Building Business Credit for Small Business
What types of business credit can you obtain for your company?
I’m sure your familiar with business credit cards, loans, and lines of credit but did you know there are four major types of business credit sources that you can establish?
In this short video I recorded with Dun and Bradstreet you will learn what these sources are and how you can go about building business credit fast without putting your personal credit and personal assets at risk.
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Tired of your business debts showing up on your personal credit reports?
You may have had good intentions opening up that corporate mastercard for your business only to find out the hard way that the $5,000 equipment purchase you recently put on your card now shows up on your personal credit files.
What’s even worse is your credit score also took a hit because the new debt just negatively impacted your personal debt to credit limit ratios too!
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Business Credit is borrowed money that your company can use to purchase products or services it needs and repay the funds at an agreed upon date or time frame. It can also refer to the amount of capital your business can secure without the use of personal assets.
The good news for you is that businesses of all sizes and entity types have the ability to create its own corporate credit identity completely separate from that of its owners.
Unfortunately most entrepreneurs are not aware of this and operate as a sole proprietorship which is a form of business structure in which the individual takes on all aspects of funding, starting and operating the business.
As a sole proprietor you keep all the net profits but you’re also taxed on them too. This is why entrepreneurs often rely on the strength of their personal credit reports to determine the amount of financing they are able to obtain for their business.
Unless you incorporate the IRS will automatically default your business as a sole proprietorship leaving you personally liable for all debts and actions made by the company.
By incorporating your business it now gets to be treated as a separate legal entity like a human being created through a legal process.
Similar to a social security number which is tied to your consumer credit files your business can obtain a Federal Tax Identification Number and establish its own business credit report.
Once you begin building business credit you can obtain everything from equipment, office furniture, supplies, and inventory or even lease automobiles through corporate fleet programs.
You should limit the use of your personal credit or guarantee by applying for vendor credit and if you apply for other sources of financing like a business line of credit then you will also need to maintain a solid bank rating too.
Business credit cards are another source of credit that your company can obtain with each card containing its own approval criteria and terms and conditions. Some cards may not be a good fit especially the ones who base its approval and payment reporting on the owner’s personal credit and not the business.
Your company can also apply for business loans which are either secured or unsecured and are traditionally funded by banks.
Each of these sources of business credit can provide the short or long term capital your business needs while protecting your personal credit and personal liability.
While it does take time to build a creditworthy company you can expect to save more money and obtain much greater financing than you would ever personally.
Are you ready to start building business credit for your company? 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 premium vendors, business credit cards, 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) =>
About the Author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building system for small business owners. 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.
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.
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.
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.
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.
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.
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.
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.
Establish Business Credit with a Bank Loan
When you build business credit nothing looks more powerful on your business credit file than a business loan. The reason behind this is because lenders and creditors know how difficult it can be and the level of scrutiny your business undergoes in order to get a bank loan approval.
While the majority banks are declining loan applications you’re probably wondering how you can possibly get approved for a business loan.
Well I have good news for you because there is a sure fire way to establish business credit with a reporting bank loan even if you are Startup Company with less than perfect credit.
So what is this sure fire bank loan strategy?
It’s called the CD secured bank loan and provides a powerful way to establish corporate credit and bank credit for your business.
So how does it work?
Basically you are securing a loan with a certificate of deposit at the bank willing to offer this type of business loan. You make a deposit into a CD account at a bank that’s SBA approved and your business loan will match 100% of the value of the CD.
When you apply for these loans make sure the exact name of your company is on the application along with your Federal Tax ID. Banks will report your payment history on this loan to Small Business Equifax and Corporate Experian.
Now keep in mind not all banks offer these types of loans and the ones that do will require a minimum loan amount which is typically $5,000. When you have a bank loan that reports on your business credit files you can establish business credit scores and profiles that will enable your business to obtain the cash financing it needs.
Not too long ago I covered how to build a strong business credit file by having the right blend of credit. By adding a reporting bank loan along with vendor credit lines and revolving credit you can imagine how this will look in the eyes of lenders and creditors when they view your file.
Adding a bank loan on your file also helps categorize your file with other businesses with bank loans as well. This will help when creditors and lenders purchase lists from the business credit bureaus for marketing pre solicited credit offers.
This strategy works as long as your personal credit scores are in the mid 600 range. If your scores are low then you may want to consider speaking with a local banker or even use the transfer of ownership strategy.
Once you secure the $5,000 or more you can always deposit the money from the loan and use it exclusively to re-pay itself. Remember your money is in a CD earning interest so it’s best to keep making your loan payments for at least 12 months before paying it in full. If you pay your loan off in a couple of months you will not build enough payment history with the bank and your credit file.
This strategy will help your business establish corporate credit and qualify for offers like pre approved no pg business credit cards.
To access banking contacts that provide CD secured loans consider joining my Business Credit Insiders Circle and add a bank loan to your business credit file today!
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 Insiders Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
Marco 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.