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Building Business Credit: How to Start Business Credit

Published By Credit Suite at January 30th, 2016

Do You Need to Start Business Credit?start business Credit Suite2 - Building Business Credit: How to Start Business Credit

There is a lot of factors that are important in business credit building. These factors must all be perfect for a creditor to extend your business credit. If you don’t meet one of these requirements, you will probably be denied and the creditor will never tell you why. So you need to start business credit.

Licenses Matter

First, make sure you have the proper state and federal licenses you need for your business.  If you are required to be licenses, you need your license before you apply.

A Business Bank Account Will Help You Start Business Credit

You will also want to make sure you have your business bank account setup.  Merchants will not extend you credit unless you have a business bank account, and the name on the account is the same as on the corporation papers.

Your Office Matters

You will need a physical location or virtual office for your business also. You can get approval for much more credit if you have a credible business with a real location.  UPS and PO boxes won’t work. You will need a real physical address.

Start Business Credit With Your Online Presence

Another factor merchants look at before issuing credit is whether you have a business website and email setup.  Again, they are looking for a credible business. Most legitimate businesses today have their own website and professional email addresses.  Banks will be looking for those before issuing credit.

Your Business Phone and Fax Numbers Count, Too

You will also want to insure your business has a real phone number that is a land-line, not a cellular phone number.  And you will want to  make sure you have that phone number listed with 411.  Most merchants will do a 411 check and if your phone number is not registered, you won’t get approval.

Start Business Credit the Right Way

Growing business credit is a process. It does not happen without effort. A company has to actively work to develop small business credit.

Having said that, it can be done easily and quickly, and it is much swifter than building consumer credit scores.

Vendors are a big part of this process.

Carrying out the steps out of order causes repetitive rejections. No one can start at the top with business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Business Fundability

A company has to be fundable to loan providers and merchants.

That is why, a company needs a professional-looking web site and e-mail address. And it needs to have site hosting from a merchant such as GoDaddy.

Also, business phone and fax numbers need to have a listing on 411. You can do that here: http://www.listyourself.net.

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

A business also needs a bank account devoted strictly to it, and it must have every one of the licenses necessary for operation.

Licenses

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

So note, that this means not just state licenses, but possibly also city licenses.

Dealing with the IRS

Visit the Internal Revenue Service web site and get an EIN for the company. They’re free. Select a business entity like corporation, LLC, etc.

A small business may begin as a sole proprietor. But they absolutely need to change to a type of corporation or an LLC.

This is to reduce risk. And it will take full advantage of tax benefits.

A business entity matters when it comes to taxes and liability in the event of litigation. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. Nobody else is responsible.

The best thing to do is to incorporate. You should only look at a DBA as an interim step on the way to incorporation.

Starting Off the Business Credit Reporting Process

Start at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a small business in their system, to generate 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 small business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.

This way, Experian and Equifax have activity to report on.

Starter Vendor Credit

First you should establish tradelines that report. 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 start to get credit for numerous purposes, and from all sorts of places.

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

But to start with, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are generally Net 30, rather than revolving.

So, if you get an approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

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

To launch your business credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then use the credit.

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

Vendor Credit – It Helps

Not every vendor can help like true starter credit can. These are merchants that grant approval with negligible effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

As you get starter credit, you can also start to get credit from retailers. This is to continue to validate you are reliable and pay punctually. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-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 still be of some worth.

You can always ask non-reporting accounts for trade references. Plus, credit accounts of any sort ought to help you to better even out business expenditures, consequently making budgeting easier.

Store Credit

Store credit comes from a variety of retail businesses.

You must use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

Fleet Credit

Fleet credit is from businesses where you can purchase fuel, and fix and take care of vehicles. You must use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the company’s EIN.

Cash Credit

These are businesses like Visa and MasterCard. You must use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

These are often MasterCard credit cards.

Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and address any mistakes ASAP. Get in the practice of taking a look at credit reports. Dig into the specifics, 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.

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

Update Your Data

Update the information if there are mistakes or the data is incomplete.

A Word about Building Business Credit

Always use credit smartly! Don’t borrow beyond what you can pay off. Keep an eye on balances and deadlines for payments. Paying on schedule and fully does more to increase business credit scores than virtually anything else.

Establishing business credit pays off. Excellent business credit scores help a company get loans. Your credit issuer knows the company can pay its debts. They understand the business is for real.

The business’s EIN connects to high scores and credit issuers won’t feel the need to demand a personal guarantee.

Takeaways for How to Start Business Credit

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

Start Business Credit – The Upshot

There are many factors to insuring you get approval for business credit.  In this blog post are just a few of the many factors you will want to meet to get approval.

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