Published By Janet Gershen-Siegel at March 22nd, 2018
Building corporate credit is within your reach! But do you truly know about building corporate credit? We break down just what you need to know and show you what will work.
Corporate credit is credit in a company’s name. It doesn’t link to an owner’s consumer credit, not even when the owner is a sole proprietor and the only employee of the company.
Accordingly, a business owner’s business and consumer credit scores can be very different.
Due to the fact that corporate credit is independent from personal, it helps to secure an entrepreneur’s personal assets, in the event of court action or business insolvency.
Also, with two distinct credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles buying power.
Another benefit is that even startup businesses can do this. Visiting a bank for a business loan can be a formula for frustration. But building company credit, when done properly, is a plan for success.
Personal credit scores rely on payments but also other factors like credit use percentages.
But for company credit, the scores really just depend on whether a corporation pays its debts in a timely manner.
Building corporate credit is a process, and it does not occur without effort. A corporation has to actively work to build corporate credit.
Nevertheless, it can be done readily and quickly, and it is much quicker than building personal credit scores.
Merchants are a big part of this process.
Doing the steps out of order will cause repetitive rejections. No one can start at the top with corporate credit.
A corporation must be Fundable to lending institutions and merchants.
That’s why, a corporation will need a professional-looking web site and e-mail address. And it needs to have site hosting bought from a supplier such as GoDaddy.
In addition, business telephone numbers need to have a listing on ListYourself.net.
Additionally, the company phone number should be toll-free (800 exchange or comparable).
A business will also need a bank account dedicated strictly to it, and it has to have all of the licenses essential for operation.
These licenses all must be in the accurate, appropriate name of the company. And they need to have the same company address and telephone numbers.
So note, that this means not just state licenses, but potentially also city licenses.
Visit the Internal Revenue Service website and get an EIN for the company. They’re free. Pick a business entity like corporation, LLC, etc.
A company can get started as a sole proprietor. But they should change to a form of corporation or an LLC.
This is in order to reduce risk. And it will maximize tax benefits.
A business entity will matter when it involves taxes and liability in the event of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.
Begin 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 company in 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 websites for the company. 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 will have activity to report on.
First you ought to establish trade lines that report. This is also referred to 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, ink and toner, and office furniture.
But to start with, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are in most cases Net 30, rather than revolving.
Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, like within 30 days on a Net 30 account.
Net 30 accounts need to be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. In comparison with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used.
To kick off your corporate credit profile the right way, you need to get approval for vendor accounts that report to the business credit reporting bureaus. As soon as 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.
Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with marginal 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 the next step.
Know what is happening with your credit. Make certain it is being reported and attend to any errors ASAP. Get in the habit of taking a look at credit reports. Dig into the specifics, not just the scores.
We can help you monitor corporate credit at Experian, Equifax, and D&B for 90% less.
Update the details if there are inaccuracies or the information is incomplete.
So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Errors in your credit report(s) can be fixed.
Disputing credit report errors usually means you specifically itemize any charges you contest.
Always use credit sensibly! Never borrow more than what you can pay off. Monitor balances and deadlines for repayments. Paying off promptly and in full will do more to increase corporate credit scores than pretty much anything else.
Establishing corporate credit pays off. Excellent corporate credit scores help a business get loans. Your credit issuer knows the company can pay its debts. They understand the business is bona fide.
The corporation’s EIN links to high scores and loan providers won’t feel the need to request a personal guarantee.
Corporate credit is an asset which can help your corporation for years to come. Learn more here and get started toward establishing corporate credit.