Published By Faith Stewart at July 17th, 2021
You can’t apply for bank credit cards for your business and expect approval if you don’t have a business credit profile. If you do apply and get approved, it will likely be on the merit of your personal credit. That means if something goes wrong, your ability to buy a house, a car, or anything else you may want to buy with consumer credit, goes down the drain.
If you are applying for high limit credit cards in the name of your business are getting denial after denial, the likely culprit is a lack of business credit profile. Or, you have a business credit profile but a low business credit score.
The idea behind business credit is that the debt is in your business name. It is totally separate from you as the owner. This means it does not impact your personal credit score. As a result, since business credit tends to have higher limits, you can actually get more funding for your business.
The key to avoiding denials is to wait to apply until your business is fundable. This includes having a strong business credit score.
If your business is not fundable, business credit will never be an option. It starts with how your business is set up. It has to be set up to be a fundable entity separate from you, the owner. How do you accomplish this? It starts with building a fundable foundation.
As you know, a foundation is only as strong as the materials you build it from. Here are the building blocks of a strong, fundable foundation for your business.
Your business should have its own phone number and a physical address.
Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability. Talk to your attorney or a tax professional about which option might work best for your business.
You have to open a separate, dedicated business bank account. There are many reasons to do this. One of them is that many lenders require it before they will extend credit.
To be fundable, you must be a legitimate business. For a business to be legitimate, it has to have all of the necessary licenses it needs to run.
Spend the time and money necessary to ensure your website is professionally designed and works well. Furthermore, pay for hosting. Don’t use a free hosting service. Also, make sure your business has a dedicated business email address with the same URL as your website. Don’t use a free service such as Yahoo or Gmail.
Now, the foundation is just the tip of the iceberg when it comes to fundability. In fact, there are well over 100 factors that affect the fundability of the business. However, they all fall into these broader categories.
Here is a visual that may help you better understand how complex and far reaching business fundability really is.
The next step is to get accounts reporting to your business credit profile. This is how you build a business credit score. High limit business bank credit cards will use your business credit score to make an approval decision.
The truth is, even if you do everything right to initially establish your business credit profile, there is no business credit score on your business’s credit report until accounts are reporting on-time payments.
With consumer credit, creditors automatically report payments. In contrast, to work intentionally to find creditors that will report your payments to your business credit profile. Surprisingly, not all of them do. In fact, only about 7% of companies that extend credit to businesses actually report accounts to business credit reporting agencies.
So, how do you find companies that will extend credit to your business without a good business credit score and report your payments? That’s the million dollar question, and it’s the trick to getting out of the “need credit to get credit cycle.”
First, the type of vendor that will extend credit to a business without a credit check is called a starter vendor. Despite not running a credit check, they do have various other factors that they look at to determine whether or not to extend credit. These vary between vendors, but they include fundability factors such as a business bank account, as well as income and time in business, among others.
Starter vendors typically will extend net terms on invoices rather than revolving credit. However, they will report your payment to the business credit reporting agencies. In turn, you build your business credit score. Yet, it is very difficult to determine which lenders will report your payments. That is where the secret weapon comes into play. That is, a business credit expert.
As for finding starter vendors that will report, a business credit expert can help. They know which accounts report and which ones you can qualify for right now. They also help you determine when the tie is right to apply for other accounts.
There are many more ways that a business credit expert can help, including helping you assess current fundability and improve it if necessary. Not only that, but they can also help you find funding that you can get while you are working on fundability and building your business credit score. Get an idea of what a business credit expert can do for you with a free consultation.
Soon, you will have an established business credit profile with multiple accounts reporting. These are credit cards that are restricted to use with the store that issues them. For example, an Office Depot card that you can only use at the store or on that store’s website. These cards typically start with fairly low limits. Yet,the limits will increase as you handle the credit responsibly. Your business credit expert can help you determine when the time is right to start this step, and guide you toward the right store cards for your business.
After you have several of these types of credit cards reporting on-time payments, you should be able to get approval with Fleet cards. These are cards that are more typically limited to the type of purchase you use them on. They are for automobile fuel and maintenance, but some do allow for certain other purchases as well. Again, your business credit expert will help you discern when the time is right to apply for fleet cards, and guide you toward the ones that will work best for your business.
After you work through each of these steps, responsibly and in order, you should have a well rounded business credit profile and strong business credit score. That is the time to apply for high limit cards. They include general business credit cards from Visa, MasterCard, Discover, and the like that are not limited by location of use or purchase type.
They generally have very high limits and favorable incentives. All you have to do is pick the ones with the best interest rates and the rewards programs that fit your business best. If you jump right in before establishing your business credit profile and business credit score, you will get denials from these types of cards every time.
Using a business credit expert to help you assess and improve fundability, find starter vendors that report, and guide you in knowing the right accounts to apply for at the right time to get approval makes the process much faster and easier. As a result, you will avoid wasting time with vendors that do not report, and move through the steps as fast as possible. Then, you can watch your business grow and thrive with high limit bank credit cards.