Building Business Credit
|
Most businesses want to be able to borrow money when they need it, without the owners having to guarantee the loans personally. This means less risk to the owners. But wanting to get credit for your business and actually getting it can be two different things.
One company recently approached us because over the past two years they had created a successful business, with over twenty employees. But they couldn't get a business loan because they hadn't taken the time to build a business credit profile and didn't know where to start.
You may have seen marketing hype about how a business credit profile can overcome a bad personal credit file. In most cases, however, it's important that small businesses have both good business credit, as well as solid personal credit on the part of the owners. This is especially true in the current environment where investors and venture capitalists aren't handing money out to just anyone who can breathe and has a business idea! Even established businesses will find it necessary in some cases to provide the business owner's personal guarantees on some loans or credit cards.
Building business credit is completely different from building personal credit, though your personal credit may be linked in some ways. For example, credit reporting giant Experian sells a business credit score that is based on both the risk of the business and the personal credit of the owner of the company.
In addition, you don't have the same credit protection laws with business credit that you do with personal credit. So you want to make sure you start out on the right foot, or it can be difficult to make corrections.
The key to properly establishing business credit is twofold:
1. Set up the proper business structure and take basic steps to ensure your business appears "real" and stable to the business credit bureaus. That means getting the proper occupational licenses, and a phone number that is listed with directory assistance in the businesses' name, among other things. Your business will generally need some form of corporate structure to effectively build a business credit rating.
2. Borrow or buy products and services from companies that will report your credit history to the major business credit reporting agencies such as Dunn & Bradstreet and Experian.
Unlike personal credit ratings, where you can have a small income yet get a top FICO credit score, the best business credit scores are reserved for large stable businesses, those with several million dollars in sales a year and 25?50 or more employees.
But don't let that stop you! By taking a few careful steps, you can start small and still build a decent business credit rating to get you the borrowing power your venture needs.
A few warnings:
1. Don't try to "buy" good credit! Some companies will offer to "sell" trade references for a large sum of money. This is a rip off and if the credit reporting agencies find out, they will purge those references.
2. Don't spend large sums of money on a shelf corporation from a company that "guarantees" you will be able to use it to get loans. More often than not, the company won't have the kind of credit rating you'll need to be successful.
3. Don't try to get business credit as a substitute for bad personal credit. If you have damaged personal credit, work on rebuilding it while you're building business credit.
Entrepreneurs are usually hard-working, creative and willing to get the job done. Fortunately, those are the same qualities that will help you through the process of building strong business credit. Get started now! For more information about building business credit, visit www.BusinessCreditSuccess.com
About The Author
Gerri Detweiler is considered one of the country's top credit experts. She has been interviewed for thousands of radio, television and print newstories including USA Today, The Wall Street Journal, The New York Times, Dateline NBC and many others. She has testified before Congress several times and worked on reform of the national credit reporting laws.
|
|
|
Credit Cards For Home Business
It is wise for you to have a company credit card like a VISA card. How can you find the least expensive bank card for your business? You may decide to use a VISA card from your local bank. Check the interest rate on unpaid balances. It is excessively high? Is it in line with other cards? If you are not sure, write to:Bankcard Holders of America560 Herndon Parkway #120Herndon, Virginia 22070Send $4.00 for an up to date listing of preferred credit cards with low interest rates and those with no or low annual fees.If you are presently like 60% of our population and carry large credit card balances and spend much of your cash flow paying high interest rates, you need to get them paid down and paid off. If you are having problems with your ability to quit...(related: Apply for a Credit Card)
Credit Repair: How To Deal With Your Creditors
If you are in danger of credit problems because you have more debts than you can handle, there are things you can do at least keep your creditors reasonably happy.First, prioritize your debts or rank them in terms of the...(related: Apply for a Credit Card)
Learn How To Improve Your Credit Score
Having a damaging credit record can hurt you in many ways. It may prohibit you from making an important purchase such as a home, car, computer or vacation. Without a healthy credit report you are severely limiting yourself from possible lenders. If you do find a lender you will undoubtedly be charge exorbitant interest rates far exceeding what recipients would receive if their credit history is in good standing. So how can you fix your credit score if you've been less than diligent with repayments to creditors? Well contrary to what many advertising scams will tell you, you can't fix your credit overnight. In most instances it takes 7 years for a payment infraction to be deleted from your credit report. If you were to file bankruptcy i...(related: Apply for a Credit Card)
Annual Credit Report And Free Annual Credit Report
Getting an annual credit report review has been the advice of many financial managers as they guided their customers to be aware of all information on credit reports. Would the idea of a free annual credit report be good news? Consumers are thrilled with the new federal mandate that demands the three major national credit bureaus offer a free annual credit report to anyone requesting copies of their pe...(related: Apply for a Credit Card)
Is Your Credit Score Costing You Money?
Most of us want a good credit report to obtain automobile financing, credit cards, and to purchase a home. But, beyond these consumer loans, your credit report can cost you in everyday living expenses. What you don't know about your credit could be costing you money.Having a credit card means that you can order tickets, rent...(related: Apply for a Credit Card)
Useful Tips When Choosing Credit Cards
Chances are you have received your share of "pre-approved" credit card offers in the mail, some with low introductory rates and other perks. Many of these solicitations urge you to accept "before the offer expires." Before you accept, shop around to get the best deal.Credit Card Terms:A credit card is a form of borrowing that oft...(related: Apply for a Credit Card)
5 Ways To Prevent Credit Card Late Fees
Paying a credit card late fee is the same as throwing your money away. Late credit card payments can also hurt your credit score. The payment tips and strategies here will show you how to prevent these costly fees.When credit card companies process credit card payments, every single detail is extremely important. Get even one of these small details wrong and you will have to pay credit card late fees.The Fair Credit Billing Act requires credit card companies to cred...(related: Apply for a Credit Card)
Finding The Right Credit Card
There are so many credit cards out there to choose from that deciding which one to get can feel really daunting. What makes one offer better than the hundreds of others you've seen? Take this little quiz to find out what you should look for in a card. First, Are You a Student? If you are, th...(related: Apply for a Credit Card)
Restore Your Credit Rating And Reduce Your Debts
Your credit rating affects many areas of your life. Opening new credit accounts, buying a home or car, getting a new job, and receiving discounts on insurance rates are just a few of ...(related: Apply for a Credit Card)
The Advantages Of Credit Cards
There are many evils associated with credit cards, but there are benefits that are hard to ignore. One benefit is having the credit card company act i...(related: Apply for a Credit Card)
site-map - Copyright © 2006 | Contact Disclaimer/Webmaster | All Rights Reserved. | Apply for a Credit Card