Get Business Credit for Startups
In a recent post that we wrote for the Small Business Administration (SBA.gov) we discussed the five different ways to get business credit whether you’re a startup or existing business. In today’s post, we’re going to expand on that article and provide immediate actions steps you can take to get the credit you need.
Now establishing business credit may appear to be a difficult and time-intensive process but that’s far from the truth. In fact, the process of building credit for your startup is not that different from what you did to build up your own personal credit.
Here are the five ways to get business credit for startups:
1) Get Payment Terms from Suppliers – If you’re an established business you can most likely get payment terms from suppliers especially if you’re a long-standing customer. Typically, suppliers will extend credit arrangements on net 30 terms.
However, if you’re applying for credit as a new customer (startup) than expect a supplier to check your Dun & Bradstreet report. They may even require you to put a percentage down with every order.
Action Step – For startups consider applying for credit with starter vendors since they are willing to extend credit on net 30 terms especially to startup companies. For a list of starter vendors check out our business credit building system.
2) Apply for a Business Credit Card – A business credit card is a fast way to build credit history for a business if the card issuer reports to the business credit agencies. Unfortunately, many cards labeled as a business credit card only report the card’s payment activity to the consumer credit agencies.
While business credit cards help keep personal and business purchases separate and provide the flexibility, control and convenience needed to manage the company’s finances; not all cards help you establish your company’s credit file.
Action Step – To pre-qualify for business credit cards that only report to the business credit agencies check out our post on stated-income business credit lines.
3) Open a Service Agreement for your Business – When you enter into a service agreement with a service provider it’s in fact a credit arrangement. Whether you set up service for a company cell phone, internet or web hosting you enter into a service agreement with that provider and agree that your company will pay for the service every month.
Action Step – When you set up any service agreements for your startup be sure it’s in the company’s name. Each service agreement is a credit reference that can be used on future credit applications.
4) Open a Secured Business Credit Card – If a poor credit rating is stopping you from getting an unsecured business credit card then consider opening a secured business credit card. This will help not only keep your personal and business purchases separate but also establish a relationship with the card issuer.
Remember, a card issuer will periodically review your account for an opportunity to upgrade to an unsecured business credit card. Your business may become eligible if it manages its account responsibly. Look at a secured business credit card as a stepping stone to an unsecured card for your company.
Action Step – Plan to deposit $500 or more to open a secured business credit card. Your card limit will equal your deposit. Card issuers such as Wells Fargo allow you to open a secured business credit card from $500 to $25,000.
5) Apply for a Retail Credit Account – There are a countless number of retailers that offer revolving store credit accounts for business customers. As a startup company, you can use a store credit account to purchase items such as office supplies, computers, building supplies, electronics, etc.
Each retail credit account becomes a trade reference for the business which can be used on future credit applications. Additionally, if a retailer does not report your payment history to a business credit agency you can always add trade references to your file with one of Dun & Bradstreet’s paid programs.
Action Step – Before you apply for a retail credit account consider establishing at least three starter vendor accounts with suppliers. Without at least 3 trade references and/or a business credit rating, retailers will most likely require a personal credit check.
*Tip – You can find a list of starter vendors and retailers that report to the business credit reporting agencies in our step-by-step business credit building system.
Well, there you have it. Five ways to get business credit for your startup. Remember, as you establish credit in your company’s name you are building an asset for the business. With a creditworthy profile; a business has stronger credit capacity. According to the SBA, “businesses have 10 to 100 times greater credit capacity compared to personal credit.”
To view the article we wrote for the SBA go to => https://www.sba.gov/blogs/5-ways-get-credit-your-business
Ready to get business credit for your startup? 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 ($497 value) =>
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About the author
Marco 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, Business.com, 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’.