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Start Business Credit: Business Start Up Credit

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Start Business CreditBusiness Start up Credit

On the previous post I mentioned how you can start building business credit right away by having your everyday expenses like web hosting, phone services and printing reported on your profile. If the companies you’re doing business with are not reporting your payment history you can use a business credit builder product at DNB that will get the job done.

You can also start corporate credit accounts with companies like Verizon, Quill, Accurate Office Supply, Best Buy, Fed Ex and many others. You will need to provide your EIN number when you open an account and some companies will request your Dun & Bradstreet number. Remember, not all companies that you start business credit with will report your payment history.

Also, each company has its own credit approval guidelines and minimum requirements for business start up credit. For example, Accurate Office Supply offers a net 30 account with no personal guarantee but requires your business to have a minimum of three trade references and one bank reference.

So if your goal is building a strong business credit file then you will either need to select companies that report to the business credit bureaus or use the dun & bradstreet credit builder product to have your trade references added yourself.

You can also take advantage of companies that provide you a business credit supplier directory like the Business Credit Insiders Circle.

Business Credit Blog » Business Credit » Start Business Credit – start up credit for small business

Start up Business Credit Cards

While trade credit with companies like Quill and Fed Ex can help your business fund its short term needs cash credit is much more preferable. The mistake that most business owners make is applying for a business credit card that requires a personal credit check as well as a personal guarantee.

These types of cards are a glorified version of a personal credit card because the charges and debt your business incurs all report on your personal credit reports. Furthermore if you default on any outstanding debt incurred on the card then you are personally liable for that debt.

So you’re probably wondering how a start up company like yours can obtain a business credit card with no personal credit check or personal guarantee. For starters I suggest a secured business credit card for establishing business credit. After several months of solid payment history you can request an unsecured credit line increase.

In addition you may want to consider a business debit card from the bank that services your business checking account. Even though this doesn’t start corporate credit for your company it does help establish bank credit.

You should always take advantage of these types of products offered at your bank. Some banks like Comerica, Key Bank and Associated Bank have its business credit card issued through Élan Financial Services. Élan’s underwriting guidelines for business credit cards require a personal credit check for approval but your company’s revolving debt and payment experience do not report to your personal credit reports. A big plus for your personal debt to credit limit ratios!

As you can see even start ups can start building business credit with everyday expenses, corporate credit accounts, a secured business credit card, a business debit card and business credit cards.

To your business credit success!

 

Business Credit Resources

» Business Credit Seminar

» Business Credit Insiders Circle

» Business Credit Blog

 

 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 Insider’s 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 Insider’s 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.

Start Building Business Credit: No Personal Credit and No Guarantee!

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Business Credit No Personal Guarantee

Start Building Business Credit

 

You can start building business credit rather quickly by applying for vendor credit lines. There are companies that are willing to extend credit to your business with no personal credit check or guarantee. Even if your company has no credit history you can get approved but expect limited terms and low credit limits initially.

The benefit to building business credit using vendor credit lines is that it will provide your business with thousands of dollars in products it needs and allow it to pay the invoices at a later date. This helps you conserve cash flow for more critical short term needs your business may have.

Another benefit is vendors report your positive payment experience to the business credit bureaus. The more vendors you establish credit lines and payment experience with the stronger the business credit profile you will build. This alone can positively impact the size of the credit limit recommendation for your business which is determined by the business credit bureaus and publicly disclosed on your file.

However, one of the biggest mistakes made by small business owners is assuming that every vendor reports their payment history. Currently there are over 500,000 vendors who extend lines of credit to businesses but less than 6,000 report your payment experience.

So when you start building your business credit file you want to be sure to select vendors that report. You can verify this by inquiring with a vendor that you plan to apply with. Be sure to ask what business credit agency they report to and how often they report.

One of my favorite aspects to vendor credit lines is the minimal qualifications required for approval. In many cases an application only requires your business contact information, Federal Tax ID#, Dun & Bradstreet#, authorized name and signature and not your social security number or personal guarantee.

The specific vendors requesting only this information will pull a business credit report to base their approval which makes obtaining vendor credit lines much easier and more convenient compared to credit cards or loans. A prime example of one of these types of vendors is a company called Quill.

Quill offers a net 30 account and reports to Dun and Bradstreet.  Best of all they report your payment history every 30 days. For small orders you can start building business credit if your business has a listing on the 411 directories and a working website. New businesses can start out with smaller limits that will increase when you pay on time every month.

I also encourage every one of my client’s to join my Business Credit Insider’s Circle. As a member they gain access to all the information, sources, videos, audios, and content not available to the general public. In addition each month we report their membership payments to Dun and Bradstreet!

As you can see vendor credit provides a way to showcase your business’s ability to properly handle its financial obligations, face scrutiny, and show responsibility while maintaining a reasonable debt to income ratio. So start building business credit today and avoid the use of your personal credit and guarantee.

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 Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Picture 2009 Super Small pic Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s 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 The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.  

Start Business Credit: What Business Structure Should I Choose?

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Business Entity

Start Business Credit: Entity Selection

 

I get asked this question quite often and thought I would clear the air on what business entity selection is best when you start building business credit.  This step by far is the most important because it’s the foundation for what you will be building your business credit upon.  Not to mention all the other important areas that entity selection affects such as taxes, liability, asset protection and so on.

 When a client comes to me for advice on selecting the best business structure, the first questions are:

 What Does Your Business Do?

I ask this to get you into the best structure for taxes. How your income is taxed depends on the type of income your business earns. If your income is earned through passive sources – rent, portfolio income, etc., it will be taxed differently than if your business provides a product or a service that you sell.

Where Do You Live?

I ask this question because where you live can make a difference to the kind of business structure you form. Some states charge more for one type of structure over another. Knowing where a client lives allows my entity specialist to choose the most economic structure.

How Much Does Your Business Earn?

This question again relates to taxes, and is specifically geared towards someone who receives “earned” income (that’s income from selling a product or providing a service). There’s an income threshold we look at – once your income surpasses it, it’s time to rethink your options.

Taxation is a Critical Factor!

Did you notice that all three of those questions are related to taxes? That’s the secret lesson to take away here. All business structures will work in all situations. The secret is knowing which business structure best matches your income and tax situation so you keep more of what you earn.

The mistake I see so many business owners make is selecting the wrong entity structure for their company. They get anxious about building their profile with the business credit bureaus and think that one type of entity is better than all the rest. There is no cookie cutter approach to entity selection because every business is different. Don’t take any shortcuts in this step because it can cost you big time.

As a business owner, you have four real choices when it comes to business structures and two bad choices:

    * C Corporation

    * S Corporation

    * Limited Liability Company

    * Limited Partnership

    * Sole Proprietorship

    * General Partnership

Business Credit Blog » Business Credit » Start Business Credit – entity selection for business credit
 

Sole Proprietor and General Partnership

 

To learn why Sole Proprietorships and General Partnerships are so dangerous to you and your family, read on.

A Sole Proprietorship is bad…

Have you heard the saying “You get what you pay for?” Well, you normally don’t pay anything to start either a Sole Proprietorship or a General Partnership. Of course you don’t get anything, either. Unless you count the following as valuable business assets:

    * Lots of personal liability

    * No protection from your business creditors

    * An increased risk of being audited

    * Problems with valuation for a subsequent sale of the business

The reason for this lack of protection is because neither of these structures is considered a separate legal structure. Instead, they are considered personal extensions of you, if you are operating as a Sole Proprietorship, or you and your partners, if you’re operating as a General Partnership.

And, because these business types are considered personal extensions of you, you don’t have any protection from them.

But a General Partnership is Downright Ugly!

It gets even worse if you are operating with a partner as a General Partnership. That’s because not only are you responsible for all debts and agreements you enter into in the name of your business, you’re also on the hook for all of your partner’s actions in the name of your business as well. This can be devastating if your partner is financially irresponsible, and, because either of you can bind the partnership; you have zero protection from your partner.

If You Don’t Choose a Good Entity, the Government Will Choose a Bad One for You!

If you’ve been doing business up to now without a business structure, both the IRS and your state government have defaulted your business into either a Sole Proprietorship or a General Partnership.

And that means you’re exposed.

Select the proper business structure  and incorporate your company if you want to start business credit and you want to protect yourself from personal liabilities. So if you already decided on the right entity structure then the next step is incorporating your business.

If you already have an existing entity set up then the next key step is obtaining a federal Tax ID.

Business Credit Resources

» Business Credit Seminar

» Business Credit Insiders Circle

» Business Credit Blog

 

Are you ready to incorporate and start building business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system.

To Your Success!

Marco Carbajo

About the Author

Marco Picture 2009 Super Small picMarco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. Want to learn more about how you can become a member and gain access to Marco’s business credit secrets, sources, and information on how to obtain unlimited financing for your business without a personal guarantee? Claim his FREE ‘Eight Steps To Ultimate Business Credit Without a Personal Guarantee’ audio seminar ($597 Value), for a limited time by submitting your name and email below =>

Business Credit Ratings Explained

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Dun and Bradstreet

Business Credit Ratings

 

There’s been quite a stir on the integration of FICO® 08 which is the credit scoring system used by the majority of lenders to determine a consumer’s credit worthiness. Similar to your personal credit ratings, businesses and corporations also have business credit ratings that potential lenders use to determine its credit worthiness.

Unlike a personal credit rating, there is no designated standard for determining the credit worthiness of businesses. However, the main tool used to determine and establish company credit ratings is D&B’s PAYDEX system.

Where a personal FICO® score is based only on credit history that includes information on how much a person borrows and how well they repay loans, a credit rating for a business takes into consideration company size as determined by assets and number of employees.

Where personal credit ratings are based on financial information provided by credit card companies, retail establishments, and financial institutions, a business credit report and rating is determined by information supplied by the business owner and gathered from vendors, suppliers, and other trade accounts.

For this reason, potential lenders may be different from one another in their evaluation of a business’ credit history by emphasizing certain qualifications more than others.

Like most industries, there is a specialized language involved with business credit reports and ratings.

The following is a list of some of the most common concepts and terms as well as their definitions:

Average High Credit / Highest Credit

In order to put a business’s credit in perspective, these are based on the total amount of credit owed as compared to the industry as a whole.

Business in Good Standing

Includes any problems with the business overall.

Commercial Credit Score

A D&B prediction regarding the chances of an account becoming severely delinquent within one year.

Comprehensive Report

This is a combination of several D&B business credit reports that paints a more complete picture of the company’s credit history. It includes the results of the PAYDEX analysis, a company’s credit score and Financial Stress class, as well as any public filings or liens, the business’s history and operations (including when it filed for incorporation, annual financial statements, facilities, affiliations, and number of employees).

Credit Score Class

This is part of the D&B assessment that gauges payment habits to determine how likely it is that a potential account will be delinquent in the next 12 months. The scoring can range from 1 to 5 with 1 being the score assigned for the lowest risk and 5 for the highest.

Financial Stress Score

This is part of the D&B assessment that analyzes the Financial Stress that a business is experiencing in order to predict how likely it is that a business will fail in the next 12 months.

PAYDEX

This is D&B’s primary assessment that analyzes how likely it is that a company will make its future payments on time.  An 80 paydex score for a business can be compared to having a 720 personal credit score.

Sample business credit reports:

Dun & Bradstreet business information report sample

Dun & Bradstreet enhanced comprehensive report sample

Dun & Bradstreet Credit eValuator Plus Report sample

Corporate Experian Business Credit Score Report sample

Small Business Equifax Commercial Credit Report sample

 

To order business credit reports:

Dun & Bradstreet (D&B)

Equifax Small Business Enterprise

Experian SmartBusinessReportsTM

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

Are you ready to start building your business ratings? 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 solutions membership helping business owners build small 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. 

Building Business Credit: Obtaining a Federal Tax ID#

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Business Federal Tax ID

A business Federal Tax ID number (also called an EIN number) is mandatory, because without one, your corporation will be useless. Your Tax ID number will be the number that identifies your business and information. It’s just like how your Social Security number will identify who you are for your personal credit.

Once you have incorporated your business then you’re ready to apply for an EIN.

If you already have a corporation or LLC but do not have a Federal Tax ID number than you will need to apply for one.

For more information be sure to check out the FAQ section on Employer ID Numbers.

If you have had a corporation for some time but never have obtained a tax ID number don’t worry. Tax ID numbers are not generated in a numerical fashion and there is no way for a lender to determine when your tax ID was obtained and compare it to the start of your business.

This is also important to know for shelf corporations if you are planning on using one. After you have obtained your tax ID number for business you’ll also be ready to open a small business bank account.

If you’re serious about building business credit without a personal guarantee then you will have to complete these two steps before you can move forward:

  1. Incorporate your business
  2. Obtain a Federal Tax ID#

What type of business structure do you have?

Ready to start building business credit for your corporation? 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) =>

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 CarbajoMarco 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, 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’.

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