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How to Build Bank Credit for Your Business

September 8, 2009 By Marco Carbajo

bank-creditRecently I shared the benefits of building business credit with each of the business credit agencies. Separation of personal and business credit is a must for small business owners in order to eliminate personal liability and protect the integrity of the corporate veil.

 

 

While this strategy creates a Paydex, Small Business Credit Risk Score, and Intelliscore for your business it’s not the only rating you should pay close attention to.

 

Your business will also need to establish effective ‘Bank Credit’.

 

Bank credit is totally separate from building business credit and in no way affects your ability to build strong business credit scores.

 

“Bank Credit” makes your business more credible in the eyes of lenders.  In this post, I want to share with you the ‘3 Main Components of Building Bank Credit’ which are:

 

  • Business Bank Account & History
  • Bank Rating Number
  • Obtaining Your First Business Bank Loan

 

So let’s get started!

 

Business Bank Account


The first step in establishing positive bank credit is to make sure that your business name and mailing address, as listed on your business bank account, matches exactly how your business name and address appear on any legal paperwork that’s been filed with the State. It must also match exactly with the name and address that appear on your Federal EIN paperwork. If it doesn’t match you’ll have to correct it immediately!

 

Business Bank History


Most lenders also determine the age of your business by the date you first opened your business bank account and not the date that appears on your Incorporation, LLC, or EIN paperwork.  However, in some instances banks may also require 24 months seasoning from the start date of your business as well.

Your business banking history is vital to your ability of being able to secure larger business loans with banks. Lenders will look to see how long that relationship has been established, so once you get your account set-up don’t change banks!

 

The longer your business banking history, the better the borrowing potential you have.

 

Bank Rating Number

 

 Your business bank account 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.

 

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

 
 
 
 
 Bank ratings consist of three factors…

 

 

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 larger loans.

 

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.

 

Obtaining Your First Business Bank Loan

 

Getting your first business loan from a bank can seem like an impossible task. The majority of the business loan applications at banks get declined because banks won’t lend to just anybody … or will they?

 

This one business bank loan strategy provides a powerful boost to building business credit fast. The business bank loan needs to be in the exact name of your company. It should be under your Federal EIN and report to the business credit agencies, specifically Equifax Small Business and Corporate Experian.*

 

So how do you accomplish this? Under this Bank Loan Program you will be securing a business loan with a certificate of deposit (CD) at the bank that is extending the business loan.  You’ll make a deposit into a CD account at an SBA preferred lending bank. Then, you receive a business loan for 100% of the value of the CD.

 

This process works very well and works every time as long as you’re personal credit scores are not in the low 500 range. If your scores are in the low 500’s, it’s best to try smaller business banks and talk to an individual banker first.

 

The Benefits of a Secured Bank Loan

 

  • It will appear on your business credit report just like any other loan.
  • There will be no note in the file, or on credit reports, that show it as “secured”.
  • It will make your business credit report stand out to other lenders and creditors who obviously know how difficult it is to get a business bank loan.

 

If you’re personal credit is a large issue and you just can’t find a business bank to do the CD program for you … don’t worry. You can still build your business credit without the bank loan; the bank loan just makes it faster. 

 
 

 *N.E.C. members are provided access to our list of banks who have done the CD-Secured Business Loan program

 

  

Remember – The secret of business is to know something that nobody else knows. ~ Aristotle Onassis

 

 
To Your Success!

Marco Carbajo

About the Author

sp_image-435950341-1242740704.pjpeg

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 =>

Filed Under: Business Credit Tagged With: bank credit, bank history, bank loan, bank loans, bank rating, banking credit, build business credit, build corporate credit, business credit agencies, business credit card, business credit loan, business credit strategy, business finance, business loan, business plan, business planning, business plans, corporate credit card, credit education, intelliscore, paydex, personal credit repair, personalcredit, small business banking, small business finance, small business financing

Welcome to Your Business Credit Membership

September 3, 2009 By Marco Carbajo

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Filed Under: Business Credit

How To Build Business Credit With Bad Personal Credit

September 1, 2009 By Marco Carbajo

Credit ReportAfter presenting to REIA of Macomb last week it was clear to me that building business credit was a HOT topic for real estate investors. It was interesting to find that small business owners and real estate investors have similiar questions when it comes to business credit.

 

As a result of the economic downturn many find themselves being faced with less than perfect credit.  While credit repair companies are springing up all over the country there are few like United Credit that can truly deliver.

 

But in the meantime can you start building business credit with bad personal credit?

 

Absolutely!

 

There are vendors, suppliers, leasing companies, and even cash credit issuers that will extend credit to your business solely based on your businesses credit rating.  In order for you to obtain cash credit without a personal guarantee first requires you to start establishing strong business credit with vendors & suppliers.

 

The key is identifying which vendors & suppliers offer the following:

  • Credit with no personal credit checks
  • Credit with no personal guarantee
  • Credit for start ups (great for new entities)
  • Monthly payment reporting to business credit bureaus

 

If this part leaves you scratching your head don’t worry we have all this work already done for you if you’re interested. As long as you understand the fact that cash credit without a personal guarantee can only happen once you have established a strong business credit profile.

 

Here’s a quick comparison on personal credit vs. business credit.

Business Credit Comparison.png.jpg

As you can see there are HUGE differences and the one in particular that should get you really excited is the unlimited amount of business credit files you can establish! 

 

For a complete list of our preferred business credit sources join my business credit community today!

 

Remember – Abundance is not something we acquire. It is something we tune into. ~ Wayne Dyer

 

To Your Success!

Marco Carbajo

About the Author

sp_image-435950341-1242740704.pjpeg

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 =>

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon
Submit Your Email and Receive ‘8 Steps to Building Ultimate Business Credit’ audio FREE ($597 Value)


Filed Under: Business Credit Tagged With: build business credit, build corporate credit, building business credit, business credit, business credit building, business credit help, business credit strategy, business credit without a personal guarantee, how to business credit, start business credit

Start Business Credit: Business Line of Credit

August 29, 2009 By Marco Carbajo

Business Line of CreditA business line of credit is a financing tool offered by most business banks. In a nutshell it’s a source of capital that you can access at any time up to a certain amount agreed upon by you and the bank. Usually, there is no collateral required to get approved, and it’s an ideal tool for businesses that are at least 2 years old.

 

A business line of credit is typically revolving like a credit card and it has no fixed payment terms and is based on an adjustable market based interest rate. Some have a feature of only requiring monthly interest only payments to be made in order to keep the payments small while your business grows. In most cases you can elect to make the full monthly payment of both the principle and interest when you want to and can pay the full balance at any time without penalty prior to the maturity date.

 

The amount your business is able to receive from a business line of credit will depend on your business past gross annual revenues and projected annual cash flow.

 

HOT Tip: Most banks will not require business tax returns and profit and loss statements when you keep your credit line of request below $50k. 

 

A good test to see if your business will qualify is to examine your business bank rating to determine if there has been a sufficient average daily balance to adequately support the line of credit repayment. Typically a low 5 bank rating can grant you an approval so be sure to establish a good rating prior to applying.

 

Here’s what you need to apply for a business line of credit

 

Business Information

 

•Business name

•Business address (physical address, no P.O. Boxes)

•Business phone number

•Business fax number

•Business Taxpayer Identification Number(s) (TIN) or Social Security Number(s) (SSN)

•Business Duns Number

•Date the business was established

•Ownership type

•Number of owners

•Gross Annual revenue or sales

•Business banking account number(s) and balance(s)

 

Business Owner Information

 

•Name

•Home address

•Home phone number

•Social Security Number(s)

•Country of Citizenship if not United States

•Date of Birth

•Percentage of ownership

•Annual household income

•Personal savings and/or checking account number(s) and balance(s)

 

Contact Information

 

•Primary contact (must be an owner of the business)

•Primary contact phone number

•Primary contact email address 

 

One of my preferred banks for business lines of credit is Wells Fargo.

 

Other banks for business lines of credit that I recommend are:

Capital One

PNC

US Bank

 

For a complete list of our preferred lenders join my business credit community today!

 

Remember – Abundance is not something we acquire. It is something we tune into. ~ Wayne Dyer

 

To Your Success!

Marco Carbajo

About the Author

sp_image-435950341-1242740704.pjpeg

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 =>

Email Newsletter icon, E-mail Newsletter icon, Email List icon, E-mail List icon
Submit Your Email and Receive ‘8 Steps to Building Ultimate Business Credit’ audio FREE ($597 Value)


Filed Under: Business Credit Tagged With: bank credit, bank credit line, bank history, bank loans, bank rating, banking credit, build business credit, build corporate credit, business credit, business credit loan, business credit strategy, business line of credit, business lines of credit, business loan, corporate credit, small business banking, small business finance, small business financing, start business, start business credit, wells fargo

Top 10 Business Credit Building Mistakes

August 17, 2009 By Marco Carbajo

Building Business Credit Mistakes

Business Credit Building

 

While many small business owners realize the benefits of starting business credit there are many mistakes that are made in the business credit building process. I felt that compiling a list of the most common mistakes I’ve seen throughout the industry can serve as a helpful guide to you. Here they are…

Choosing the wrong entity structure

Selecting the right entity structure for your business is the most important step you can make. Not just from a business credit standpoint but also from a tax and asset protection standpoint as well.  In addition there are state filing fees, franchise fees, licenses, resident agent service and a host of other important factors to consider.

Selecting the wrong SIC code 

There are certain codes that the business credit bureaus and lenders tend to stay away from. These industries include real estate investing, car sales, adult entertainment, travel, lending, restaurants, and dry cleaners. When you classify your business be sure to stay away from these classifications.

Selecting the wrong NAICS code

If you plan on investing in real estate then you will want to make sure that the company you build credit on is not “real estate investing”. Most banks will automatically turn you down because this is a high risk category. You still will be able to invest in real estate but you may have to set up a business that does business development, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investments from a separate division or company that does something else.

Using a home or cell phone number as a business phone number

There’s nothing wrong with using these phone numbers but when it comes to business credit building it does matter. Your number has to be listed in the 411 national directories and cell phones and VOIP as well as call forwarding numbers do not work.

Having inconsistent information on business documents

When you start business credit you must pay close attention to details. The information used to open your credit file must match the information you use on applications, documents, and filings.

Applying for credit with the wrong vendors

There are 500,000 vendors in the U.S. that extend credit to businesses but less than 6,000 report to the business credit bureaus. Too many make the mistake of believing that simply doing business with a vendor will result in establishing business credit. Not true!

Applying for credit with vendors that report slow

There are vendors who do report your payment history but only on a quarterly or even yearly basis. Time is of the essence so you have to make sure the vendor you apply with also reports to the business credit bureaus on a monthly basis!

Applying for personal credit cards disguised as business credit cards

Pay special attention to what a credit card application requires and what the terms and conditions are.  A credit card that reports only to your personal credit is not a true business credit card

Applying for business credit cards that do not report to the business credit bureaus

There are over 500 business credit cards available in the marketplace but less than 70 report your payment history to the business credit bureaus.

Not establishing an effective bank rating

A minimum of a low 5 bank rating is a must if you plan to apply for a line of credit or loan. You can achieve a low 5 rating with a $10k balance in your account.

To access a complete step by step business credit building system with 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) =>

To Your Success!

 Marco Carbajo

About the Author

Marco 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 corporate 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.  

Filed Under: Business Credit Tagged With: build business credit, building business credit, business credit, business credit builder, business credit building, how to build business credit, how to business credit, how to business credit building, start business credit

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