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Building Corporate Credit the Right Way

Published By Janet Gershen-Siegel at February 12th, 2018

Start Building Corporate Credit the Right Way

Building corporate credit the right way means that your firm acquires chances you never assumed you would. You can get brand new equipment, bid on buildings, and cover the company payroll, even when times are a bit lean. This is particularly helpful in seasonal firms, where you can go for months with just nominal sales.

Corporate credit is credit in a business’s name. It doesn’t link to a business owner’s individual credit, not even when the owner is a sole proprietor and the sole employee of the business.

Therefore, a business owner’s business and personal credit scores can be very different.

Building Corporate Credit the Right Way: The Advantages

Due to the fact that small business credit is separate from consumer, it helps to protect an entrepreneur’s personal assets, in the event of litigation or business bankruptcy.

Also, with two distinct credit scores, a small business owner can get two different cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup ventures can do this. Going to a bank for a business loan can be a formula for frustration. But building company credit, when done right, is a plan for success.

Individual credit scores depend upon payments but also additional considerations like credit utilization percentages.

But for business credit, the scores truly only hinge on if a company pays its bills in a timely manner.

Building Corporate Credit the Right Way: The Process

Establishing company credit is a process, and it does not happen automatically. A company has to proactively work to establish company credit.

Nonetheless, it can be done easily and quickly, and it is much quicker than developing individual credit scores.

Vendors are a big aspect of this process.

Undertaking the steps out of sequence will result in repetitive denials. Nobody can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Building Corporate Credit the Right Way: Start with Business Fundability

A small business must be fundable to loan providers and vendors.

As a result, a company will need a professional-looking website and email address. And it needs to have website hosting bought from a supplier like GoDaddy.

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

In addition, the company phone number should be toll-free (800 exchange or the equivalent).

A small business will also need a bank account devoted solely to it, and it has to have every one of the licenses necessary for operation.

Licenses

These licenses all have to be in the perfect, correct name of the small business. And they must have the same business address and telephone numbers.

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

Building Corporate Credit the Right Way Credit Suite

Learn more here and get started toward growing business credit.

Building Corporate Credit the Right Way: Dealing with the IRS

Visit the IRS website and acquire an EIN for the business. They’re free. Pick a business entity such as corporation, LLC, etc.

A company can begin as a sole proprietor. But they will probably want to change to a type of corporation or an LLC.

This is in order to lessen risk. And it will make best use of tax benefits.

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

Sole Proprietors Take Note

If you operate a small business as a sole proprietor, then at 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 end up being personally accountable for all company debts.

Also, according to the IRS, using this arrangement there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 probability for corporations! Prevent confusion and noticeably decrease the odds of an IRS audit simultaneously.

Building Corporate Credit the Right Way: Getting Started

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 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 websites for the company. 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.

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

Vendor Credit Tier

First you must build trade lines that report. This is also called 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 acquire credit in the retail and cash credit tiers.

These types 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 of all, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are in most cases Net 30, rather than revolving.

So, 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 need to be paid in full within 30 days. 60 accounts must be paid completely 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 launch your business credit profile properly, you ought to get approval for vendor accounts that report to the business credit reporting bureaus. Once 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.

Build Business Credit the Right Way Credit Suite

Vendor Credit Tier – It Helps with Building Corporate Credit the Right Way

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with nominal 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 one time to these vendors. So, this is to demonstrate you are dependable and will pay promptly. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/

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 such as Office Depot and Staples.

Only 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.

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

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are companies like BP and Conoco. Use this credit to buy fuel, and to fix, and take care of vehicles. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 company telephone listing.

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

Building Corporate Credit the Right Way Credit Suite

Learn more here and get started toward growing business credit.

Cash Credit Tier

Have you been responsibly handling the credit you’ve gotten up to this point? Then progress to the cash credit tier. These are businesses like Visa and MasterCard. Only use your Social Security Number 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 need to see a PAYDEX Score of 78 or more. 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 service providers such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are frequently MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Building Corporate Credit the Right Way Credit Suite

Learn more here and get started toward growing business credit.

Building Corporate Credit the Right Way: Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and take care of any inaccuracies ASAP. Get in the practice of checking credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. 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 Record

Update the information if there are errors 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.

Building Corporate Credit the Right Way: Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any problems in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs usually 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 errors normally means you send a paper letter with copies of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always send copies and retain the original copies.

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

Dispute your or your small business’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs.

You can dispute inaccuracies on your or your small business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.jsp.

And D&B’s PAYDEX Customer Service contact number is here: www.dandb.com/glossary/paydex.

A Word about Building Corporate Credit the Right Way

Always use credit smartly! Never borrow beyond what you can pay off. Monitor balances and deadlines for payments. Paying off punctually and fully will do more to elevate business credit scores than virtually anything else.

Building company credit pays off. Good business credit scores help a business get loans. Your credit issuer knows the small business can pay its debts. They know the business is for real.

The small business’s EIN connects to high scores and loan providers won’t feel the need to ask for a personal guarantee.

Building Corporate Credit the Right Way: Takeaway

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

 

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