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How to Establish Corporate Credit for Your Startup

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Establish Corporate Credit

Is personal credit cards a major sources of financing for your new business venture? establish corporate credit

You’re not alone as statistics show that over 65% off all business owners use credit cards for business purchases but what’s alarming is only 50% of those cards are actually in the business name.

As a business owner using personal credit cards for business is a risky approach since you assume total liability and if your company is sued or fails you risk losing personal assets and good credit ratings as well.
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Company Credit: It’s a Journey Not a Destination

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Company Credit

 

What should you expect when building company credit? How long should it take to obtain the financing your business needs?

There’s no cookie cutter answer to these questions because every business is different and has its own unique contributing factors. For example, a five year old business will have greater business credit opportunities than a company that just opened its doors a month ago.

In addition, the credit needs for every business will continue to change as the business expands and requires additional funding. There’s not a point when a business owner says I’ve arrived because there’s always room for growth, expansion and improvements.

I love using analogies so I thought this would be a great opportunity to share with you a personal story of mine that can be compared to what many business owners face when establishing company credit.

August of last year I took a trip to visit my sister in New Mexico and I never would have imagined that it would be such a life changing experience. During my visit we decided to take on the La Luz trail which was a 10.5 mile hike up the Sandia Mountain which reaches over 10,300 feet.

I thought the hike would be no problem for me because I was in fairly good shape. But, what happened next was not at all what I expected.

After enduring the steep foothills and rough terrain during the first 2 miles I found myself utterly exhausted. My heart felt like it was going to pop out of my chest and my legs and feet were in agonizing pain.

I stopped and realized there was no way I could continue this hike so I turned around and walked back down the mountain. I felt defeated and mad at myself for not being physically capable of finishing what I started.

On the way down I made a promise to myself to make some serious lifestyle changes. I knew I would be coming back next year for a visit and would face the Sandia Mountain hike again.

When I got back from the trip I started going to the gym every day. I even took a before photo shot of my hefty 244pound body.

In just two months I lost 44 pounds, 4 inches off my waist and was working out six days a week. My energy levels soared and I was now in the best shape of my life.

Just last week I went back to New Mexico again to visit my sister and I was ready to take on the La Luz trail hike for the second time. This time I was 44 pounds lighter and also had my 14 year old son with me which was some extra motivation.

After 5 hours, 3,159 calories and 10.5 miles later I reached the top of the 10,357 foot Sandia Mountain! It was an amazing feeling to win and share that success with my family. The right training and preparation paid off and now I’m ready to take on the next big hike!

This personal story of mine is a lot like what business owners may experience when they decide to start establishing company credit.

They begin with positive expectations but lack the much needed preparation and training to complete all the steps required for building company credit. Without being prepared they face setbacks and even roadblocks that prevent them from progressing.

As a business owner you will need to first plan, prepare and then take action. Building company credit is nothing like hiking a big mountain but it sure can feel like an uphill battle without the right training, guidance and support.

Looking to establish company 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) =>

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. A business credit building program providing no personal guarantee business credit. He is a business credit blogger for AllBusiness.com, a subsidiary of Dun and Bradstreet 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 American Express Small Business, Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain. 

How to Establish Business Credit with a Reporting Bank Loan

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Establish Business Credit with Bank LoanEstablish 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 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.  

How GMAC helps Small Business Owners Establish Business Credit

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Establish Business Credit GMAC

Establish Business Credit with GMAC

 

While there are many reasons to establish business credit many small business owners overlook the advantages of financing their autos with corporate credit. The key is keeping all your business related expenses and obligations separate from your personal credit files.

This includes minimizing the use of personal credit checks and personal guarantees to get business credit.  Are your business debts reporting on your personal credit files? Does your auto loan or lease for your company report to your personal credit files?

The good news is there are companies like GMAC that understand the importance of keeping personal obligations separate from your business debts.  More importantly one program it offers reports your payments to your business credit report and not your personal credit files.

Third Party Guaranty by GMAC

This program was specifically designed for business owners to keep their automotive financing separate from personal credit. It even allows you to keep your personal name off of the vehicle contract and title.  Now that’s what I’m talking about!

Now you may have to provide the additional financial backing that GMAC requires like a personal guaranty if your established corporate credit cannot support the loan or lease. 

Here’s a quick rundown of the benefits:

  • Build credit in your business name only.
  • Your vehicle purchase or lease will not be reported on your personal credit reports, unless your business defaults.
  • Added protection from liability, since your name remains off of the vehicle’s title and contract.
  • Personal privacy since you are only personally contacted in the event of default

Now to take it a step further suppose your business needs to purchase multiple vehicles. GMAC also has a program called the GMAC Commercial Line of Credit.

The best part of this program is your business can provide the financial data it needs to establish a business line of credit with GMAC one time rather than provide the same information for each vehicle purchase. This is extremely convenient especially if you have to purchase or lease multiple vehicles at different times and at different dealerships.

Think about the positive impact this will have on your personal debt-to-income ratios if suddenly your future auto loans or leases stop reporting on your personal credit reports and now report to the business credit bureaus.

There are also several other major automotive companies like GMAC that offer vehicle financing programs designed to establish business credit while protecting your personal credit files. We offer these and many other credit sources to members of my Business Credit Insiders Circle.

Take advantage of all the benefits that major corporations have been utilizing for years.

To your business credit success!

 

Business Credit Resources

» Start Business Credit

» Business Credit Builder

» Business Credit Blog

To access business credit insider secrets, corporate fleet suppliers, 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 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.  

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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