Published By Janet Gershen-Siegel at June 9, 2018
Who out there needs business credit for trucking? We can help you get it.
Written by Janet Gershen-Siegel
Why, exactly, do you need business credit for trucking? We’ve got the answers here – business credit is good for all business and not just brick and mortar companies! Here is part 1 of our two-part examination of this topic.
If you’ve got an EIN, then the IRS says you’ve got a business. But if you only have personal credit, then you’re responsible for your business’s debts and taxes. Also, you’re even responsible for its bankruptcy, if that happens. You don’t want this. Separate business from personal credit and it won’t.
And in particular, fleet credit will directly help your trucking business. And gas credit cards will, too; we all know how expensive it is to fill up these days.
Business Credit is credit obtained in a business’s name. With business credit the business builds its own credit profile and credit score. With an established credit profile and score, the business will then qualify for credit.
Since the business qualifies for the credit, in some cases there is no personal credit check required. So the business can use its credit to qualify for revolving store credit cards. These are from merchants such as BP, Sunoco, Exxon, Shell, Ford, RGS Fleets, Walmart, even MasterCard, Visa, and AMEX. Plus the business can use its credit to qualify for fleet credit for maintenance and repair of company vehicles including trucks. And the business can also qualify for credit lines and loans.
A credit profile can be built for a business which is completely separate from the business owner’s personal credit profile. This gives business owners double the borrowing power as they have both personal and business credit profiles. A business owner can get credit much faster using their business credit profile versus their personal credit profile. Approval limits are much higher on business accounts versus personal accounts. Per the SBA, credit limits on business cards are usually 10 – 100 times higher than for consumer credit.
Dun & Bradstreet’s Business PAYDEX scores are based on payment history. However, personal credit scores are based on 5 factors: payment history (35%); utilization (30%); length of credit history (15%); accumulation of new credit (10%); and credit mix (10%).
When done right, you can build business credit without a personal credit check and regardless of personal credit quality, with no personal credit reporting of business accounts. Most business credit can be obtained without the owner taking on personal liability, or a personal guarantee.
Hence in case of default, the business owner’s personal assets can’t be pursued. When a business owner applies for financing, their business credit is reviewed. Not having business credit established will get an owner declined for financing. There are no regulations requiring lenders notify the business owner for their reason for denial, so most never know.
Almost any business can get business credit as long as it has an EIN number and entity setup. You don’t need collateral or financials. Your company can be a startup. You just need to know the proper building steps. All highly-successful businesses have business credit; it’s a “rite of passage” to ever reach true success.
A business starts building a brand new credit profile much the same as a consumer does. The business starts with no credit profile. Then the business gets approval for new credit that reports to the business credit reporting agencies. The business uses the credit and pays the bill timely. A positive business credit profile is established. As the business keeps using credit and pays bills timely it will qualify for more credit.
The perception lenders, vendors, and creditors have of your business is crucial to your ability to build strong business credit. Before applying for business credit a business must insure it meets or exceeds all lender credibility standards. There are over 20 credibility points that are necessary for your business to have a strong, credible foundation.
It is vital that you use your exact business legal name. Your full business name should include any recorded DBA filing you are using. Make sure your business name is exactly the same on your corporation papers, licenses, and bank statements.
You can build business credit with nearly any type of corporate entity. To separate business credit from personal credit, your business must be a separate legal entity. It cannot be a sole proprietor or partnership. Without a separate business entity (Corporation or LLC) you might be ‘doing business’ but not truly ‘a business’. You need to be a Corporation or an LLC to separate personal from business.
Whether or not you have employees, your business entity must have an EIN. Your EIN is used to open your bank account and to build your business credit profile. So take the time to verify that agencies, banks, and trade credit vendors list the exact same EIN.
Your business address must be a real brick-and-mortar building, with a deliverable physical address. It cannot be a home address, a PO Box, or a UPS address. Some lenders will not approve and fund unless these criteria are met.
However, virtual addresses are great business address solutions. For address only, you will receive mail and packages at a dedicated business address. For a virtual office, you get a professional business address. Often you also get dedicated phone and fax numbers, receptionist services, and part-time use of fully furnished offices and meeting rooms. And for a true office, you’ll have your own full-time private office. It’ll have receptionist services, dedicated phone and fax, internet, full furnishings, meeting rooms, and more.
You must have a dedicated business phone number listed with 411 directory assistance, under the business name. Lenders, vendors, creditors, and even insurance providers will verify your business has a listing with 411. A toll-free number will give your business credibility. But you must have a local business number for a listing with 411 directory assistance.
Lenders view 800 number or toll-free phone numbers as a sign of business credibility. Even for a single owner with a home-based business, a toll-free number makes you seem like an even bigger company. It’s very easy and inexpensive to set up a virtual local phone number or a toll free 800 number. A cell or home phone number as your main business line is a problem. Because it could get you flagged as a non-established business which is too high of a risk. Therefore, don’t give a personal cell phone or residential phone as the business phone number! Also, you can forward a virtual number to any cell or land line phone number.
Lenders also feel a business is more credible if it has a fax number. As a business you need a fax number to get important document. And you will also need it to fax in some of your credit applications. You can set up an e-fax going directly to your email.
You will also need a business website. Credit providers will research your company on the internet. It is best if they learned everything directly from your company website. Not having a website will severely hurt your chances of getting business credit. There are many places online offering affordable business websites. That way, you can have an internet presence with an overview of company services and contact information. Plus, it is important to get a business email address for your company.
It’s not only professional, but greatly helps your chances of getting an approval from a credit provider. In addition, setting up a business email address is just too easy and inexpensive to neglect. When it comes to your business email, never use free email services like Yahoo and Hotmail. The email address should be at yourcompany.com.
Your business banking history is vital to future success in securing larger business loans. The date you open your business bank account is the day that lenders consider your business to have started. This is regardless of when you incorporate or reach any other business milestone. The longer your business banking history, the better your borrowing potential is.
Having a high account balance is essential in obtaining an excellent Bank Rating. And a good Bank Rating is essential for loan approval down the road. Try to keep a bank balance of $10,000 or higher for a 5 Bank Rating.
A common mistake when building credit for a company is non-matching business addresses on the business licenses. However, even worse is not having the licenses you need for your trucking business to operate legally.
Contact the State, County, and City Government office. Do this to see if you need any licenses and permits to run a trucking business. This includes your commercial driver’s license. Also, your business filings must have correct listings at the state, county, and city levels. Plus your IRS filings must have correct listings.
Also verify that main agencies have your business listed the same way and with your exact legal name. This is the state, IRS, your bank, and the 411 national directory. Also ensure every bill you get has your correct business name and it comes to your business address.
Tomorrow, we’ll look at more details of getting trucking business credit. Discover this new way to monitor your business credit scores.