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Business Credit: Top 10 Myths-Part 2

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Business Credit Building MythsBusiness Credit: Top 10 Myths

 

On the previous post I covered the first four myths on building business credit. I encourage you to bookmark these posts so you can revisit them at any time.

Here are the remaining myths of the top 10 surrounding the corporate credit industry:

6: All vendors, suppliers and lenders report to the business credit bureaus

Not true! There are over a half a million vendors and suppliers that are willing to extend vendor lines of credit to your business but less than six thousand of these companies report to the business credit bureaus. What’s even more alarming is not all of these companies report on a monthly basis either. Some only report to the business credit bureaus once every six months!

5: All business credit cards report to the business credit bureaus

Currently there are over five hundred business credit cards in the marketplace but less than forty will issue a card without requiring a personal credit check or personal guarantee. These select cards report solely to the business credit bureaus and not your personal credit reports. However, there are also a few business credit cards that require a personal guarantee but only report to the business credit bureaus.

4: Every business has a business credit profile with the business credit bureaus

A Dun & Bradstreet profile requires that a business owner first apply for a DUNs number and submit their business information. Corporate Experian and Small Business Equifax create a business profile report for your company once a lender or supplier that you have payment experience with submits a data record. There are many other business credit bureaus that require business owners to complete a registration process prior to creating a profile.

3: Buy a shelf corporation and get all the business credit you’ll ever need

Shelf corporations provide certain advantages when it comes to obtaining credit simply from the fact that a business that is five years old has a much greater influence to a lender than a business that’s been in business for a few months.

With that said a shelf corporation alone will not enable you to obtain all the credit you need because there are many other factors that are taken into consideration. For example, if you have a ten year old shelf corporation that needs a $100k business line of credit a bank will need to view your company’s bank rating, balance history, financials, tax returns, profit & loss statements and so on.

2: All you need is a strong paydex score to qualify for a business line of credit

While a strong business credit file does play a part in qualifying banks look at many other factors. This includes your bank rating, balance rating, NSF track record and personal credit scores.

1: All you need is an 80 paydex score to get unlimited business financing

This by far is one of the biggest myths in business credit because an 80 paydex score with Dun & Bradstreet is said to be like having a 720 personal credit score. While that may be true to some degree there are some important details that many fail to mention. For example, you can have four positive trade references reporting with $200 being the highest credit limit on all four accounts and still score an 80 paydex.

This is because DNB’s rating system requires a minimum of four positive trade references but if the four you have are small limits then this hardly qualifies your business to get approved for thousands of dollars of cash credit, lease credit, business loans and business lines of credit.

In addition, having only a DNB file is like having only one personal credit file with the credit reporting agencies. Let’s say all you have is a personal credit file with Equifax but have no file with Transunion or Experian. You would never be able to get approved for a mortgage because you don’t have a completed financial picture for lenders to review your creditworthiness.

This holds true for your business as well. In order to show a complete business credit report for your company then you will need to have a profile with the three main business credit bureaus.

Now that you know the myths surrounding the industry I encourage you to share this information with other small business owners and put your company on the path to corporate credit success!

Business Credit Resources

» Start Business Credit

» Business Credit Insiders Circle

» Business Credit Blog

 

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

Marco CarbajoMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. 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.  

Top 10 Myths about Building Business Credit- Part 1

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Business Credit Building MythsBuilding Business Credit Myths

 

Building business credit is one of the greatest opportunities for small business owners. It provides our business with the ability to obtain financing for unforeseen expenses, operations, expansion costs and investments.

There’s so much going on with building corporate credit that there are several different fields devoted to servicing it, including business credit cards, small business loans, accounts receivable factoring, merchant account cash advance, business lines of credit, equipment financing, secured/unsecured loans and many others.

These types of financing have been around for a long time, so you’d think that by now we would know all there is to know about building small business credit. After years of studying and applying every aspect of it, there are still many facets of business credit that remain secretive. And because building business credit is complex, we tend to simplify information about how it works in order to make it more understandable.

This has resulted in many myths about establishing business credit. Let’s look at the 10 myths that have been circulating about business credit, beginning with, of all things, its starting line.

10: Sole proprietorships can establish business credit

A sole proprietorship is not considered a separate legal structure. Instead, it is considered a personal extension of you so you don’t have any protection from them. So every time you apply for credit for your business you will need to supply your social security number as the number that identifies your business.

As a result you are responsible for all debts and agreements you enter into in the name of your business; you’re also on the hook for all of your partner’s actions in the name of your business as well.

9: Using personal credit for business has no effect on the corporate veil

When you use your personal credit for the benefit or operation of your company it can lead to an “alter-ego” decision by regulatory or a financial organization, and a piercing of the corporate veil. This would directly endanger the owner’s personal assets and make the owner or owners directly liable for the penalties or repayment of any debts incurred by the business or corporation.

8: Obtain unlimited business credit for real estate investing

There are certain industries like real estate investing that are flagged as a high risk with the business credit bureaus. If you plan on investing in real estate then you will want to make sure that the company you are building corporate credit for is not “real estate investing”. Most banks will automatically turn you down because your company is operating in a high risk industry. You still will be able to invest in real estate but you may have to set up a business that does business development, business management, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investing from a separate division of the company.

7: Credit repair is illegal and cannot be done.

False.  Consumers have every right to repair their own credit in accordance with the Fair Credit Reporting Act. If you choose to use a credit repair company be sure to verify their track record with the BBB. Also, if you are paying for the service before its rendered be sure the company is in compliance with the Credit Repair Organizations Act (CROA). *Non Profits and Credit Union Service Organizations (CUSO) are exempt from CROA.

 

Read part 2 of the  Top 10 Myths about Business Credit

 

Business Credit Resources

» Start Business Credit

» Business Credit Builder

» Business Credit Blog

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco CarbajoMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. 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.  

Need to Establish a Business Credit Account for your Non-Profit?

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Establish Business CreditEstablish Business Credit

As a non-profit organization there are many opportunities for you to get business credit? For example, Wal-Mart offers a Community Business Credit Account specifically designed for non-profit organizations such as charities, hospitals, schools or religious organizations.

When you apply for the account you will need to provide the legal name of your organization, your tax exempt 501 (c)(3) number and DUNs number.

You will also need to determine how many authorized buyer cards you want with the maximum set at 99. I also suggest that you consider selecting the purchase order option.

Now on this new business credit account you are required to furnish your social security number but I would suggest leaving it blank if you have a strong Dun & Bradstreet file with an 80 paydex score and at least five or more trade accounts with decent credit limits.

You can complete the new business credit application online but you will need to print it out and fax it upon completion.

Now keep in mind you can build business credit with this account and receive larger extensions of business credit but each month you will have to pay the balance in full because it’s a net 30 account.

The Wal-Mart Community Account Application is specifically designed for non-profits so if you’re company is a for-profit business then you will need to check out Wal-Mart’s Business Credit Account.

As a non-profit I encourage you to establish business credit with companies like Wal-Mart that are willing to provide business credit cards or corporate accounts that cater to non-profit community organizations.

To your Business Credit Success!

Business Credit Resources

» Business Credit Seminar

» Business Credit Builder

» Business Credit Blog

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco CarbajoMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. 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.  

How to Secure a Small Business Line of Credit

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business line of creditSmall Business Line of Credit

 
Not too long ago I did a podcast covering how to obtain a small business line of credit. From that interview I have assembled answers to some of the most common questions that I get from my members that will help you in establishing business credit for your company.

Why is this one of the most popular forms of business loans?

Well, there are a couple of reasons why a business line of credit is so popular. First of all, it allows your business to obtain a large sum of cash, what I call cash on demand and it allows it to make purchases that are either too large for small business credit cards or too small to take out business loans.

The second reason why it’s so popular is because of the easy access to cash. Typically, a small business line of credit works like a revolving credit card but the major difference is that they have much lower interest rates and higher available credit limits than a revolving credit card.

The third reason why it’s so popular is the payment flexibility because some banks even offer special features that require monthly interest only payments to be made by the business and this allows the business owner to have small payments if they tap into their credit line.

Can I qualify if I have not been in business for a long time?

Yes, but banks typically prefer that a business has at least a two-year track record of being established. If you’re a startup company the bank will require a personal guarantee and may require that you put up some personal collateral to secure the line of credit as well. Keep in mind that your approval is going to be based on your business’ past revenues, cash flow, bank rating, business credit report and your personal credit scores.

Business Credit Blog » Business Credit » Business Line of Credit – questions and answers for securing a small business line of credit
How do I qualify if I had bad personal credit?

As a temporary solution you can transfer 100% of the business to your partner with the strong personal credit profile. The transfer of ownership is done privately and can be easily filed in your corporate record keeping book. Make sure you consult with your CPA and attorney if this is something that you’d like to do but remember, the transfer of ownership can be transferred right back after you finish applying.

What amount should I apply for?

It’s a lot easier to get approved for a $50k line of credit compared to $100k line of credit simply because of the documentation and amount of financials required on larger credit lines. You see, banks only require a couple of things for $50k or less credit line applications. For example, they require a low five bank rating, a solid business credit report, and personal credit scores of 680 or greater to approve a $50k line of credit.

Now, if you’re applying for a small business line of credit line greater than $50k than in most cases, you end up having to also provide two years of personal tax returns, two years of business tax returns, profit and loss statements and financial statements. So you can see the difference in documentation is substantial when it comes to the amount of credit that you’re applying for.

Can I apply for multiple business lines of credit?

Yes, you can and should always diversify your business credit and banking relationships. A tough lesson that many small business owners faced as a result of the recent credit crunch was that they put all of their banking and credit lines in one basket. As soon as their credit line was cut their business was strapped with no other access to credit.

When you establish multiple corporate credit lines, it puts you and your business in a much safer and stronger position so if one of your banks happens to reduce or even cancel your line; you still have several other ones readily available to you.

One word of caution about this is don’t open more than three business bank accounts within a 90-day period because your business could possibly get stuck in chex systems which is the ratings systems that banks use when you open up a business bank account.

Whatever your situation is in your business, if you think you don’t need the credit right now or you don’t need the cash that is the best time to get started.

Business Credit Resources

» Business Credit Seminar

» Business Credit Builder

» Business Credit Blog

 

Are you looking for access to lines of credit, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus? Become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

 

Marco CarbajoMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insiders Circle. 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.  

Are Business Credit Lenders getting it right?

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Business Credit LendersBusiness Credit Lenders

One of my favorite business credit lenders who get it right when it comes to small business and has the track record to prove it is Regions Financial Corporation.

According to Tim Laney, senior executive vice president and head of Region’s Business Services Group, “Small businesses are the engine of our economy and Regions has a long track record of providing capital to small businesses along with solutions to help small business owners manage all of their financial needs.”

Don’t just take it from me in a yearly study measuring banks’ strength on small business lending the SBA ranks it number three among the large U.S. banks for the sixth consecutive year! It also happens to own the number one slot for small business lending in Alabama and Tennessee.

With such an impressive track record it shouldn’t surprise you that Regions Bank is also behind some of the new business credit cards to hit the marketplace.

Business Credit Blog » Business Credit » New Business Credit Cards – new business credit cards for small business

New Business Credit Cards

We recently launched a new business credit card bundle package offering unsecured business lines of credit that do not report to your personal credit. Here’s a brief overview:

Low Interest

  • Rates as low as 6.99% for FULL DOC applicants.
  • As low as 8.99% for STATED INCOME applicants.

No Doc or Full Doc

  • We have products that tailor to how established your business is. If your business is a start up, we have No Doc products available. If your business is established and showing profit, we have full doc products available.

Funding in as little as 15 days

  • Quick approvals for stated income applicants

No collateral

  • All products, no doc or full doc, are unsecured. We do not collateralize or lien against any work equipment, commercial property, or personal property.

No Restrictions on use

  • All our credit lines can be used same as cash.

No Upfront Costs

  • Not sure if you qualify? Apply without an application fee!

Lines will not report to the personal credit bureaus

  • Drawing these credit lines will not affect your personal debt/credit ratio.

This bundled business credit card package can help in establishing business credit for a new or existing business while providing you the tools you need to manage your company’s expenses.

When banks like Regions get it right by issuing new business credit cards and business credit loans through all economic cycles, including the recession in order to support the small business engine other business credit lenders should pay close attention.

To Your Business Credit Success!

Business Credit Resources

» Business Credit Help

» Start Building Business Credit

» Business Credit Blog

Looking to obtain 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) =>

Marco Carbajo

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for AllBusiness, 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 the SBA Community, 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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