Business Credit

Building Business Credit for Small Business

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Are Bad Credit Business Loans Worth It?

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Bad Credit Business Loan picTimes are tough for small business owners who have seen their good credit fall to the wayside from using their personal credit cards to finance purchases, equipment, and even payments to suppliers or vendors to keep their businesses going during these tough economic times.

 

While bad credit business loans are a viable option they do come with a price that most are not willing to pay. It can also be a difficult task but it is definitely possible despite the current economic times.  

 

Before you decide this is an option you’re willing to pursue I encourage you to do your homework and don’t jump into anything without carefully weighing all your options on the table.

 

Below I have listed several ways to obtain a business loan if you have bad credit but be prepared to pay higher fees and higher interest rates with some of them.

 

Sub-prime lenders

While there is sub-prime lending programs designed for business owners with bad credit, these specific programs charge anywhere from 12% to 18% interest, and even higher. This is not an option I would recommend because you end up weakening your finances in the long term.

 

Transfer of Ownership

One of the ways you can solve a bad credit problem is through a transfer of ownership. In many cases two partners in a corporation own 50% each and one partner may have excellent credit while the other may have bad credit. In these cases both will have to be included in the credit check for a business loan with the bank and the one partner with bad credit will ruin the chances of obtaining a loan for the business.
If this is the case than an option would be to transfer 100% of the business to the partner with the strong personal credit profile. The transfer of ownership is done privately and is simple to complete and can easily be filed in your corporate record keeping book. Make sure you consult with your CPA and attorney if this is something you would like to do. Remember, the ownership can be transferred right back once you have finished applying for a business loan with your bank.

 

Secured Business Loan

A sure way to obtain a loan with bad credit is to post sufficient collateral. This type of loan is known as a secured business loan and is typically asset-based, which means hard assets are used like equipment, commercial real estate, receivables and in some cases inventory.

 

Co-Signer

This happens to be a very common solution for bad credit business loans. A creditworthy co-signer will act as a guarantor for the business loan and they can be a business or trading partner, or investor, or subsidiary company with a strong credit score.

 

As you can see a business loan with bad personal credit is possible even during these challenging times. As you work on repairing your personal credit these options can be a temporary solution for your business to obtain the funding it needs. While bad credit business loans are costly you have to ultimately decide if it’s a price your willing to pay.

 

To Your Success!

Marco Carbajo

About the Author

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Marco Carbajo is a business credit specialist, author, speaker, and founder of http://www.startbusinesscredit.com . Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below=>

Business Credit Ratings Explained

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Dun and Bradstreet

Business Credit Ratings

 

There’s been quite a stir on the integration of FICO® 08 which is the credit scoring system used by the majority of lenders to determine a consumer’s credit worthiness. Similar to your personal credit ratings, businesses and corporations also have business credit ratings that potential lenders use to determine its credit worthiness.

Unlike a personal credit rating, there is no designated standard for determining the credit worthiness of businesses. However, the main tool used to determine and establish company credit ratings is D&B’s PAYDEX system.

Where a personal FICO® score is based only on credit history that includes information on how much a person borrows and how well they repay loans, a credit rating for a business takes into consideration company size as determined by assets and number of employees.

Where personal credit ratings are based on financial information provided by credit card companies, retail establishments, and financial institutions, a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

Like most industries, there is a specialized language involved with business credit reports and ratings.

The following is a list of some of the most common concepts and terms as well as their definitions:

Average High Credit / Highest Credit

In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole.

Business in Good Standing

Includes any problems with the business overall.

Commercial Credit Score

A D&B prediction regarding the chances of an account becoming severely delinquent within one year.

Comprehensive Report

This is a combination of several D&B business credit reports that paints a more complete picture of the company’s credit history. It includes the results of the PAYDEX analysis, a company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).

Credit Score Class

This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.

Financial Stress Score

This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.

PAYDEX

This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time.  An 80 paydex score for a business can be compared to having a 720 personal credit score.

Sample business credit reports:

Dun & Bradstreet business information report sample

Dun & Bradstreet enhanced comprehensive report sample

Dun & Bradstreet Credit eValuator Plus Report sample

Corporate Experian Business Credit Score Report sample

Small Business Equifax Commercial Credit Report sample

 

To order business credit reports:

Dun & Bradstreet (D&B)

Equifax Small Business Enterprise

Experian SmartBusinessReportsTM

Every business will at one point require an influx of cash in order to cover operating expenses, expansion costs, legal fees, inventory or a range of other items the business may require in order to operate. The worst mistake you can make is seeking funding when your business needs it most. Lenders extend cash credit lines to businesses that don’t need the capital and have strong business credit ratings. Start digging your well before your business gets thirsty!

Are you ready to start building your business ratings? Become a member of my Business Credit Insiders Circle and gain access to a proven step by step business credit building system. A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) => 

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit solutions membership helping business owners build small business credit. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

Building Business Credit: Obtaining a Federal Tax ID#

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Business Federal Tax ID

A business Federal Tax ID number (also called an EIN number) is mandatory, because without one, your corporation will be useless. Your Tax ID number will be the number that identifies your business and information. It’s just like how your Social Security number will identify who you are for your personal credit.

Once you have incorporated your business then you’re ready to apply for an EIN.

If you already have a corporation or LLC but do not have a Federal Tax ID number than you will need to apply for one.

For more information be sure to check out the FAQ section on Employer ID Numbers.

If you have had a corporation for some time but never have obtained a tax ID number don’t worry. Tax ID numbers are not generated in a numerical fashion and there is no way for a lender to determine when your tax ID was obtained and compare it to the start of your business.

This is also important to know for shelf corporations if you are planning on using one. After you have obtained your tax ID number for business you’ll also be ready to open a small business bank account.

If you’re serious about building business credit without a personal guarantee then you will have to complete these two steps before you can move forward:

  1. Incorporate your business
  2. Obtain a Federal Tax ID#

What type of business structure do you have?

Ready to start building business credit for your corporation? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system? A system that provides you access to premium vendors, business credit cards, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

To Your Success In Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com,  have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.

Top 10 Credit Reporting Agencies Every Business Owner Should Know

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business-credit-reportI was excited to write this particular post because there is such a tremendous lack of awareness in the entrepreneur and small business community surrounding the business credit industry.

I have assembled my ‘Top 10 Credit Reporting Agencies Every Business Owner Should Know’ in order to full educate the entrepreneur and small business community on what’s available in the marketplace to grow and maintain their credit files.

While the majority of consumers are fully aware of the three main consumer credit reporting agencies known as Equifax, Transunion, and Experian there are a few that realize that there are six other separate business credit reporting agencies that specifically collect data on businesses. 

The tenth reporting agency is extremely important as it has to do with you’re ability to open up a checking account with a financial institution. Banks use a reporting agency known as ChexSystems which is a network comprised of member Financial Institutions that regularly contribute information on mishandled checking and savings accounts to a central location.

Here are a few examples of the difference between a personal credit rating and business credit rating.

A personal credit score is based only on credit history whereas a credit rating for a business takes into consideration other factors like company size as determined by assets and number of employees.

Also a personal credit score is based on financial information provided by credit card companies, retail stores, and financial institutions whereas a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

Here are the Top Business Credit Reporting Agencies Every Entrepreneur Should Know About

Dun and Bradstreet (D&B)

D&B is the primary business credit reporting agency. For years, D&B has offered a variety of ratings tools that can be used to determine whether to engage in business with a particular company and to determine loan terms. For a business to get listed with this agency it needs to first obtain a DUNS Number. The most commonly used business credit score for vendors to determine a businesses’ credit worthiness is based off of D&B’s Paydex score.

Equifax Small Business Enterprise

Equifax, one of the three primary consumer credit rating agencies, also provides business credit evaluations for over 22,000,000 small businesses and corporations. Equifax has developed its own business credit score known as the Small Business Credit Risk ScoreTM. This evaluation is based on a combination of reported financial transactions, including banking, leases, trade accounts, public records, as well as the demographics of the business.

The Financial Services Credit Risk ScoreTM assigns a score from 101-992 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency.

The Suppliers Credit Risk ScoreTM assigns a score from 101-816 with the highest score indicating the lowest risk of delinquency and the lowest score indicating the highest risk of delinquency. These scores also include explanations of why a particular business earned that score based on a series of reason codes provided in the report.

Experian SmartBusinessReportsTM

Experian is another one of the three primary consumer credit rating agencies who provides business credit evaluations. Unlike D&B and Equifax, Experian’s SmartBusinessReportsTM doesn’t assign a business credit score. Given this information, it would be up to the lender to interpret the risk associated with this type of payment history.

Credit.net

Credit.net is a division of InfoUSA® that generates credit reports on approximately 15,000,000 businesses. There are 6,000,000 of the reports in their database that have been completed on small businesses with four employees or less. The credit analysis provided by Credit.net relies on four criteria: years in business, number of employees, public records, and stability within the industry. Its business credit score is a grading system from A through C (70-100) and is awarded as an evaluation of the company’s credit history.

AccurintTMBusiness

This is a new business that is a combination of forces between The Better Business Bureau (BBB) and LexisNexis, one of the leading providers of business services and information. AccurintRBusiness is like Experian in that they provide public and business profile information, including credit history based on payment patterns of small, medium, and large companies. This company provides a payment history only with no type of unique business credit scoring system.

ClientChecker

This is a credit reporting bureau that started in 2003 and specifically targets small businesses, freelance professionals, and contractors seeking information to help them determine which other businesses they should do business with. Rather than providing a fixed business credit score, ClientChecker compiles information based on feedback from its members.

*Another business credit reporting agency worth mentioning is Paynet

Paynet is the premier provider of risk management tools and market insight to the commercial credit industry, collecting real-time loan information from more than 200 leading U.S. lenders.

The company’s proprietary database is the richest and largest collection of commercial loans and leases, consisting of more than 14 million current and historic contracts worth $645 billion.

These business credit reporting agencies allow a business to establish its own credit profile, scores, and payment history. The challenge for entrepreneurs and small business owners is realizing that a business credit file will not be established unless the file is initially set up and activated by the business owner.

I encourage all entrepreneurs and small business owners to separate your personal credit from your business credit and position your business for unlimited financing potential.

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>

To Your Success In Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com,  have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.

Small Business Credit with No Personal Guarantee

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Credit for Small Business

Business Credit with No Personal Guarantee

 

Building small business credit has incredible advantages including obtaining cash credit cards with no personal guarantee. Two of the most common questions I’ve been getting lately is…

Are no personal guarantee businesss credit cards still available in the marketplace?

 and…

How do I go about finding who offers no personal guarantee cash credit cards for businesses?

That’s the magical question but before you get some answers you need to know that in order for you to obtain cash credit cards with no personal guarantee you will need to have an established business credit profile with a DNB paydex of 80 or greater plus 7-10 trade lines (vendor credit) reporting credit lines ranging from $2k and greater.

The video below will share with you the three ways to obtain Small Business Credit with No Personal Guarantee credit cards for your business. Don’t be confused with no personal guarantee vendor credit because that’s very easy to obtain. Cash credit is what most if not all business owners are seeking to obtain greater amounts of especially these days.

 

 

If you plan to apply for a business credit card prior to building business credit pay close attention to what information the application requires. It must require your Federal Tax ID, Dun and Bradstreet number, and may require a personal credit check. It’s always a good idea to verify with the credit card issuer how they report your payment history. If the answer is your personal credit file then it’s not a true business credit card.

True business credit cards offer three main benefits:

  1. Payment history is solely reported to the business credit bureaus
  2. No personal guarantee which shields you and your family from liability
  3. Separation of Personal Credit and Business Credit eliminates the co mingling of funds & credit profiles

What type of small business credit are you looking for? 

Looking for no personal guarantee business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free audio seminar ($597 value =>

About the Author

Marco CarbajoMarco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle.  He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.

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