How To Build Business Credit
So many business owners fail at establishing business credit due to fact most have no idea how to approach the idea of achieving business credit credibility.
The lenders care about one thing:
Are you attractive on paper?
That is truthfully the only thing any lender will ever worry about. All lenders measure risk in an effort to help them reduce the default rate a prospective client could have. They do this by measuring the “fundability” of a business.
Here’s five quick tips to help you establish your business credit in the quickest fashion
1. Ensure everything in your business is set up. You must be in a position to receive credit in the first place before you apply. This includes a 20 point checklist a few of them are: ensure you have an EIN number, ensure you an incorporated, ensure you have an 800 number and ensure you are listed in the 411 directory.
There are 16 other points such as this that a business owner must have in place to qualify for any type of financing. We know because we have the lending guildelines from over 2000 lenders!
Part of the reason lending institutions require such information is due to the fact that so many people apply for business financing and small business loans who, quite frankly, have no business applying. This helps weed out many business owners who simply will never receive financing for their small business.
2. Start with vendor accounts. Vendor accounts, unlike revolving accounts, are typically set up with net 30 terms. This requires the business owners to pay, in full, the balance at the end of each month on the amount allotted by the vendor. Many vendors including staples, home depot, radio shack, Uline shipping etc, all have vendor accounts that can be set up for any type of business owner. We have the exact underwriting guidelines for these plus 300 other vendors in our business credit program. Therefore the business owner will always be approved for the vendor account before they even apply.
3. Access your Duns Account and Duns number to ensure your vendor tradelines are reporting. Unless you know how to set this up, Dun and Bradstreet can charge anywhere from $700- $1500 to get a business owner set up. They like to couple products and programs in an effort to squeeze the business owner’s cash. The truth is, through our business finance suite business owners can be set up with a Duns account for free. This virtually covers the cost of the system.
Knowing what trade lines are popping on your business credit profile is crucial to the success of a business owner. Reason being, many revolving lines of credit rely on the fact of starter vendors as trade references before extension of corporate credit will be granted. Knowing what is on your business credit report can be the difference between success and failure in establishing business credit quickly.
4. Make sure you are using no personal guarantee, no personal credit check vendors to get started.
The idea of building corporate credit is to remove your personal liability from your business risks right? Well then for that to be true a business owner must not take on personal guarantees or allow personal credit checks to take place to be approved the right way for business credit. Knowing which vendors do not require personal guarantees of personal credit checks can be tricky. You have to have access to underwriting guidelines to know exactly which ones do and which ones do not. We have those inside our business finance suite. You can request this information up front from the vendor if you wish or you can gather many applications and skip the section that asks about your personal information. There are not to many out there unless you have a source to use.
5. Make sure you “x” number of tradelines reporting before you apply for business credit, revolving accounts.
This is crucial to your success. So many business owners fail at corporate credit because they have no idea what it take for a business owner to be approved for a VISA line of $10,000.
Do you think any merchant would extend a VISA line of credit for $10,000 to a business owner who has credit in their business’ name that is either not been established or is poor?
And this is why so many business owners fail. When people talk about business credit they talk about going and applying for something like a Staples of Visa. Well, if you had nothing in place to be attractive on paper to the lender, does it make sense for the lender to lend to you?
Would you lend to you? If you had no business credit?
Probably not. And financial institutions will not either.
Building business credit is about having everything in place just to be set up to receive business financing. If your foundation is shattered you will no have a chance at receiving any type of financing. Building business credit can be one of the toughest thing a business owner accomplishes if they don’t know where to start.