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.

There has been a growing interest in shelf corporations from many of the investors, small business owners and entrepreneurs that I have the opportunity to speak with on a daily basis who are looking for ways to speed up the business credit building process.

I felt that by sharing some insight with you on shelf corporations and what are the key business credit building advantages will better prepare you in making a more educated decision if this is an option you’re thinking about.

Now, let’s first cover the basics.

What is a shelf corporation?

A “Shelf Corporation, also known as an “Aged Corporation” (or “Aged Company” when referring to an LLC, for example) is a corporation that is already formed, but not in use, and ready for “purchase” by a new owner. There are many reasons that people purchase shelf corporations, and there are certain things to look out for when considering one of these “ready-made” corporations which I will cover shortly.

Now one of the questions I’m sure you’re thinking is “Why should I purchase a Shelf Corporation?”

Shelf corporations allow you to engage into business, credit, or real estate agreements as an established company without having to go through the long waiting period of establishing a brand new corporation.

Most potential creditors or business resources are less likely to extend credit or lend to new or up-start corporations. By approaching them as an established corporation or company, the more likely your business has the chances of more access to credit lines, banking relationships, leases, and so on.

For example, during the initial stages of building business credit there are some vendors that will only extend credit to companies that are at least 2 years in business. In some cases they also require a personal guarantee if the business is less than a year old. By purchasing a shelf corporation that’s three or even ten years old can drastically increase the number of credit opportunities available to you.

Now don’t worry if your existing corporation is less than 2 years old because you’ll still be able to obtain business credit, but the amount of banks that you can apply at will be limited. If you’re planning on starting a corporation or setting up another corporation then this may be an option to entertain.

Shelf corporations can also offer a large increase in borrowing power as well as enhanced credibility for your business when talking to customers and lenders.

Remember the age of the owners does not necessarily correspond with the age of the company.

When the H.J. Heinz Company advertises that it was established in 1869, it doesn’t mean that all of the shareholders are well over 100 years old. It simply means that the company was filed in that year. You can take advantage of similar credibility benefits when advertising to customers.

The age of your company can give greater credibility to customers and lenders than a business that was recently established. So, purchasing companies with established credit and existing credit lines can give the business a big financial boost.

Here are the Top 5 Advantages of a Shelf Corporation

1. Saving time and expense of forming a brand new corporation

2. Instant access to contract and government contract bidding. Most states require that your company be in business for a specified minimum length of time.

3. Instant credibility and an appearance of corporate history.

4. More attractive to potential investors and investment capital.

5. Faster and easier access to banking relationships and lines of credit.

If you currently have a shelf corporation then you can use it to obtain credit card funding. As far as purchasing a shelf corporation, given the current credit crunch, banks want to see more than even being a 2 year old corporation. So if your only interest is in applying for bank financing keep in mind Shelf Corporations have no business history, tax returns, financials and existing revenue.

Caution!

There are many companies that sell shelf corporations that have done business in the past, DO NOT buy these! If a shelf corporation has done business in the past and you purchase it you also assume all past liabilities of that company. So if the company has had any lawsuits brought against the corporation from the past you are now liable because you now own the corporation.

It’s critically important that the shelf corporation you are considering not have any inherent or lingering liabilities. For the most part, this can be assured by looking into the history of the corporation and ensuring that the extent of its business activities were limited or non existent except for the application of an Employer Identification Number and maybe the formation of a bank account.

Shelf corporations can be a great option if the proper due diligence is taken and there are many aged shelf Nevada corporations, Delaware corporations, Wyoming corporations, offshore corporations and Canadian Corporations that are available but be sure you do your homework.

Are you considering a shelf corporation?

P.S If you are interested in a LLC Shelf corporation that’s 1-2 years old let me know and I would be happy to help you. I have several Nevada LLC’s with Wells Fargo bank history. Email ceo@startbusinesscredit.com if you’re interested.

Remember – “Formal education will make you a living; self-education will make you a fortune.” ~ Jim Rohn

About the Author

Marco Carbajo is a business credit specialist, author, speaker, and founder of http://www.startbusinesscredit.com . Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below To Your Success! =>