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Building Business Credit for Small Business

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25 Business Credit Building Rules For Small Business Owners

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Building Business Credit

 

There are quite a bit of obstacles that every aspiring entrepreneur faces as they strive to do all the right things in order to make their dream business a reality.

It can be an overwhelming experience especially if you have limited support, funding and tools at your disposal. Whether you have a product or service to bring to the marketplace careful planning and execution can greatly improve the success of your new venture.

To help you in your preparation I have assembled my top 25 business credit building rules which can greatly improve your ability in obtaining the credit your company needs.

  1. Select the proper entity structure that best serves the needs of your business.
  2. Choose a business name that does not trigger red flags with the business credit bureaus.
  3. Assemble a winning financial team that understands the nature of your business and its vision.
  4. Avoid selecting a high risk SIC and NAICS classification code for your company.
  5. Do not use a P.O. Box as your business address. However, a P.O. Box for your business mailing address is acceptable.
  6. Verify that your business is 411 listed prior to applying for credit.
  7. Always use the same exact company information when completing registrations, applications and documents.
  8. Have a fully functional company website before applying for credit. Parked domains and web sites under construction are immediate red flags.
  9. Do not use a free email account for your company email address.
  10. Establish a “low 5” bank rating as soon as possible in order to build bank credit.
  11. Obtain diverse credit account types in order to establish a strong business credit profile.
  12. Pay invoices 10, 15 or 20 days ahead of the due date.
  13. Use your credit on a consistent basis in order to establish good payment history.
  14. Keep debt to credit limit ratios at no more than 30% in order to minimize your company’s debt exposure
  15. Utilize all credit types (business credit cards, business charge cards, business debit cards, prepaid business credit cards etc.) to your advantage as each one serves a unique purpose.
  16. Use secured credit cards in order to start building business credit for your company.
  17. Start a personal credit recovery plan if you have less than perfect credit.
  18. If you process credit card transactions every month consider using a merchant card in order to access cash at your convenience.
  19. Extend credit to consumer and business customers and increase sales by as much as 50%.
  20. Report the payment experience of your business customers to the business credit bureaus.
  21. Get your company listed with the major business credit bureaus.
  22. Establish a reporting bank loan on your company credit profile.
  23. Create a complete and sound business plan.
  24. Monitor your business credit profiles.
  25. Add positive trade references to your file through DNB’s trade reference builder program.

Let these rules serve as a helpful guide as you strive towards your goals of obtaining the financing your company needs.

Ready to access a step-by-step business credit building system? 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) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit membership helping business owners build small business credit. 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.

Looking to Bid for Government Contracts? Better Complete Your CCR Registration

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Bid for Government Contracts

 

If you are a sole proprietor, corporation or partnership and plan to do business with the federal government you will need to be registered in CCR before being awarded a contract.

There’s no cost to register and you can update your company information at any time and in one location via a CCR log in.

Keep in mind all federal government agencies can retrieve your company data from this one central location making the process seamless and hassle free.

So what is CCR?

The Central Contractor Registration (CCR) is a government-wide registry and its sole purpose is to collect, validate, store and distribute information.  

CCR shares the collected data with federal agencies’ finance offices, federal government procurement and electronic business systems.

First you should check to see if your company is already registered by going to the CCR web site and clicking on the ‘CCR Search’ tab.

You will need to supply your company’s DUNs number so if you don’t have one than I can guarantee that your company is not listed because a DUNs number is required to register in CCR.

CCR Registration

Here is checklist of required information in order to register in CCR:

  • Employer Identification Number (EIN) or Taxpayer Identification Number (TIN)
  • DUNs Number –Your business can obtain a DUNs number within 24 hrs absolutely free through the D&B D-U-N-S Request Service for US Federal Government Contractors and Grantees.
  • Point of Contact (CCR POC) – Designate someone in your company who will be directly responsible for maintaining and updating the company CCR profile.
  • Electronic Business Point of Contact (EB POC) – This will be the person in charge of deciding which employees of your company may represent your company to federal business systems.
  • Marketing Partner ID (MPIN) – This will be a special password that you will have to designate during the registration process.

It’s extremely important that all the detailed information about your company matches exactly in each of the DNB, IRS and CCR databases. Any mismatched data can result in a delay of your CCR registration.

Paying attention to details not only impacts your ability to get registered with CCR but also plays a vital role in the business credit building process too.

My suggestion is to create a document that contains all your company details in order so anytime you have to complete a registration or credit application you use the document for reference.

That way you can be certain that every time you submit your company information it’s a 100% match across all data bases.

For additional information about CCR registration you can download its free CCR User’s Guide as well as view step-by-step screen shots of the entire CCR Registration process.

Ready to get listed with the major business credit bureaus? 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) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit membership helping business owners build small business credit. 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. 

Are Credit Report Inquiries Hurting Your Credit Score?

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Credit Report Inquiries

 

Out of the 88 negative rating factors that can hurt your credit score one in particular that I would like to cover in this post are inquiries.

In the credit scoring system inquiries are given two types of classifications one being ‘soft inquiries’ and the other ‘hard inquiries’. Let’s cover these two briefly:

Soft Inquiries

These inquiries do not affect your credit score so don’t be alarmed if you see a lot of these on your file.

There are three main types of credit checks that fall into this classification.

  1. Personal – When you order your own credit reports or scores directly from the major consumer credit agencies or myFICO.
  2. Promotional – Businesses that check your credit for promotional purposes use the data in order to solicit its products or services such as those pre approved credit card offers you find in your mailbox.
  3. Procedural – As part of its procedure a company or lender that you currently have an established account with may periodically check your credit in order to either extend additional credit or look for signs of financial distress.

Hard Inquiries

A hard inquiry is what negatively impacts your score and according to myFICO one additional hard inquiry for some people may take up to but not more than 5 points off a credit score!

This credit check occurs when a creditor pulls your report as a result of you applying for credit. One important thing to remember is when you apply for credit with multiple lenders in order to search for the best rate on a mortgage, auto or student loan FICO will consider all these inquiries within a 30 day period to count as a single inquiry.

Unfortunately there’s no way to determine what impact a hard inquiry will have because it varies from consumer to consumer and is based on different credit histories.

Even though hard inquiries can stay on your credit files for two years FICO’s scoring model only factors in those inquiries from the last 12 months. So be selective where you apply for credit because too many recent hard inquires can signal a red flag with creditors.

If you identify any unauthorized hard inquiries on your credit file then you will need to prepare an inquiry dispute letter and submit it to both the consumer credit agency and creditor. This is different than disputing information like a late payment and currently none of the consumer credit agencies offer an online dispute option for credit report inquiries.

I also suggest you send the letter via Certified Mail Return Receipt Requested so you can properly track the dispute submission and response time.

Remember the Fair Credit Reporting Act was put in place to protect you from unfair credit reporting and this includes the use of unauthorized hard inquiries.

Ready to improve your credit scores? 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 personal credit recovery services, 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) =>

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.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. 

Top 7 Deal Makers or Deal Breakers in Financing for Business

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Financing for Business

 

If you plan on applying for financing there are a couple of key points that you should take into consideration before taking the leap.

Getting approved for a loan these days requires careful planning and preparation on your part. Lenders have certain expectations and underwriting criteria they have to meet so the better you come prepared the greater the chances of approval.

Here are my Top 7 Deal Makers or Deal Breakers in Financing for Business:

Credit – Lenders will evaluate the strength of your personal and business credit scores. You should be fully aware of how you personally rate with the three main consumer credit agencies.

You should also know where your company stands with the three main business credit bureaus as well.

Most traditional lenders will require a minimum personal score of 680 and a business score of 75 in order to be considered.

Capital – Having skin in the game as a startup is very important to a lender or investor. Typically you should have at least 20% or more of the loan amount you are requesting invested in your business.

Another factor that lenders use to assess your company’s capital is to check your company’s bank ratings three to six months prior to the date of your loan application.

As mentioned on previous posts you should shoot for a low 5 rating ($10k balance) at least 90 days prior to applying.

Collateral – Lenders may require that you pledge collateral to secure the loan but not all types of collateral are accepted. While real estate, heavy equipment, CDs, Stocks/Bonds and Accounts Receivable are acceptable forms of collateral items like jewelry, mutual funds and IRAs are typically not.

Conditions – Certain areas that you have no control over but can affect your ability to obtain financing include economic, environmental and even political conditions. For example, during the recent economic downturn we have seen how lenders reacted by tightening their grips and cutting the credit lines of thousands of small businesses.

Character – Ever heard the saying ‘people will do business with people they know, like and trust.” Well, it’s true!

When you have a solid reputation and operate your business with the highest integrity it will make all the difference in the world.

Capacity – Do you have what it takes to pay back the loan? Lenders need to know that you have the necessary qualifications and experience so they can be assured that there is a minimal risk of default.

One of the ways to present your credit capacity to a lender is through a business plan. A business plan can answer many of the questions that cause lenders to decline an applicant.

Cash Flow – The flow of cash coming in and going out of your business can tell a lot about how you manage your company’s finances. A lender can see firsthand whether your business is generating enough cash flow to repay your loan.

This is where you want to make sure that you are not making unnecessary expenses so your cash flow statement can portray your business in the right light.

Each of these points can play a pivotal role when seeking financing for your business. The better the preparation you have the greater the possibility for funding approval.

In search of business financing? 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) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system providing no personal guarantee business credit. 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. 

7 Ways to Maximize Your Business Credit Score

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Business Credit Score

 

Let’s suppose for a moment that you’ve taken a few steps necessary to establish business credit for your company.  You got approved for a line of credit with a few suppliers, made purchases, paid your invoices and see the payment experience listed on your business credit report.

After seeing your business credit score you decide to jump into the big leagues and apply for a business credit card without supplying a personal credit check or personal guarantee. 

You’re shocked to find out that your business was declined and you can’t seem to figure out why. You have a favorable paydex score with Dun and Bradstreet so what’s the problem?

Believe me this happens more than you can imagine and because of all the misinformation circulating the internet about what it takes to build a strong business credit score and report many business owners simply throw up their hands and say well at least I gave it a shot. 

First, let me be the one to inform you that in order to qualify for financing other than vendor credit lines you will need to have a strong business credit score and report with all three major business credit bureaus.

Not one, not two but all three!

In addition to getting listed with all three major bureaus you also need to build a strong profile and score.

7 Ways to Maximize Your Business Credit Score

  1. Pay Better Than On Time – Paying your invoices 10, 15 or even 20 days ahead of the due date can classify your business as one that pays ‘better than terms’. This looks extremely favorable on your credit files and can increase your scores.
  2. Minimize Debt to Credit Limit Ratios – Keep your debt to credit limit ratios at no more than 30%. This helps reduce your company’s overall debt exposure. You don’t ever want your company to be perceived as overextended.
  3. Establish Payment History – Making a onetime purchase with a supplier hardly establishes your company’s creditworthiness. You should make purchases using your credit on a regular basis in order to build a solid payment track record. The longer the payment history the stronger the file you will have.
  4. Add Trade References – If you have suppliers that are not listed on your files you can easily add them by utilizing DNB’s trade reference builder program. By adding just a couple of additional trade references with years of payment history you can dramatically improve your business credit score.
  5. Increase Credit Limits – Don’t hesitate to request a credit limit increase with suppliers or creditors that you have a good track record with. But keep in mind, if you’re not utilizing your existing credit lines and using a good portion of the limit a supplier or creditor will flat out deny your request.
  6. Establish a Reporting Bank Loan – Getting a reporting bank loan on your files is priceless and can open more doors than you can imagine. Many creditors realize the scrutiny that banks impose on a company in order to get a loan so simply having one speaks volumes for your company’s creditworthiness. A good strategy is the CD Secured loan which many banks still offer to this day.
  7. Diversify Your Credit Types – This by far is one of the most important factors for a strong business credit score and report but it’s the one that is least discussed. Your company should have a diversity of credit types reporting on its file such as trade credit, revolving credit, lease credit, lines of credit, etc.

By getting listed with the major business credit bureaus and applying these seven strategies you can expect your company to be well on its way to maximizing its business credit scores and reports.

Ready to maximize your business credit scores? 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, Banking contacts, 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) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system helping business owners build small business credit. 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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