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HOW TO BUILD BUSINESS CREDIT IN A MONTH OR LESS

HOW TO BUILD BUSINESS CREDIT IN A MONTH OR LESS

Business Credit Benefits

Building Business

Building business credit has many benefits.

Credit Profile

A credit profile can be built for a business that is completely separate from the business owner’s personal predict profile, doubling the borrowing ability.

Credit Limits

Credit limits and capacity on these business accounts is much higher than with consumer credit.

Initial Profile

Business credit can also be built very quickly, and an initial profile only takes 30-90 days to get set up.

Credit Check

When done correctly, business credit can be built without a personal credit check.

Credit Quality

When done correctly, business credit can be built without a personal credit check.

Personal Liability

Most business credit can be obtained without the owner taking on personal liability, or a personal guarantee, which means in case of default, the business owner’s personal assets can’t be pursued.

Credit Reports

Anyone can see your business credit reports, so having business credit makes you more credible for:

  • Prospects
  • Clients
  • Competitors
  • Lenders
  • Credit issuers
  • Those interested in buying your company

Ein Number

Almost any business can get business credit as long as it has an EIN number and entity setup.

Collateral

You don’t need collateral or financials.

Startup Business

You can be a startup business

Building Steps

You just need to know the proper building steps

Business Credit Types

Business credit is offered in 3 main types:

Vendor Credit

1. This is initial business credit that’s used to start a business credit profile and score, usually has net 30 terms

Store Credit

1. Available at most retail stores like Lowes, Amazon, Apple, BP, Walmart, etc.

Cash Credit

1. Visa, Mastercard, and Amex cards you can use anywhere

3 Steps to Build Your Initial Business Credit Profile

A business starts building a brand new credit profile similarly as a consumer does

  • 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.

Step 1: Your Credibility

Initial Business Credit

When building an initial business credit profile it’s essential that you meet credit issuer’s criteria

Personal Credit

Your personal credit isn’t being used for approval, and you have no business credit yet established. This means that what is on your application is the only thing being reviewed for approval, so your application must be very strong to ensure approval.

Corporate Entities

Build Business

You can build business credit with any entity type

Separate Business Credit

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

Corporation Or Llc

Unless you have a separate business entity (Corporation or LLC) you might be “doing business” but you are not truly a business.

Personal Liability

These entities by default eliminate your personal liability, other entities don’t.

Business Name

Legal Name

One of the biggest reasons for denial is your application not having the same legal name as what is on file in state records.

Business Name

It is very important that you use your exact business name

Recorded DBA

Your full business name should include any recorded DBA filing you will be using

Corporation Papers

Ensure your business name is exactly the same on your corporation papers, licenses, and bank statements.

EIN

Tax Id Number

Whether or not you have employee numbers, your business entity must have a Federal Tax ID number (EIN)

Social Security Number

Just like you have a Social Security Number, your business has an EIN

Essential Items

This is one of two essential items vendors look at for approval

Business Listed

Take the time to verify that all agencies, banks, and trade credit vendors have your business listed with the same Tax ID number

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 funds unless this criteria is met.

Phone Number

411 Directory

You must have a dedicated business phone number that is listed with 411 directory assistance, under the business name

Verify Your Business

Lenders, vendors, creditors, and even insurance providers will verify that your business is listed with 411

Essential Item

This is the second essential item that initial credit vendors look at for approval

Business Phone Number

You must use a business phone number, not a home or cell phone.

Fax Number

You should get an 800 number and a fax number

Ip Numbers

Voice Over IP numbers are okay, you can’t just use a home or cell phone

Website and Email

Credit Providers

Credit providers will research your company on the internet and it is best if they learned everything directly from your company website

Professional Email

You should also have a professional email address such as yourname@yourcompany.com

Super Cheap

These are super cheap and easy to set up

Uncredible

Not having an email or a website will make you look uncredible

Licensing

Contact The State

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.

Unlicensed

Do not apply if you are unlicensed when you should be

Business listings

Verify Main Agencies

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.

Ensure Every Bill

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.

Step 2: Your Business Credit Reports

Business Credit Reports

Business Credit reports are offered by Experian Commercial, Dun & Bradstreet, and Equifax Commercial

Business Credit Reports

You will first want to get a copy of your business credit reports to see what is being reported now

Inaccurate Information

You will also want to dispute any derogatory inaccurate information

Experian

Smart Business Report

Visit: http://www.smartbusinessreports.com/ for a copy of your Smart Business report, which costs around $49-99

Business Credit Score

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 inquiries.

Equifax

Equifax Small Business

You can purchase a copy of your Equifax Small Business Credit Report here: http://www.equifax.com/small-business/credit-report/en_sb

D&B And Experian

It typically takes more time to create a file with Equifax Small Business than D&B and Experian

Who Report To Equifax

This is why it is important to apply with the credit providers who report to Equifax

Dun & Bradstreet

Obtaining A DUN

Obtaining a Dun & Bradstreet number (D-U-N-S #) begins the process of building your business credit profile with them

D-U-N-S #

Your D-U-N-S # will also play an important role in enabling your business to borrow without a personal guarantor, and it is free at http://www.dnb.com/

Charge You $2,000

D&B will “roll” this into a package and charge you $2,000 or more.

DNBI Selfmonitor

You can also enroll for the DNBi SelfMonitor to monitor your credit during the building process

Self Monitoring

A subscription for D&B Self Monitoring is $39-99 per month

Read and Understand Your Reports

Consumer Reports

Business credit reports are very different from consumer reports.

5 Scores

Most reports have 5 scores on them, all assessing risk for different things.

Paydex Score

The main score in the business world, the Paydex score is based solely on payment history, very different from consumer scores.

Personal Credit Scores

Based On 5 Factors

  • Payment history 35%

  • Utilization 30%

  • Length of Credit History 15%

  • Accumulation of New Credit 10%

  • Credit Mix 10%

Dun & Bradstreet’s Business Paydex Score

Are Based On Payment History

  • Expect payment may come early 100

  • Payment is prompt 80

  • Payment comes 14 days beyond terms 70

  • Payment comes 14 days beyond terms 70

  • Payment comes 30 days beyond terms 50

  • Payment comes 60 days beyond terms 40

  • Payment comes 90 days beyond terms 30

  • Payment comes 120 days beyond terms 20

Business Credit Reports

Business Credit Reports List:

  • Details on payments the business has made for each individual account
  • Full payment record
  • Upper credit limit

  • How much the business owner currently owes on each account

  • How much is past due
  • What the terms of the account are
  • When the account was reported and last updated
  • D&B reports also list payment details for each account. They also add detailed commentary to the report indicating payment patterns.
  • Current assets
  • Liabilities
  • Working capital
  • Net worth
  • Sales
  • Reports also list payment details for each account and detailed commentary to the report indicating payment patterns

Better Assess

These reports look and feel different than consumer reports, so make sure to thoroughly search them to better assess your business risk.

Step 3: Get Approved for Vendor Credit

2 Ways to Start Business Credit

Dun & Bradstreet

  • D&B Credibility offers one way to start a business credit profile and they will try to convince you that it is the only way, even though it’s not
  • They will charge upwards of $2,000 to put trade lines on your report using your current creditors.
  • These only report to D&B and take time
  • They choose what can and can’t get added, and most can’t get added.
  • You don’t obtain usable credit at all, just your current creditors are added.

Build Business Credit

The other way to build business credit is similar to how you build consumer credit.

New Creditors

Get approved for new creditors that report to the business reporting agencies

Credit Report

You get real credit that you can use to build your business, and then that business credit report establishes your business credit profile and score.

Obtain Vendor Accounts

No Prior Business

When you have no prior business credit reports established, you must start building credit using vendor accounts.

Accounts From Vendors

These are accounts from vendors who give you initial credit, even if you are a startup business.

Business Reporting Agencies

This credit reports to business reporting agencies, so you get real credit and build business credit at the same time.

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
  • If you are 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.
  • 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 payments terms upon verification of as little as an EIN number and 411 listing.
  • First, you apply and get the account
  • Next, you use the credit, spending over $50
  • Finally, you pay the bill early or on time, remember the main business credit scores are solely based on how you pay.
  • Those accounts will then report to the business reporting agencies in 30-50 days, or up to 3 reporting cycles
  • Once you are reported, you will then have a business credit profile
  • You will have a good business credit score, as long as you paid your bills on time, and you will have multiple trade lines
  • You will need to have 5 reporting accounts to move on and start getting store credit, which is the next step in building business credit.

Start Vendor Accounts

Starter Vendors

You must start a business credit profile and score with starter vendors

Initial Credit

Starter vendors will give you initial credit even if you have no credit, no score, or no trade lines now

Staples

Most stores like Staples will not give you initial starter credit, so you shouldn’t even try applying.

  • Deal with corporate setup and compliance
  • Report to Experian
  • Only 411 listing and EIN required
  • Reports in 30-60 days
  • Net 30 terms

True Starter Vendors

Laughlin Associates

  • Deal with corporate setup and compliance
  • Report to Experian
  • Only 411 listing and EIN required
  • Reports in 30-60 days
  • Net 30 terms

Quill Office Supplies

  • Office, packaging , and cleaning supplies
  • Reports to D&B
  • Must place initial order first unless D&B score is established
  • Sometimes you will need to place up to 3 orders of $50 or more for them to approve you with no initial credit established
  • Net 30 terms

Gempler’s/office Depot

  • Work supplies and products
  • Reports to D&B
  • Place initial order $50 dollars and select “Invoice me” option

  • They will pull credit

  • If not approved, pre-pay for order and keep purchasing and choosing “invoice me” option until approved for Net 30 terms

Reliable Office Supplies

  • Office supplies and promotional products
  • Report to D&B, Experian, and Equifax
  • Place initial order, then request your order be invoiced or billed to your company

  • They will pull your credit

  • If not approved, pre-pay for order and keep purchasing and choosing “invoice me” option until approved for Net 30 terms

  • The more orders you place, the better your chance of approval for Net 30 terms

Uline Shipping Supplies

  • Shipping, packing, and industrial supplies
  • Report to D&B
  • You must have your DUNS number
  • They will ask for two references and bank reference
  • First few orders might need to be pre-paid to initially get approved for Net 30 terms

Monopolize Your Marketplace

  • Everything you need to know about marketing and business 10 audio CD set
  • Report to Experian
  • Upon check out, choose “4 equal payments of $59.99” option
  • First charge takes place in 30 days
  • Need a bank account, EIN, deliverable address.
  • 30-60 days for reporting

Things to Remember

  • You might need to get some vendors you won’t often use just to build your initial credit
  • Do not put your SSN on the applications
  • Paying your bills early is the key to a good score
  • Do not start with store credit, you will get denied. Wait until you have 5 accounts reported
  • Do not apply for cash until you have 10 reported accounts