Published By Janet Gershen-Siegel at January 22nd, 2018
Building corporate credit fast means that your small business gets chances you never assumed you would. Developing corporate credit opens doors.
Corporate credit is credit in a small business’s name. It doesn’t tie to an entrepreneur’s individual credit, not even if the owner is a sole proprietor and the solitary employee of the small business.
Therefore, an entrepreneur’s business and personal credit scores can be very different.
Since corporate credit is independent from personal, it helps to secure an entrepreneur’s personal assets, in the event of legal action or business bankruptcy.
Also, with two separate credit scores, an entrepreneur can get two separate cards from the same vendor. This effectively doubles purchasing power.
Another advantage is that even startup ventures can do this. Heading to a bank for a business loan can be a formula for disappointment. But building corporate credit, when done properly, is a plan for success.
Individual credit scores depend upon payments but also additional components like credit utilization percentages.
But for corporate credit, the scores really only hinge on if a company pays its invoices timely.
Building corporate credit is a process, and it does not occur automatically. A business will need to proactively work to develop corporate credit.
That being said, it can be done easily and quickly, and it is much faster than developing individual credit scores.
Merchants are a big aspect of this process.
Undertaking the steps out of sequence will cause repetitive rejections. Nobody can start at the top with company credit.
A business must be Fundable to credit issuers and merchants.
As a result, a company will need a professional-looking web site and email address. And it needs to have site hosting from a supplier such as GoDaddy.
Plus, company phone numbers ought to have a listing on ListYourself.net.
In addition, the business telephone number should be toll-free (800 exchange or comparable).
A small business will also need a bank account devoted strictly to it, and it has to have all of the licenses essential for running.
These licenses all have to be in the exact, accurate name of the small business. And they must have the same company address and telephone numbers.
So bear in mind, that this means not just state licenses, but possibly also city licenses.
Visit the Internal Revenue Service website and obtain an EIN for the business. They’re free of charge. Pick a business entity such as corporation, LLC, etc.
A business can start off as a sole proprietor. But they should switch to a type of corporation or an LLC.
This is in order to diminish risk. And it will optimize tax benefits.
A business entity will matter when it comes to tax obligations and liability in the event of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and taxes. Nobody else is responsible.
Start 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 company 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 sites for the small 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.
In this way, Experian and Equifax will have something to report on.
First you need to build trade lines that report. This is also known as vendor credit. Then you’ll have an established credit profile, and you’ll get a corporate credit score.
And with an established corporate credit profile and score you can begin to get more credit.
These varieties of accounts often tend to be for the things bought all the time, like marketing materials, outdoor work wear, and office furniture.
But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are frequently Net 30, instead of revolving.
So, if you get 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.
Not every vendor can help in the same way true starter credit can. These are merchants that will grant an approval with a minimum of effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
You want 3 of these to move onto more credit.
Know what is happening with your credit. Make certain it is being reported and fix any inaccuracies ASAP. Get in the habit of taking a look at credit reports. Dig into the specifics, not just the scores.
Update the information if there are errors or the information is incomplete.
So, what’s all this monitoring for? It’s to challenge any problems in your records. Errors in your credit report(s) can be fixed. But the CRAs often want you to be specific about the issues with your report.
Always use credit sensibly! Don’t borrow beyond what you can pay off. Track balances and deadlines for repayments. Paying promptly and completely will do more to boost corporate credit scores than almost anything else.
Establishing corporate credit pays. Great corporate credit scores help a company get loans. Your loan provider knows the small business can pay its debts. They recognize the small business is authentic.
The small business’s EIN links to high scores and lending institutions won’t feel the need to call for a personal guarantee.
Corporate credit is an asset which can help your small business for many years to come. Learn more here and get started toward building corporate credit fast.