cell or home phone number as your main business line could get you “flagged” as an un-established business that is too high of a risk. DON’T give a personal cell phone or residential phone as the business phone number. You can forward a virtual number to any cell or land-line phone number.
Lenders perceive a credible business as one with a fax number. As a business you will need a fax number to receive important documents, you will also need it to fax in some of your credit applications. You can setup an e-fax that goes directly to your email.
Credit providers will research your company on the Internet. It is best if they learned everything directly from your company website. Not having a company website will severely hurt their chances of obtaining business credit.
There are many places online that offer affordable business websites so you can have an internet presence that displays an overview of your company’s services and contact information.
It is important to get a company email address for your business. It’s not only professional, but greatly helps your chances of getting the thumbs up from a credit provider. Setting up a business email address is just too easy and inexpensive to neglect.
Avoid using free email services like Yahoo and Hotmail . There is nothing worse than credit providers seeing an email address like firstname.lastname@example.org
The Email address should be yourcompany.com. A great example is an email like email@example.com or firstname.lastname@example.org.
Your business banking history is vital to your future success of being able to secure larger business loans. The date you open your business bank account is the day that lender’s consider your business to have started.
So if you incorporated your business 10 years ago, but you just opened the business bank account yesterday, then your business started yesterday. The longer your business bank in history, the better your borrowing potential will be.
Having a high account balance is essential in obtaining an excellent Bank Rating. Having a good Bank Rating is essential for loan approval down the road. Try to keep a bank balance of $10,000 or higher for a 5 Bank Rating.
One of the most common mistakes when building credit for your company is non-matching business addresses on your business licenses. Even worse is not having the “required” licenses for your type of business to operate legally.
You will need to contact the State, County, and City Government offices to see if there are any required licenses and permits to operate your type of business.
On licensing State business, County license and/or permit, City license and/or permit filings and IRS filings listed correctly.
Take the time to verify that main agencies (State, IRS, Bank, and 411 national directory) have your business listed the same way and with your Exact Legal Name.
Also take the time to ensure every bill you get (power bill, phone bill, landlord, etc.) has the business name listed correctly and comes to the business address.
Business Credit reports are offered by Experian, Dun & Bradstreet, and Equifax. You will first want to get a copy of your business credit reports to see what is being reported.
Visit http://www.smartbusinessreports.com/ for a copy of your Smart Business report and $49-99 for Smart Business Report. Find out how many trade lines are reporting, see if you have a business credit score assigned, see if you have an active Experian Business Profile, and check on recent inquires.
You can purchase a copy of your Equifax Small Business Credit Report here http://www.equifax.com/small-business/credit-report/en_sb. It typically takes more time to create a file with Equifax Small Business than D&B and Experian
This is why it’s important to apply with the credit providers who report to Equifax and $99.95 for a full report. Obtaining a Dun and Bradstreet number (D-U-N-S #) begins the process of building your business credit profile with them.
Your D-U-N-S # will also play an important role in enabling your business to borrow without a personal guarantor, http://www.dnb.com/. DBC will “roll” this into a package and charge you 2k or possibly more.
You can also enroll for the DNBi SelfMonitor to monitor your credit during the building process. A subscription for D&B Self Monitoring is $39-99 per month.
A business credit report can be started much the same as a consumer report commonly is, with small credit cards. The business can be approved for small credit cards to help them build an initial credit profile. These types of initial cards in the business world are commonly referred to as “vendor credit”.
A vendor line of credit is when a company (vendor) extends a line of credit to your business on “Net 15, 30, 60 or 90” day terms. This means that you can purchase their products or services up to a maximum dollar amount and you have 15, 30, 60 or 90 days to pay the bill in full. So if you’re set-up on Net 30 terms and were to purchase $300 worth of goods today, then that $300 is due within the next 30 days.
You can get products and services for your business needs and defer the payment on those for 30 days, thereby easing cash flow
And some vendors will approve your company for Net 30 payment terms upon verification of as little as an EIN number and 411 listing.
Here are some vendors who will approve you for initial credit… even if you have none now:
Laughlin and Associates
Always apply first without using your SSN. Some vendors will request it and some will even tell you on the phone they need to have it, but submit first without it.
When your first Net 30 account reports your “tradeline” to Dun &
Bradstreet, the DUNS system will automatically activate your file if it isn’t already. This is also true for Experian and Equifax.
You need to have a total of at least five (5) Net 30 day pay accounts reporting/Some vendors require an initial prepaid order before they can approve your business for terms. Your vendors do not necessarily have to serve 100% of your business needs.
Pay your Net 30 vendor accounts in-full and on-time. You must be patient and allow time for the vendors’ reporting cycles to get into the reporting systems .It typically takes 3 cycles of “Net” accounts reporting to build credit scores.
Most Merchants and major retailers do offer business credit, they just don’t advertise it. There is no benefit to the merchant to promote credit with no personal liability if the business owner is willing to take on that liability so they don’t promote their business credit cards and regularly ask for a SSN.
After 5 trade lines are established using vendor accounts, obtaining revolving accounts is the next step. Revolving accounts are cards a business owner can use and not be required to pay the full balance owed each month.
Revolving account approvals will begin coming from stores. Store revolving credit must be obtained before the business owner starts getting Visa, MC, Amex, type cards.
Most stores will NOT approve a business owner for business credit unless the owner has an established credit profile and score, just like in the consumer world. Vendor accounts must be used first to establish a profile and score, then store credit can be obtained. It usually takes only 90 days or less to establish a score and profile with trade lines.
Most major stores do offer business credit including: Home Depot and Lowes, Office Depot and Staples, Best Buy, Walmart, Sam’s Club, Costco, Amazon, Dell, Apple, BP, Chevro, Racetrack and most others.
Once 10 total accounts are on the credit, an owner can then start applying for Visa, MC, Amex type credit. Approval amounts will be equivalent to the highest credit limit account on the business report. Try to have 10 accounts with at least one of hem having a 10k high limit.
It is essential to keep using the credit, keep applying for more, and talk with credit providers to raise credit limits. If you do this, business credit will keep growing until higher limit credit lines are obtained, within 6-12 months.
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