Business Credit Archives - Page 88 of 92

8 Steps to Building Business Credit

October 20, 2009 By Marco Carbajo

Small Business Credit Card I felt inspired to write this post after receiving so many questions about business credit and how you go about getting approved for cash credit lines despite the current credit crunch in the economy.

Let me be the first to tell you that businesses are still getting cash credit and business financing today but lenders have adopted new criteria and stricter guidelines that many business owners fail to recognize or adapt to.

It’s more important now than ever to be pro active and informed on what is required to obtain business financing for your business. I don’t recommend anyone to wait until you need financing to start because the business credit building process takes time and doesn’t happen overnight.

Ever heard the phrase ‘Dig your well before you get thirsty?’

I’ll even give you the shovel!

Fair enough?

Great!

It’s important to understand that the biggest benefit to building business credit is not just having access to cash credit. One of the greater benefits is obtaining cash credit that does not report to your personal credit profiles. However, before any business credit building begins you’re business must meet certain corporate conformity guidelines in order to prevent it from getting red flagged by the business credit bureas.

When you start building business credit and progress in the process by establishing trade credit and eventually cash credit it’s important for you to understand that is not the end result that you should be shooting for. After building your business credit foundation the cash credit that you obtain should only be just the beginning!

You can be assured that you will obtain as much cash credit for your current needs when you follow the right steps but whether your business obtains $50,000 or $200,000, if you continue to follow the right step-by-step process you will be able to increase your cash credit lines to double or even triple the initial amount.

‘Eight Steps to Building Ultimate Business Credit’

1. Corporate Conformity

This is where you’re business credit foundation is set up and it’s critical not to take short cuts or side steps because you’re ability to obtain financing can be hampered. At this stage it’s vitally important to structure your business entity properly from both a tax and asset protection standpoint. In additon, both the business credit bureaus and lending institutions will verify certain information about your business that must meet specific lending guidelines. In order to achieve the best business classification ratings make sure you meet all the requirements before moving on to the next step in the business credit building process.

2. Business Plan

This is not a mandatory step, but it’s necessary for your overall business success as well as a door opener for specific lenders.

3. Business Credit Profile

Once you have completed corporate conformity you will be ready to set up your business credit profile with Dun & Bradstreet as well as steps to activate your business credit profile with Corporate Experian and Business Equifax.

4. Tier 1 Trade Accounts

This is the first step where you will be setting up trade accounts for your business that are known to grant small amounts of credit to businesses that have no credit history.

*Please note –

Even if you have been in business for several years doesn’t mean you have business credit history. After setting up your business credit profile there will be no history so you will need to start small and gradually build it to larger amounts over time.

5. Tier 2 Trade Accounts

At this point you set up business trade accounts for your business that are known to grant credit to businesses that have little business credit history. Because most Tier 1 accounts will now be reporting on your business credit profile you can now apply for Tier 2. When Tier 2 vendors pull your business credit report they will see that you have some good history so they will grant additional credit in amounts higher then approved for in Tier 1.

6. Tier 3 Trade Accounts

These companies will grant credit in higher amounts than what was granted from Tier 1 and Tier 2 accounts. Those members with good personal credit history may also be ready for bank financing at this stage. Each tier builds upon the previous tier. Many of my clients who want to apply for bank financing at this stage can but at this stage they will need to use their personal credit scores for approval and will need to be in the 680+ range. If personal credit scores are below the necessary range then I suggest enrolling in a credit restoration program.

7. Tier 4 Cash Credit Accounts

Tier 4 accounts consist of vendors who will grant your business cash credit cards, typically with a Visa or MasterCard logo. Benefits to you include no personal guarantee and affect on your personal credit profiles.

8. Advanced Business Financing

At this stage of the process your business credit file is built, you have history, business scores, rating; access to funding and you can continue to obtain even larger amounts of financing by following my advanced business credit building strategies. There are many different advanced strategies to obtain additional capital with and without a personal guarantee at this stage.

Remember it’s not only about how much cash credit you obtain initially, it’s about setting up yourself for much larger amounts of capital for your business. This is accomplished by following a proven simple step-by-step process to building ‘Ultimate Business Credit!’

Remember – “People only see what they are prepared to see.” ~ Ralph Waldo Emerson

To Your Success!

Marco Carbajo

About the Author

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 Lines: How to Qualify

October 20, 2009 By Marco Carbajo

While most of you are familiar with the stories surrounding several national banks that have cut business credit lines for small business it’s important to note that there are state banks, credit unions, and some regional banks that are issuing credit lines to small business. Qualifying for small business credit lines is not as difficult as you are led to believe.

When you are prepared and educated on the approval process you can have full confidence in knowing that you can obtain as much bank lines of credit as you need with as many banks as you wish. Now, let me be the first one to admit that the following information does not guarantee an approval but you can bet that it does greatly increase your chances.

Hopefully you already have a business bank account and a comfortable relationship with a banking contact. I suggest you apply for no more than a $50k line of credit because in most cases you will not have to provide tax returns or profit and loss statements. This makes the application process much easier with less paperwork. I have put together the following checklist for you that can be used with as many banks as you wish to establish lines of credit with:

Business credit file with a minimum 80 paydex score
Personal credit score of 680+
Bank rating classification of low 5 (minimum)
Balance rating classification of low 5 (3 mos prior to applying)
No NSF track record

Your small business banking history is vital to your ability of being able to get approved for a line of credit. Your bank will look to see how long that relationship has been established, so once you get your account set-up don’t change banks! There’s nothing wrong with having several business bank accounts and relationships with multiple banks.

Keep in mind that in order to qualify banks will refer to your business bank account because it reflects how you manage your cash flow. Lenders want to know that your business cash flow is capable of handling the business debt and expenses on a consistent basis. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan applications declined right away.

If a loan amount requires a $1,000 month payments then lenders need to see at least a “Low 5″ bank rating. Your “Bank Rating” is based on your average daily minimum balance over the last 3 months. Let’s take a look at these numbers:

Bank Rating	Account Balance	Bank Rating	Account Balance
Low 4	$1,000 – $3,999	Low 5	$10,000 – $39,999
Mid 4	$4,000 – $6,999	Mid 5	$40,000 – $69,999
High 4	$7,000 – $9,999	High 5	$70,000 – $99,999

Three Factors Banks Review For Approving A Small Business Line Of Credit

1. The first factor is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. $10,000 will rate as “Low 5″, $5,000 rates as “Mid 4″, $999 rates as “High 3″, and so on. You need to maintain a minimum “Low 5” bank rating ($10,000) for at least 3 months. Unfortunately, without at least a “low 5″ rating, most lenders will assume your business has little ability to repay.

2. The second factor is the bank rating cycle which is three (3) months. You’ll want to have at least a low 5 for the three months prior to applying for a line of credit or larger loan.

3. The third and final factor has to do with how you manage the account. NSF (bounced) checks destroy bank ratings. From this point forward, NSF checks are something you can’t let happen. I would suggest that you add overdraft protection to your account as soon as possible.

This system works every time as long as you’re personal credit scores are 680+ not in the low 500 range. If your scores are in the low 500’s, it’s best to start repairing your credit and consider a CD Secured loan with your bank. Remember, you can set up $50k credit lines with as many banks as you have accounts with! The best part of all is this is just using one of my business credit building strategies!

P.S. CLICK HERE to join as a business credit member and obtain access to my private list of banking contacts and business credit resources.

To Your Success!

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of https://businesscreditbuilders.org. 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 =>

Building Business Credit: Overview

October 13, 2009 By Marco Carbajo

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1. Building Business Credit: Entity Selection

October 13, 2009 By Marco Carbajo

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How Shelf Corporations Improve Business Credit Building

October 1, 2009 By Marco Carbajo

There has been a growing interest in shelf corporations from many of the investors, small business owners and entrepreneurs that I have the opportunity to speak with on a daily basis who are looking for ways to speed up the business credit building process.

I felt that by sharing some insight with you on shelf corporations and what are the key business credit building advantages will better prepare you in making a more educated decision if this is an option you’re thinking about.

Now, let’s first cover the basics.

What is a shelf corporation?

A “Shelf Corporation, also known as an “Aged Corporation” (or “Aged Company” when referring to an LLC, for example) is a corporation that is already formed, but not in use, and ready for “purchase” by a new owner. There are many reasons that people purchase shelf corporations, and there are certain things to look out for when considering one of these “ready-made” corporations which I will cover shortly.

Now one of the questions I’m sure you’re thinking is “Why should I purchase a Shelf Corporation?”

Shelf corporations allow you to engage into business, credit, or real estate agreements as an established company without having to go through the long waiting period of establishing a brand new corporation.

Most potential creditors or business resources are less likely to extend credit or lend to new or up-start corporations. By approaching them as an established corporation or company, the more likely your business has the chances of more access to credit lines, banking relationships, leases, and so on.

For example, during the initial stages of building business credit there are some vendors that will only extend credit to companies that are at least 2 years in business. In some cases they also require a personal guarantee if the business is less than a year old. By purchasing a shelf corporation that’s three or even ten years old can drastically increase the number of credit opportunities available to you.

Now don’t worry if your existing corporation is less than 2 years old because you’ll still be able to obtain business credit, but the amount of banks that you can apply at will be limited. If you’re planning on starting a corporation or setting up another corporation then this may be an option to entertain.

Shelf corporations can also offer a large increase in borrowing power as well as enhanced credibility for your business when talking to customers and lenders.

Remember the age of the owners does not necessarily correspond with the age of the company.

When the H.J. Heinz Company advertises that it was established in 1869, it doesn’t mean that all of the shareholders are well over 100 years old. It simply means that the company was filed in that year. You can take advantage of similar credibility benefits when advertising to customers.

The age of your company can give greater credibility to customers and lenders than a business that was recently established. So, purchasing companies with established credit and existing credit lines can give the business a big financial boost.

Here are the Top 5 Advantages of a Shelf Corporation

1. Saving time and expense of forming a brand new corporation

2. Instant access to contract and government contract bidding. Most states require that your company be in business for a specified minimum length of time.

3. Instant credibility and an appearance of corporate history.

4. More attractive to potential investors and investment capital.

5. Faster and easier access to banking relationships and lines of credit.

If you currently have a shelf corporation then you can use it to obtain credit card funding. As far as purchasing a shelf corporation, given the current credit crunch, banks want to see more than even being a 2 year old corporation. So if your only interest is in applying for bank financing keep in mind Shelf Corporations have no business history, tax returns, financials and existing revenue.

Caution!

There are many companies that sell shelf corporations that have done business in the past, DO NOT buy these! If a shelf corporation has done business in the past and you purchase it you also assume all past liabilities of that company. So if the company has had any lawsuits brought against the corporation from the past you are now liable because you now own the corporation.

It’s critically important that the shelf corporation you are considering not have any inherent or lingering liabilities. For the most part, this can be assured by looking into the history of the corporation and ensuring that the extent of its business activities were limited or non existent except for the application of an Employer Identification Number and maybe the formation of a bank account.

Shelf corporations can be a great option if the proper due diligence is taken and there are many aged shelf Nevada corporations, Delaware corporations, Wyoming corporations, offshore corporations and Canadian Corporations that are available but be sure you do your homework.

Are you considering a shelf corporation?

P.S If you are interested in a LLC Shelf corporation that’s 1-2 years old let me know and I would be happy to help you. I have several Nevada LLC’s with Wells Fargo bank history. Email [email protected] if you’re interested.

Remember – “Formal education will make you a living; self-education will make you a fortune.” ~ Jim Rohn

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