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Building Business Credit for Small Business

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Building Business Credit for Your Small Business

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Building Business Credit

 

If you hope to qualify for financing for your business without having to use your personal credit then building a solid company foundation with positive business credit history is mandatory.

Here is a brief overview of the steps you will take to move you through the process and get your company on the path to obtaining the funding it needs based on its own creditworthiness.

Shelf Corporations

If you think purchasing shelf corporations will open up the credit floodgates for your company think again! These aged corporations provide the perception of years in business which is important in the eyes of lenders and customers. But there is a lot more to building corporate credit then age alone but if you do decide to purchase one make sure it’s reasonably priced and at least two years old with no liabilities attached.

Dun & Bradstreet

Once you have a corporation set up and completed all the necessary corporate conformity guidelines including but not limited to 411 listings, verifications and licenses you will be ready to register with Dun & Bradstreet.

Establish Business Credit

Once your registered you will need to establish business credit by first applying for vendor credit accounts with companies that report on a monthly basis. Once you get approved and start making purchases make sure to pay your invoices on time and monitor your files.

To get listed with Corporate Experian and Equifax Small Business you will need to establish accounts with companies that report to these specific bureaus.

Business Credit Cards

One of the ways you can start establishing business credit is through a secured card. This helps prevent your company from incurring any revolving debt so it’s a good place to start but as you continue building corporate credit you may soon qualify for no personal guarantee business credit cards.

If you must apply for business credit cards that requires your personal guarantee be sure that it reports your payment history to your business credit files and not your personal credit reports.

Small Business Loans

Obtaining small business loans can be difficult but it’s not impossible. It really depends on the level of bank credit that you have established. I would first focus on securing a business line of credit for your company so you can have the funds readily available when needed. This is much more convenient then having to apply for a loan every time your business needs the funds.

Business Credit Information

Finally you should stay plugged in and up to date with the latest news, resources and business credit information so your company can continue to expand its funding capabilities as well as leverage its diversity of credit.

Building business credit is not something you should spend your precious time or resources trying to figure out. It’s simply smart business to utilize a system that can take you through the process. With the right plan and execution of that plan you can expect your company to qualify for business financing without having to put your personal credit and personal assets at risk.

Looking to access a proven step by step business credit building system? A system  that provides you access to premium vendors, business credit cards, funding sources 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 Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit builder membership helping business owners build business credit. 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.  

Building Business Credit: 20 Steps to No Personal Guarantee

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Building Business Credit

While obtaining business credit cards, small business loans and a business line of credit is the common objective for many small business owners the

Business Credit No Personal Guarantee

re is a growing demand for learning how to qualify without having to use personal credit or a personal guarantee.

I’m happy to see that more and more business owners are embracing the idea of completely separating your personal credit from business credit. Many of

our new members were never aware of the danger that co mingling the use of credit profiles for personal and business can jeopardize the protection of the corporate veil plus limit the amount of funding their business can obtain.

Here are twenty steps to building corporate credit without using a personal guarantee. Please note that I’ve used examples from my business credit building system.

  1. Incorporate your business and obtain a Federal Tax ID#- your Tax ID number will be the number that identifies your business and information. It’s just like how your social security number will identify who you are for personal credit.
  2. Complete corporate conformity (411 listing, verifications, business license, etc.) –vendors, lenders and banks will do their due diligence prior to extending credit to your company. Don’t expect to receive credit by skipping these key fundamental steps.
  3. Select the right business classification codes – avoid selecting codes that will trigger a red flag with the business credit bureaus and lenders. This can stop your business credit building efforts dead in its tracks.
  4. Set up a complete profile with Dun and Bradstreet – Simply obtaining a DUNs number doesn’t cut it you will need to furnish additional information on your profile to give creditors a complete picture of your business. Remember there are companies like First Equity that offer no personal guarantee business credit cards but by invitation only. They purchase targeted lists from the business credit bureaus which you want your company to be on.
  5. Add existing positive trade references – if you have existing trade references to add to your file then you may want to consider using DNB’s business credit builder program which allows you to add your own references but keep in mind there are certain references they will not accept.
  6. Apply for vendor lines of credit – obtaining vendor credit can be simple and some suppliers even specialize in extending credit to startup companies or businesses with no credit at all. The key though is applying for credit with vendors that report each month and report the true credit limits your approved for. Keep in mind that we provide these to you as a member of our Business Credit Insiders Circle.
  7. Pay invoices ahead of the due date – you can increase your paydex score to 90 or higher by simply paying your invoices 10-20 days ahead of the due date. A big plus on your files!
  8. Build solid payment history – while account types and trade lines are a factor keep in mind that a payment track record is the final ingredient. Don’t think that one paid invoice will make your business capable of acquiring no personal guarantee credit lines or credit cards.
  9. Monitor your business credit file – a no brainer and a good habit to adopt for your personal files as well.
  10. Get listed with multiple business credit bureaus –target specific business credit bureaus that cater to your industry on top of the big three.
  11. Set up a small business bank account –before selecting a financial institution for your banking make a list of the financial products you may need. Consider a credit union or community bank because they are much more flexible in today’s economic environment.
  12. Establish a minimum ‘low 5’ bank rating – establish bank credit with your small business bank account.
  13. Obtain secured business credit cards
  14. Open a small business credit line
  15. Establish a diversity of credit – build a strong business credit rating by obtaining different account types. This includes trade credit, revolving credit, loans and leases.
  16. Keep proper financials
  17. Establish a well written business plan – A business plan is your blueprint that outlines every necessary component for the success of your business. Enough said!
  18. Maintain personal credit scores at 680+ – when applying for no personal guarantee credit a lender or creditor may still require a personal credit check.
  19. Build large trade lines with multiple tiers of credit –you can request for a credit limit increase usually after six months of good payment history. Before applying for larger tiers of credit be sure to know what the requirements for approval are.
  20. Stay informed! – join forums, social networks, read articles, subscribe to blogs and consider joining memberships like the business credit insiders circle.

Following these steps will provide your business opportunities to establish business credit in the name of your business while protecting your personal credit and personal liability.

Ready to start building your 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 audio seminar ($597 value) =>

To Your Success In Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the author

Marco CarbajoMarco 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, 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’.

Build Corporate Credit for your Home Based Business

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Build Corporate CreditOne of my friends recently asked me whether or not he can build corporate credit for his home based business. After asking a few simple questions there was really only one obstacle that was preventing him from starting which was the legal structure of the sole proprietorship that he chose for his company.

 Unfortunately, this happens to be the most common choice among home based businesses. Normally you don’t pay anything to start a sole proprietorship. Of course you don’t get anything, either.

Unless you count the following as valuable business assets:

    * Lots of personal liability

    * No protection from your business creditors

    * An increased risk of being audited

    * Problems with valuation for a subsequent sale of the business

The reason for this lack of protection is because a sole proprietorship is not considered a separate legal structure. Instead, it is considered a personal extension of you and because this business types is considered a personal extension of you, you don’t have any protection from it.

 In addition, you can’t establish corporate credit separate from your personal credit with a sole proprietorship. In order to build company credit you will need to first incorporate your home based business and next obtain an employee identification number (EIN).

This step by far is the most important because it’s the foundation for what you will build business credit upon.  Not to mention all the other important areas that entity selection affects such as taxes, liability and asset protection.

 Once you incorporate your business and have obtained an employee identification number you will then need to complete the standard corporate conformity guidelines that creditors expect your business to complete. There are over twenty specific tasks that I review with our members prior to setting up their business credit file and applying for vendor credit lines to build their corporate credit.

 Now if you’re wondering why your home based business would need this credit information first ask yourself the following questions:

 Do I use my personal credit cards to pay for my home based business expenses?

 Do I purchase goods and services from other businesses using my personal credit in order to operate and grow my home based business?

 Do the credit card charges I incur for my home based business show up on my personal credit reports?

 When you build business credit you have the unique opportunity to obtain business credit cards with no personal guarantee. Best of all when you use these cards for your home based business expenses they don’t affect your personal credit reports!

 Some other benefits include:

  • Business credit cards have much higher limits than personal credit cards.
  • You can build companycredit even if you have bad personal credit
  • Reduce your tax burden and improve accounting

If you’ve been doing business up to now without a business structure, both the IRS and your state government defaults your business into a sole proprietorship.

And that means you’re exposed.

 Now is the time to select the proper business structure for your home based business if you want to establish corporate credit and you want to protect yourself from personal liabilities.

 

To access corporate 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 Picture 2009 Super Small picMarco 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 4 Reasons Not to Use Personal Credit for Business

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Business Credit Card picStatistics show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name. The others continue to use the owner’s personal credit cards for business transactions.

Using your personal credit, also known as you’re “Consumer Credit Profile,” instead of establishing Business Credit is a bad idea on many fronts.

 

Here are my ‘Top 4 Reasons Why You Should Not Use Personal Credit for Business.’

 

Reason 1

It impacts your personal debt to credit limit ratios, credit scores, and personal finance capacity for you and your family.

 

This reason alone has caused severe personal credit damage and liability to small business owners across the country who have lost their businesses due to the recession and have used personal credit and personal guarantees for all their business financing. Just ask Kirk Brown, owner of Buck’s Shoes in Fremont, who knows firsthand what using personal credit for business can do.

 

When you properly separate your personal credit from business credit the debt you accumulate for your business should only report to your business credit file not your personal credit file. More importantly you protect you and your family from personal liability when you get approved solely on your businesses’ credit file.

 
Reason 2

When you use your personal credit for the benefit or operation of the 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.

 

It’s always a good idea to build business credit rather than abandon it through the co-mingling of funds–and this includes the “co-mingling” of credit profiles.

 

Many entrepreneurs believe that a corporation protects them because corporations are viewed as separate legal entities but you can jeopardize that protection when you use personal credit for the benefit or operation of your corporation!

 

Reason 3

Another disadvantage of using your personal credit in place of proper business credit is the fact that the use of personal credit for the operation of a company can make your company appear improperly funded or operated, or may incorrectly establish that your business credit is unstable, unreliable, or overextended.

 

Reason 4

Last but not least what might be perfectly normal and acceptable for a business credit profile, such as submitting multiple applications for business credit, can have a serious negative impact on personal credit because of what’s called excessive inquiries.

 

Solution:

Start building business credit for your corporation separate from your personal credit and improve your company’s image, protect you and your family’s assets, credit capacity, and personal liability.

 

Remember – To be prepared is half the victory. ~ Miguel De Cervantes

 

To Your Success!

 Marco Carbajo

About the Author

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Marco Carbajo is a business credit specialist, author, speaker, and founder of the National Entrepreneur Club.  Click here to visit his blog and signup free to get strategies, resources, and response-boosting tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.

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