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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

Business Structures to Avoid for Building Business Credit

July 21, 2009 By Marco Carbajo

Business EntityI get asked this question quite often and thought I would clear the air on what business entity selection is best for building business credit.  This step by far is the most important because it’s the foundation of your business credit.  Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.

 

As a business owner, you have four real choices when it comes to business structures for building business credit, and two bad choices:

 

    * C Corporation

    * S Corporation

    * Limited Liability Company

    * Limited Partnership

    * Sole Proprietorship

    * General Partnership

 

You can learn more about your four good choices by listening to my FREE Business Corporations Seminar.

 

CLICK HERE to listen

 

To learn why Sole Proprietorships and General Partnerships are so dangerous to you and your family, read on.

 

A Sole Proprietorship is bad…

 

Have you heard the saying “You get what you pay for?” Well, you normally don’t pay anything to start either a Sole Proprietorship or a General Partnership. 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 neither of these structures is considered a separate legal structure. Instead, they are considered personal extensions of you, if you are operating as a Sole Proprietorship, or you and your partners, if you’re operating as a General Partnership.

 

And, because these business types are considered personal extensions of you, you don’t have any protection from them.

 

But a General Partnership is Downright Ugly!

 

It gets even worse if you are operating with a partner as a General Partnership. That’s because not only are you 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. This can be devastating if your partner is financially irresponsible, and, because either of you can bind the partnership; you have zero protection from your partner.

 

If You Don’t Choose a Good Entity, the Government Will Choose a Bad One for You!

 

If you’ve been doing business up to now without a business structure, both the IRS and your state government have defaulted your business into either a Sole Proprietorship or a General Partnership.

 

And that means you’re exposed.

 

Use a Proper Business Structure – If you want to build business credit and you want to protect yourself from personal liabilities.

 

CLICK HERE to join my business credit community today and discover what cash credit and financing opportunites you can obtain for your business entity. 

 

Remember – There is one thing stronger than all the armies in the world and that’s an idea whose time has come ~ Victor Hugo

 

 

To Your Success!

Marco Carbajo

About the Author

sp_image-435950341-1242740704.pjpegMarco 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 credit building tips with blog updates, news, and more! To start building business credit join his business credit community today and Click Here.

Filed Under: Business Credit Tagged With: build business credit, building business credit, business credit, business credit blog, business credit blogger, business credit builder, business credit building, business credit coach, business credit help, business credit information, business credit service, getting business credit, how to build business credit, marco carbajo

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