How to Easily Build Business Credit in 4 Simple Steps
- 1. How to Easily Build Business Credit in 4 Simple Steps
- 2. Ty Crandall Director of Business Services (877) 600-2487 ty@creditsuite.com
- 3. Business Credit • Business Credit is credit that is obtained in a Business Name • With business credit the Business builds its own credit profile and credit score • With an established credit profile and score, the business will then qualify for credit
- 4. Business Credit • This credit is in the business name and based on the business’s ability to pay, not the business owners • Since the business qualifies for the credit, in some cases there is no personal credit check required from the business owner
- 5. Business Credit • The business can use its credit to qualify for revolving store credit cards like Staples, Lowes, Sam’s Club, Costco, BP, Wal-Mart, even MasterCard, Visa, and AMEX • The business can also qualify for credit lines and loans
- 6. Business Credit Benefits • A credit profile can be built for a business that is completely separate from the business owner’s personal credit profile • This gives business owners DOUBLE the borrowing power as they have both Personal and Business credit profiles built
- 7. Business Credit Benefits • Business credit scores are based only on whether the business pays its bills on time • A business owner can obtain credit much faster using their business credit profile versus their personal credit profile.
- 8. Business Credit Benefits • Approval limits are much higher on business accounts versus personal accounts • Per SBA, credit limits on business cards are usually 10-100 times higher than consumer credit
- 9. Business Credit Benefits • When done correctly Business Credit can be built without a personal credit check • Business credit can quickly be obtained regardless of personal credit quality
- 10. Business Credit Benefits • Most business credit can be obtained without the owner taking on personal liability, or a personal guarantee • This means in case of default, the business owner’s personal assets can’t be pursued
- 11. Business Credit Benefits • When a business owner applies for financing, their business credit IS reviewed • Not having business credit established will get an owner DECLINED for financing • There are no regulations that require the lenders notify the business owner for their reason for denial, so most never know
- 21. 4 Easy Steps to Quickly Building Business Credit
- 22. Business Credit Building – The business starts with no credit profile – The business gets approved for new credit that reports to the business credit reporting agencies – The business uses the credit and pays the bill timely – A positive business credit profile is established – As the business continues using the credit and pays bills timely it will qualify for more credit A business starts building a brand new credit profile much the same as a consumer does
- 23. Step 1- Build Business Credibility • The perception lenders, vendors, and creditors have of your business is critical to your ability to build strong business credit. • Before applying for business credit a business must insure it meets or exceeds all lender credibility standards • There are over 20 credibility points that are necessary for a business to have a strong, credible foundation
- 24. Business Name • It is very important that you use your exact business legal name • Your full business name should include any recorded DBA filing you will be using • Insure your business name is exactly the same on your corporation papers, licenses, and bank statements
- 25. Corporate Entities • You can build business credit with almost any corporate entity type • If you truly want to separate business credit from personal credit your business must be a separate legal entity not a sole proprietor or partnership • Unless you have a separate business entity (Corporation or LLC) you might be "doing business" but you are not truly "a business“ • You need to be a Corporation or an LLC in order to separate personal from business +
- 26. EIN • Whether you have employees or not, your business entity must have a Federal Tax ID number (EIN) • Just like you have a Social Security Number, your business has an EIN • Your Tax ID number is used to open your bank account and to build your business credit profile • Take the time to verify that all agencies, banks, and trade credit
- 27. Business Address • Business Address –Must be a real brick-and-mortar building –Deliverable physical address –Cannot be a home address –Cannot be a PO Box –Cannot be a UPS address • Some lenders will not approve and fund unless this criteria is met
- 28. Business Address • Business Address Solutions – Address Only - Receive mail and packages at your dedicated business address. – Virtual Office - Professional business address, dedicated phone and fax numbers, receptionist services, and part-time use of fully furnished offices and meeting rooms. – True Office - Your own full-time private office with receptionist services, dedicated phone and fax, internet, full furnishings, meeting rooms, and more.
- 29. 411 • You must have a dedicated business phone number that is listed with 411 directory assistance, under the business name • Lenders, vendors, creditors, and even insurance providers will verify that your business is listed with 411 • A toll-free number will give your business credibility, but you must have a LOCAL business number for the listing with 411 directory assistance
- 30. Phone Number • Lenders perceive 800 Number or toll-free phone numbers as a sign of business credibility • Even if you're a single owner with a home-based business, a toll-free number provides the perception that you are an even bigger company • It's incredibly easy and inexpensive to set-up a virtual local phone number or a toll free 800 number
- 31. Phone Number • A cell or home phone number as your main business line could get you "flagged" as an un-established business that is too high of a risk. • DON'T give a personal cell phone or residential phone as the business phone number • You can forward a virtual number to any cell or land-line phone number
- 32. Fax Number • Lenders perceive a credible business as one with a fax number • As a business you will need a fax number to receive important documents, you will also need it to fax in some of your credit applications • You can setup an e-fax that goes directly to your email
- 33. Website • Credit providers will research your company on the internet • It is best if they learned everything directly from your company website. • Not having a company website will severely hurt their chances of obtaining business credit • There are many places online that offer affordable business websites so you can have an internet presence that displays an overview of your company's services and contact
- 34. Email • It is important to get a company email address for your business. • It's not only professional, but greatly helps your chances of getting the thumbs up from a credit provider. • Setting up a business email address is just too easy and inexpensive to neglect
- 35. Email • Avoid using free email services like Yahoo and Hotmail • There is nothing worse than credit providers seeing an email address like partychic2009@yahoo.com • The Email address should be yourcompany.com • A great example is an email
- 36. Bank Account • Your business banking history is vital to your future success of being able to secure larger business loans • The date you open your business bank account is the day that lender's consider your business to have started • So if you incorporated your business 10 years ago, but you just opened the business bank account yesterday, then your business started yesterday • The longer your business banking history, the better your borrowing potential will be
- 37. Bank Account • Having a high account balance is essential in obtaining an excellent Bank Rating • Having a good Bank Rating is essential for approval • Try to keep a bank balance of $10,000 or higher for a High 5 Bank Rating
- 38. Licensing • One of the most common mistakes when building credit for your company is non-matching business addresses on your business licenses • Even worse is not having the "required" licenses for your type of business to operate legally • You will need to contact the State, County, and City Government offices to see if there are any required licenses and permits to operate your type of business
- 39. Licensing • State business filings listed correctly • County license and/or permit filings listed correctly • City license and/or permit filings listed correctly • IRS filings listed correctly
- 40. Business Listings • Take the time to verify that main agencies (State, IRS, Bank, and 411 national directory) have your business listed the same way and with your Exact Legal Name. • Also take the time to ensure every bill you get (power bill, phone bill, landlord, etc.) has the business name listed correctly and comes to the business address.
- 41. Step 2- Obtain Business Credit Reports • Business Credit reports are offered by Experian, Dun & Bradstreet, and Equifax • You will first want to get a copy of your business credit reports to see what is being reported
- 42. Experian • Visit http://www.smartbusinessreports.com/ for a copy of your Smart Business report • $49-99 for Smart Business Report • Find out how many trade lines are reporting, see if you have a business credit score assigned, see if you have an active Experian Business Profile, and check on recent inquries
- 43. Equifax • You can purchase a copy of your Equifax Small Business Credit Report here http://www.equifax.com/small-business/credit-report/en_sb • It typically takes more time to create a file with Equifax Small Business than D&B and Experian • This is why it's important to apply with the credit providers who report to Equifax • $99.95 for a full report
- 44. Dun & Bradstreet DUNS Number • Obtaining a Dun and Bradstreet number (D-U-N-S #) begins the process of building your business credit profile with them • Your D-U-N-S # will also play an important role in enabling your business to borrow without a personal guarantor. • http://www.dnb.com/ • $299- 699 per DUNS Number
- 45. Dun & Bradstreet • You can also enroll for the DNBi SelfMonitor to monitor your credit during the building process • A subscription for D&B Self Monitoring is $39-99 per month • Activate your DUNS # and get your file a D&B Rating •
- 46. Step 3- Obtain Vendor Accounts • A business credit report can be started much the same as a consumer report commonly is, with small credit cards • The business can be approved for small credit cards to help them build an initial credit profile • These types of initial cards in the business world are commonly referred to as “vendor credit”
- 47. Vendor Accounts • A vendor line of credit is when a company (vendor) extends a line of credit to your business on "Net 15, 30, 60 or 90" day terms. • This means that you can purchase their products or services up to a maximum dollar amount and you have 15, 30, 60 or 90 days to pay the bill in full. • So if you're set-up on Net 30 terms and were to purchase $300 worth of goods today, then that $300 is due within the next 30 days.
- 48. Vendor Accounts • You can get products and services for your business needs and defer the payment on those for 30 days, thereby easing cash flow • And some vendors will approve your company for Net 30 payment terms upon verification of as little as an EIN number and 411 listing
- 49. Vendor Accounts • Always apply first without using your SSN. • Some vendors will request it and some will even tell you on the phone they need to have it, but submit first without it. • When your first Net 30 account reports your "tradeline" to Dun & Bradstreet, the DUNS system will automatically activate your file if it isn't already. This is also true for Experian and Equifax.
- 50. Vendor Accounts • You need to have a total of at least five (5) Net 30 day pay accounts reporting. • Some vendors require an initial prepaid order before they can approve your business for terms. • Your vendors do not necessarily have to serve 100% of your business needs.
- 51. Vendor Accounts • Pay your Net 30 vendor accounts in-full and on-time • You must be patient and allow time for the vendors' reporting cycles to get into the reporting systems • It typically takes 3 cycles of "Net" accounts reporting to build credit scores
- 52. Vendor Accounts • Most Merchants and major retailers do offer business credit, they just don’t advertise it • There is no benefit to the merchant to promote credit with no personal liability if the business owner is willing to take on that liability • So they don’t promote their business credit cards and regularly ask for a SSN
- 53. Step 4- Obtain Revolving Accounts • After 5 trade lines are established using vendor accounts, obtaining revolving accounts is the next step • Revolving accounts are cards a business owner can use and not be required to pay the full balance owed each month
- 54. Obtain Revolving Accounts • Revolving account approvals will begin coming from stores • Store revolving credit must be obtained before the business owner starts getting Visa, MC, Amex, type cards
- 55. Obtain Revolving Accounts • Most stores will NOT approve a business owner for business credit unless the owner has an established credit profile and score, just like in the consumer world • Vendor accounts must be used first to establish a profile and score, then store credit can be obtained • It usually takes only 90 days or less to establish a score and profile with trade lines
- 56. Obtain Revolving Accounts • Once 10 total accounts are on the credit, an owner can then start applying for Visa, MC, Amex type credit • Approval amounts will be equivalent to the highest credit limit account on the business report • Try to have 10 accounts with at least one of them having a 10k high limit
- 57. Obtain Revolving Accounts • It is essential to keep using the credit, keep applying for more, and talk with credit providers to raise credit limits • If you do this, business credit will keep growing until higher limit credit lines are obtained, within 6-12 months
- 58. Learn more about business credit at www.CreditSuite.com Ty Crandall 877-600-2487 ty@creditsuite.com