How to Build Bank Credit for Your Business

September 8, 2009 By Marco Carbajo

Recently I shared the benefits of building business credit with each of the business credit agencies. Separation of personal and business credit is a must for small business owners in order to eliminate personal liability and protect the integrity of the corporate veil.

While this strategy creates a Paydex, Small Business Credit Risk Score, and Intelliscore for your business it’s not the only rating you should pay close attention to.

Your business will also need to establish effective ‘Bank Credit’.

Bank credit is totally separate from building business credit and in no way affects your ability to build strong business credit scores.

“Bank Credit” makes your business more credible in the eyes of lenders. In this post, I want to share with you the ‘3 Main Components of Building Bank Credit’ which are:

Business Bank Account & History
Bank Rating Number
Obtaining Your First Business Bank Loan

So let’s get started!

Business Bank Account

The first step in establishing positive bank credit is to make sure that your business name and mailing address, as listed on your business bank account, matches exactly how your business name and address appear on any legal paperwork that’s been filed with the State. It must also match exactly with the name and address that appear on your Federal EIN paperwork. If it doesn’t match you’ll have to correct it immediately!

Business Bank History

Most lenders also determine the age of your business by the date you first opened your business bank account and not the date that appears on your Incorporation, LLC, or EIN paperwork. However, in some instances banks may also require 24 months seasoning from the start date of your business as well.

Your business banking history is vital to your ability of being able to secure larger business loans with banks. Lenders will look to see how long that relationship has been established, so once you get your account set-up don’t change banks!

The longer your business banking history, the better the borrowing potential you have.

Bank Rating Number

Your business bank account reflects how you manage your cash flow. Lenders want to know that your business cash flow is capable of handling the business debt and expenses on a consistent basis. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan applications declined right away.

If a loan amount requires a $1,000 month payments then lenders need to see at least a “Low 5” bank rating. Your “Bank Rating” is based on your average daily minimum balance over the last 3 months.

Bank Rating	Account Balance	Bank Rating	Account Balance
Low 4	$1,000 – $3,999	Low 5	$10,000 – $39,999
Mid 4	$4,000 – $6,999	Mid 5	$40,000 – $69,999
High 4	$7,000 – $9,999	High 5	$70,000 – $99,999

Bank ratings consist of three factors…

1. The first factor is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. $10,000 will rate as “Low 5”, $5,000 rates as “Mid 4”, $999 rates as “High 3”, and so on. You need to maintain a minimum “Low 5” bank rating ($10,000) for at least 3 months. Unfortunately, without at least a “low 5” rating, most lenders will assume your business has little ability to repay.

2. The second factor is the bank rating cycle which is three (3) months. You’ll want to have at least a low 5 for the three months prior to applying for larger loans.

3. The third and final factor has to do with how you manage the account. NSF (bounced) checks destroy bank ratings. From this point forward, NSF checks are something you can’t let happen. I would suggest that you add overdraft protection to your account as soon as possible.

Obtaining Your First Business Bank Loan

Getting your first business loan from a bank can seem like an impossible task. The majority of the business loan applications at banks get declined because banks won’t lend to just anybody … or will they?

This one business bank loan strategy provides a powerful boost to building business credit fast. The business bank loan needs to be in the exact name of your company. It should be under your Federal EIN and report to the business credit agencies, specifically Equifax Small Business and Corporate Experian.*

So how do you accomplish this? Under this Bank Loan Program you will be securing a business loan with a certificate of deposit (CD) at the bank that is extending the business loan. You’ll make a deposit into a CD account at an SBA preferred lending bank. Then, you receive a business loan for 100% of the value of the CD.

This process works very well and works every time as long as you’re personal credit scores are not in the low 500 range. If your scores are in the low 500’s, it’s best to try smaller business banks and talk to an individual banker first.

The Benefits of a Secured Bank Loan

It will appear on your business credit report just like any other loan.
There will be no note in the file, or on credit reports, that show it as “secured”.
It will make your business credit report stand out to other lenders and creditors who obviously know how difficult it is to get a business bank loan.

If you’re personal credit is a large issue and you just can’t find a business bank to do the CD program for you … don’t worry. You can still build your business credit without the bank loan; the bank loan just makes it faster.

*N.E.C. members are provided access to our list of banks who have done the CD-Secured Business Loan program

Remember – The secret of business is to know something that nobody else knows. ~ Aristotle Onassis

To Your Success!

Marco Carbajo

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 =>

Start Business Credit: Business Line of Credit

August 29, 2009 By Marco Carbajo

A business line of credit is a financing tool offered by most business banks. In a nutshell it’s a source of capital that you can access at any time up to a certain amount agreed upon by you and the bank. Usually, there is no collateral required to get approved, and it’s an ideal tool for businesses that are at least 2 years old.

A business line of credit is typically revolving like a credit card and it has no fixed payment terms and is based on an adjustable market based interest rate. Some have a feature of only requiring monthly interest only payments to be made in order to keep the payments small while your business grows. In most cases you can elect to make the full monthly payment of both the principle and interest when you want to and can pay the full balance at any time without penalty prior to the maturity date.

The amount your business is able to receive from a business line of credit will depend on your business past gross annual revenues and projected annual cash flow.

HOT Tip: Most banks will not require business tax returns and profit and loss statements when you keep your credit line of request below $50k.

A good test to see if your business will qualify is to examine your business bank rating to determine if there has been a sufficient average daily balance to adequately support the line of credit repayment. Typically a low 5 bank rating can grant you an approval so be sure to establish a good rating prior to applying.

Here’s what you need to apply for a business line of credit

Business Information

•Business name

•Business address (physical address, no P.O. Boxes)

•Business phone number

•Business fax number

•Business Taxpayer Identification Number(s) (TIN) or Social Security Number(s) (SSN)

•Business Duns Number

•Date the business was established

•Ownership type

•Number of owners

•Gross Annual revenue or sales

•Business banking account number(s) and balance(s)

Business Owner Information

•Name

•Home address

•Home phone number

•Social Security Number(s)

•Country of Citizenship if not United States

•Date of Birth

•Percentage of ownership

•Annual household income

•Personal savings and/or checking account number(s) and balance(s)

Contact Information

•Primary contact (must be an owner of the business)

•Primary contact phone number

•Primary contact email address

One of my preferred banks for business lines of credit is Wells Fargo.

Other banks for business lines of credit that I recommend are:

Capital One

PNC

US Bank

For a complete list of our preferred lenders join my business credit community today!

Remember – Abundance is not something we acquire. It is something we tune into. ~ Wayne Dyer

To Your Success!

Marco Carbajo

About the Author

Business Credit Help that Can Make or Break You

July 12, 2009 By Marco Carbajo

Business Credit Help

One of the mistakes that I see business owners make when attempting to build business credit is not paying attention to details. I want to provide you a business credit tip that can help improve your chances of getting approved for loans, credit cards, and lines of credit for your business.

One small detail like choosing an SIC code in a high risk classification can mean your business being flagged as a high risk with the business credit bureaus. As a result every lender, creditor, or company that pulls your business credit report will see that you’re business is in a high risk classification.

As a result many lenders will automatically decline your application! In addition, Dun & Bradstreet will minimize the credit limit recommendation for your company on your DNB file which lenders take a close look at prior to extending credit to your business.

This short video will give you these high risk categories to stay away from so you can prevent your business from being placed in a high risk classification. If you haven’t selected an SIC code or NAICS code for your entity you will need to prior to setting up your Dun & Bradstreet file.

Don’t let a simple detail like this hurt your chances for obtaining the cash credit and financing your business needs and deserves.

Every business will at one point require an influx of cash in order to cover operating expenses, expansion costs, legal fees, inventory or a range of other items it may require in order to operate.

Another major benefit for building business credit is you’re ability to have access to capital which provides the leverage you need to purchase additional income producing assets like other businesses, real estate, equipment and so on.

The worst mistake you can make is seeking funding when your business needs it most. Lenders extend cash credit lines to businesses that are not in high risk industries, don’t need the capital and have strong business credit ratings. Start digging your well before your business gets thirsty!

Ready to start building your business 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 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 builder system helping business owners establish business credit with no 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.

Business Loan Finance: How to Get Approved

June 17, 2009 By Marco Carbajo

Business Credit Lending institutions want to lend money because it’s the way they make money. However, they only want to lend money to a borrower who is able to repay the loan on time and in full.

When lending small amounts of money under $50,000 typically the qualification depends solely on personal and business credit scores. Depending on the personal and business credit scores, they either will or will not approve the loan.

When deciding to extend credit to a business lenders use the ‘Four Factors for Lending Approval’:

Capacity

Collateral

Conditions

Character

Each of these areas helps the lender to determine the overall risk of the loan. While each of the C’s is reviewed, none of them on their own will prevent or guarantee access to financing. There are really no automatic formulas or guaranteed percentages that are used with the Five C’s. They are only a variety of factors lenders use to evaluate and decide how much of a risk the potential borrower is.

Let’s cover these 4 Factors in greater detail.

Capacity

This is an evaluation of your ability to repay the loan. Capacity is evaluated by several components including cash flow, payment history, and additional cash sources. The best way to show your capacity is with a strong business credit profile, a strong bank rating (typically a low 5), a well designed business plan and/or prior year(s) financials that show you can produce enough cash to repay the loan.

If your loan is under $50k most banks will grant an approval if you have a strong business credit rating, a favorable personal credit score, and a low 5 bank rating.

CLICK HERE for a free business plan course

Collateral

Heavy machinery, inventory, equipment, stocks and bonds, and other expensive business assets that can be sold if a borrower fails to repay the loan are considered collateral. One of the easiest ways to obtain a business loan for building business credit and bank credit is using the CD-Secured loan strategy.

*There are specific banks that do these types of loans that can allow you to grow your access to capital at a much faster rate.

Conditions

Be prepared to prove that the conditions are right for your business. Make sure there’s a market, an industry, positioning, competitiveness, and experience to back up your plan.

Character

Lenders have to believe that a business owner is a reliable individual who can be depended on to repay the loan. Some areas they look into include personal credit history, education, and work experience.

When applying for a small business loan, don’t forget the importance of personal relationships. Apply for a loan at a bank where you already have a positive business relationship. Also, make an attempt to meet with the person who will be evaluating your application, such as a bank’s lending officer, rather than the teller who handles your day-to-day banking transactions.

If you want to succeed in getting a loan, be sure to also check out Elements of a Successful Small Business Loan Application.

*Gain access to my private list of banks that do CD-Secured loans when you join our business credit building system.

Remember – To succeed in business, to reach the top, an individual must know all it is possible to know about that business. ~ J. Paul Getty

Looking to rebuild your business 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 business credit building audio seminar ($497 value) =>

To Your Success in Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the Author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.

Credit Cards for Business

June 10, 2009 By Marco Carbajo

small-business-credit-card While small business credit card usage is on the rise according to the 2009 Small Business Credit Card Survey the majority of all small business owners fail to understand the importance of what’s in the fine print.

Statistics even 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.

I hope to provide you with some insight into business credit cards and what you should pay close attention to when applying.

First, you should be aware that there are over 500 business credit cards available in the marketplace but less than 70 report your payment history to the business credit bureaus.

In addition, there are less than 40 business credit cards that will extend cash credit cards to your business without a personal guarantee.

Here are my ‘Top 4 Types of Business Credit Card Applications’ you should know about

The Business Credit Card Wannabe

This business credit card is by far the worst and in my opinion very misleading. It doesn’t matter how much fluff or creative sales copy is used by these particular companies what matters is what’ in the fine print! In a nutshell this business credit card application is nothing more than a glorified personal credit card.

How to identify?

The application requires your personal information, social security number, and business name only. No Tax ID# or Duns# is required.

Disadvantages

Personally liable for all debt

All charges and debts are reported on personal credit files

Impacts personal debt to credit limit ratios

The Business Credit Card Poser

This business credit card is doing its best to be a true business credit card but it doesn’t quite make the grade. In a nutshell this card still requires a personal guarantee but what makes it appealing is the payment history and credit card balance are solely reported to the businesses credit reports not personal.

How to identify?

The application requires your business information, Fed Tax ID#, Duns#, personal information and social security number.

Disadvantages

Personally liable for all debt if the business defaults

The True Business Credit Card

This is the real deal business credit card and what truly represents what every business owner should have. A card that is tied to the business and completely separate from personal credit. This card is the best of both worlds! The payment history and balances report solely on the business credit reports and there is no personal guarantee keeping the liability strictly tied to the business.

How to identify?

The application requires your business information, Fed Tax ID#, Duns#, personal information but no personal social security number. (No personal guarantee)

Disadvantages

NONE

*Keep in mind there are also business credit cards that allow you to apply with business information only and no personal credit check. However, if you’re business credit scores and files are not strong enough they may require a personal guarantee for approval. I call this the ‘Two Faced Business Credit Card’.

To Your Success in Business and in Life!

Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook and Twitter.

About the Author

How to Build Bank Credit for Your Business

Start Business Credit: Business Line of Credit

Business Credit Help that Can Make or Break You

Business Credit Help

Business Loan Finance: How to Get Approved

Credit Cards for Business

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