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What’s the Best Way to Build Business Credit? We Have the Secret!

Published By Janet Gershen-Siegel at October 9th, 2019

Learn the Best Way to Build Business Credit

We can show you the best way to build business credit! Get the kind of business funding that can take your business to new heights!

The Best Way to Build Business Credit – But What’s Business Credit, Anyway?

Small business credit is credit in a business’s name. It doesn’t link to a business owner’s personal credit, not even if the owner is a sole proprietor and the sole employee of the small business.

Accordingly, a business owner’s business and individual credit scores can be very different.

The Benefits

Because business credit is distinct from consumer, it helps to secure a business owner’s personal assets, in the event of a lawsuit or business bankruptcy.

Also, with two separate credit scores, a business owner can get two different cards from the same merchant. This effectively doubles buying power.

Another benefit is that even start-ups can do this. Heading to a bank for a business loan can be a recipe for frustration. But building company credit, when done the right way, is a plan for success.

Individual credit scores rely on payments but also various other factors like credit usage percentages.

But for company credit, the scores actually just hinge on whether a company pays its debts on a timely basis.

The Best Way to Build Business Credit – The Process

Building business credit is a process, and it does not occur automatically. A business will need to actively work to build company credit.

Nonetheless, it can be done easily and quickly, and it is much speedier than building consumer credit scores.

Merchants are a big aspect of this process.

Undertaking the steps out of order will lead to repetitive rejections. Nobody can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

The Best Way to Build Business Credit – Enhancing Company Fundability

A company must be fundable to credit issuers and vendors.

Therefore, a company will need a professional-looking web site and email address. And it needs to have site hosting bought from a vendor like GoDaddy.

Also, business telephone and fax numbers must have a listing on ListYourself.net.

Also, the business telephone number should be toll-free (800 exchange or comparable).

A business will also need a bank account dedicated strictly to it, and it needs to have all of the licenses essential for operation.

Licenses

These licenses all have to be in the exact, appropriate name of the company. And they need to have the same business address and telephone numbers.

So bear in mind, that this means not just state licenses, but possibly also city licenses.

Best Way to Build Business Credit Suite

Learn more here and get started toward establishing small business credit.

The Best Way to Build Business Credit – Working with the IRS

Visit the IRS website and get an EIN for the small business. They’re totally free. Select a business entity such as corporation, LLC, etc.

A company can begin as a sole proprietor. But they will more than likely wish to change to a type of corporation or an LLC.

This is in order to limit risk. And it will optimize tax benefits.

A business entity will matter when it pertains to taxes and liability in case of litigation. A sole proprietorship means the owner is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you operate a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Hence, you can wind up being personally accountable for all small business debts.

In addition, according to the IRS, by having this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 possibility for corporations! Avoid confusion and significantly reduce the chances of an Internal Revenue Service audit as well.

The Best Way to Build Business Credit – Starting Off the Business Credit Reporting Process

Begin at the D&B website and obtain a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a small business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s web sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you should build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to obtain credit in the retail and cash credit tiers.

These kinds of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first off, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are often Net 30, versus revolving.

Hence, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid in full within 60 days. In comparison with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.

To begin your business credit profile the proper way, you should get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then make use of the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Best Way to Establish Company Credit Suite

Vendor Credit Tier – It Helps

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with very little effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to verify you are dependable and will pay punctually. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/

The Best Way to Build Business Credit – Accounts That Do Not Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can yet be of some worth.

You can always ask non-reporting accounts for trade references. And also credit accounts of any sort will help you to better even out business expenditures, thereby making budgeting less complicated. These are companies like PayPal Credit, T-Mobile, and Best Buy.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are service providers like Office Depot and Staples.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or higher.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to purchase fuel, and to fix, and maintain vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or better and a 411 business phone listing.

Shell might say they want a specific amount of time in business or revenue. But if you already have enough vendor accounts, that won’t be necessary. And you can still get approval.

Best Way to Build Business Credit Suite

Learn more here and get started toward establishing small business credit.

Cash Credit Tier

Have you been responsibly handling the credit you’ve up to this point? Then move to the cash credit tier. These are businesses such as Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or higher. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established company.

These are businesses such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are normally MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.

Best Way to Build Business Credit Suite

Learn more here and get started toward establishing small business credit.

The Best Way to Build Business Credit – Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and deal with any inaccuracies ASAP. Get in the habit of taking a look at credit reports and digging into the specifics, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: www.creditsuite.com/monitoring.

At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Equifax costs about $19.99.

Update Your Data

Update the data if there are mistakes or the data is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go here: www.experian.com/small-business/business-credit-information.jsp. So for Equifax, go here: www.equifax.com/business/small-business.

The Best Way to Build Business Credit – Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any inaccuracies in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs normally want you to dispute in a particular way.

Get your company’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax business credit report at: www.equifax.com/business/credit-information.

Disputes

Disputing credit report inaccuracies generally means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always send copies and keep the original copies.

Fixing credit report inaccuracies also means you precisely itemize any charges you dispute. Make your dispute letter as clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.

The Best Way to Build Business Credit – A Word about Building Business Credit

Always use credit smartly! Don’t borrow more than what you can pay off. Monitor balances and deadlines for payments. Paying promptly and in full will do more to raise business credit scores than nearly anything else.

Building company credit pays. Good business credit scores help a small business get loans. Your credit issuer knows the small business can pay its financial obligations. They recognize the small business is bona fide.

The business’s EIN links to high scores and lenders won’t feel the need to ask for a personal guarantee.

The Best Way to Build Business Credit – Takeaways

Business credit is an asset which can help your company for many years to come. Learn more here and get started toward growing small business credit.

 

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