Building Business Credit for Small Business
An entrepreneur that I know had a remarkable business idea – the kind that keeps
you up at night when you think of all the possibilities and opportunities that lie ahead.
It offered a perfect solution, with lots of potential customers to market to. He did all his homework by researching market demand, competition, pricing and so on.
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While traditional lenders have been sticking to their strict underwriting guidelines there are several creative business financing tips that may just help get you the funds you need.
Before getting into the details let me be the first to remind you that separating your personal credit from your business credit should be your primary goal. If you’re at the early stages of building your company’s credit file then you may have to use your personal credit to secure financing until your company becomes creditworthy.
Merchant Cash Advance
This option has many benefits if you are in need of short term business financing. In a nutshell you are borrowing against future credit card sales in order to receive cash immediately.
Best of all you can qualify with bad credit, no personal guarantee and no collateral.
Some of the requirements are:
Finally your repayment is based only on your credit card sales and it’s automatically debited so you don’t even have to worry about a payment schedule.
Social Lending
Lending networks like Lending Club and Prosper provide a way for you to obtain creative business loans that range from $1k to $25k for your business. Rather than go through the red tape that traditional lenders impose these networks make the process so much easier. You simply post a loan listing and set the rate you want to pay and they do the rest.
The rate is fixed and so are your payments but best of all you don’t have to take the loan if you don’t like the rate.
Some of the requirements are:
Even though you’re securing the loan using your personal credit the interest rate you will pay is much less than the rate you will pay if you use your personal credit cards for funding.
Vendor Lines of Credit
Another alternative to creative business loans is obtaining vendor credit from your suppliers and other companies whose products and services you can use. This not only helps you conserve cash flow but also builds your corporate credit file too.
In most cases you can qualify with no personal credit check or guarantee which supports your overall business credit building strategy.
Equipment Leasing
When you need business financing for business equipment and you can’t secure finances through traditional sources like a bank than leasing is a viable alternative. You not only benefit from tax deductible lease payments but you also can get a buy-out option as well.
In addition you get a low fixed rate and a low down payment which is usually one or two lease payments upfront. Compared that to a traditional loan, where a bank requires up to 20% down of the total price of the equipment.
As you can see there are many creative business financing options that will provide your business the financing it needs short term or long term while you continue to work on establishing the creditworthiness of your company.
Looking to access creative business financing sources? 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 corporate credit builder membership helping business owners establish no personal guarantee 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.
Qualifying for a bank loan or other traditional sources of business financing can seem like an impossible task if you’re like most small business owners that haven’t even begun to establish credit in the name of your business let alone have any type of business credit scores.
You probably believe that you have no other choice but to use your personal credit but let me share with you a viable alternative before you slap down your plastic.
Vendor credit lines also known as trade credit is when a company extends credit to your company in order to allow you to buy its products and services upfront but defer the payment for a later date.
After you purchase a product they will issue an invoice which must be paid according to the terms of your agreement. If you’re a startup company or have no business credit then most net 30 vendors will have net 10 or net 15 day terms initially. Keep in mind these terms can be extended to net 30, 90 or even 120 day terms if you continue to build a solid payment history with your vendors.
Some of the major benefits include:
Now for business credit building purposes there are some key factors that never get mentioned which can make all the difference in the world.
You see not all vendors report your payment history, in fact out of half a million vendors in the U.S. less than 6,000 supply payment data to a business credit bureau. So either you should select the right companies to apply with or you can always purchase one of DNBs trade reference programs.
Several other factors to consider are the frequency of reporting and how the data is being reported by your vendors. Some report on a quarterly or even yearly basis which does not help in building your profile in a timely manner.
As far as your payment data it’s vital that the actual vendor credit limits that your company is approved for displays on your file not just the amount owed. Some vendors will not report this information and it can have a dramatic impact on how lenders view your company’s creditworthiness plus it affects the size of the credit limit recommendations that business credit bureaus list on your file.
I know this can seem confusing and time intensive but there are ways to streamline this whole process taking all the guesswork and frustration out of the equation. By taking advantage of all the tools and resources available you can improve your company’s ability to qualify for the business financing it needs.
Looking to access vendor credit lines? 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) =>
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit services membership helping business owners build business credit without personal guarantee. 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.