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Published By Faith Stewart at February 14th, 2019
Who doesn’t love romance? Pretty much everyone loves romance in some way. It may not be chocolates and flowers however. Maybe you have a romance with football or working out. Something about it just calls to you. It strikes a chord deep inside, and you just can’t deny it. When it comes to business, the romance of the road often calls. Whether your business is one that has regular travel or simply a company car for errands, travel is necessary, and the fleet credit tier is your answer.
When it comes to business credit, there are multiple tiers you can work through to establish your score. You start at the vendor credit tier and work through the retail credit tier. After that comes the fleet credit tier and the cash credit tier. Then, you can make it to the big show, which would be business loans from traditional lenders.
You have to start somewhere though, and the fleet credit tier is a romantic stop on the road. These are cards that are specifically for fuel costs and automobile repair and maintenance.
Why not just use regular credit for fuel and auto repair and maintenance? Well, here is the thing. Those credit cards with the high limits and lower interest required to manage the costs of a fleet of automobiles do not come easily.
You have to have a business credit score that is decent. Those cards are in the cash credit tier. You can use them for anything your heart desires, even automobile costs. But a mediocre credit score, no credit score, will not cut it for cards in the cash credit tier. After you work through a couple of the credit tiers and you get some accounts reporting to the credit agencies on behalf of your business however, you may qualify for cards in the fleet credit tier.
As a bonus, you are continuing to build your business credit while you use the fleet credit tier and make on-time payments on a consistent basis.
Just like any relationship, you have to use a little romance. It’s the thrill of the chase. The fleet credit tier loves for you to pursue it. It needs to see that you are working hard at building strong business credit before it will open up and let you in. Where do you start? Flowers? Chocolate? Actually, you start with the vendor credit tier.
Think of this as the warm up. If you are a young man trying to romance a young woman, you need to start with the parents. You have to go through them first. When you get there, you might offer the mom flowers. That is a romantic gesture, right?
To get in good with the fleet credit tier, you have to make it through the vendor credit tier first. Romance it a little to prove you are worthy to move on. What is the vendor credit tier, and how do you make it like you?
Head out on the road to the fleet credit tier and you will have to cross the vendor credit tier bridge first. These are starter vendors that will offer you net 30 terms on invoices and report your on -time payments to the credit agencies.
What does that have to do with the fleet credit tier? Well, you cannot begin a relationship with the fleet credit tier without a strong business credit score. That has to start somewhere, and the vendor credit tier is that somewhere. You can typically get an account with them even if you do not have business credit. When they report your payments, your credit starts to build.
There are plenty of vendors to choose from, but some of the most popular include:
You can order packing supplies and even some janitorial supplies from Uline. A few initial purchases may be necessary to get net 30 approval, but then you are well on your way to a strong business credit score.
Grainger sells industrial supplies, some tools and equipment, and products conducive to outdoor work. Similar to Uline, you may need to make some initial purchase and show how long you have been in business to get net 30 terms.
This is a vendor of general office supplies. Quill sells everything from pens and pencils to office furniture and printer ink. Order a few things and then apply for net 30 terms.
These vendors sell things that all businesses use on a daily basis, so making purchases will not be hard. Use them to purchase things you would purchase anyway and get your payments reported to the credit agencies.
When you ready to romance your date and get the show on the road, you will often find that after the parents you have a big brother to contend with. He isn’t as easy as the parents. And he may go to your school, he may even overhear your locker room talk. He is blocking the path.
After you make it through the vendor credit tier, you still have to go through the retail credit tier to get to the fleet credit tier. These are store cards such as Office Depot, Best Buy, Walmart, and even Amazon.
Once you have 3 to 5 vendors reporting, you can start to apply for cards from the retail credit tier. They like to see a solid business credit score, so you cannot try to apply for them until you have used the vendor credit tier to build up your score.
If you make it this far, come bearing gifts. Your sweetheart will definitely want that chocolate and roses. Once you make it through big brother and have several accounts reporting from the retail credit tier, you can hit the road and begin to apply for cards from the fleet credit tier.
There are tons of fleet credit cards, but to give you an idea of what is out there, here are a few examples.
The ARCO fleet card will report your payments to Equifax and Dun & Bradstreet. For approval, you will need an EIN as well as a bank and trade reference. There is no minimum purchase amount required and new businesses are welcome to apply.
You will also have to provide your gross annual income along with the business name, address, and telephone number.
Valvoline will report payments to Experian and Dun & Bradstreet. You will need to have established business credit history, which is what the vendor credit tier helps with. In addition, an EIN is required.
WEX also reports to Experian and Dun & Bradstreet. A $500 deposit is required, as well as a 411-business phone number listing.
If you will notice, each of these cards rely on your business credit rather than your personal credit. Before you can romance the fleet credit tier, your business must break up with your personal credit. How do you that? How do you ensure your business has its own credit that isn’t connected to your personal credit score? You cannot begin a new relationship until you end the one you are currently in, right?
How and why do you need to break up with your personal credit score? Why establish separate business credit?
The first reason to establish a business credit score is obvious. If your personal credit isn’t great, you are going to struggle to find funding for your business. However, the flip side will also be an issue. If your business doesn’t do great, it can affect your personal credit.
Here is another thought. Personal credit cards have lower limits than business cards. Business expenses are significantly higher than personal expenses. If you put business expenses on personal credit cards, they are going to max out quickly. This can cause your personal credit score to drop even if you are successfully keeping up with payments.
That is because the ratio of your debt to your available credit is one of several factors that affects your personal credit score. Putting business expenses on personal credit cards can cause this ratio to get way out of whack.
This is easier if you do it on the front end, but it is never too late. Here is what you need to do.
You are going to need to incorporate. A sole proprietorship or partnership is not going to work for this. It needs to be a corporation, an s-corporation, or an LLC. Which one you choose will depend on your tax and liability protection needs, but any one of them will work for the purpose of establishing your business as a separate entity.
If you and your business share a phone number and address, you are going to share a credit score as well. Get a business address and phone number and list them in the directories under the business name. You need a toll-free number, whether it be an 800 number or some other toll-free exchange.
Get a number that identifies your business but isn’t your social security number. That is exactly what the EIN is. You can get one for free through the IRS website.
This is an identifying number with Dun & Bradstreet. They are the largest and most used business credit reporting agency, but you cannot have a credit score with them unless you have a D-U-N-S number, which is their business identifying number.
You can sign up for a number on their website. It is free, but know that they will try to upsell you. Just ignore it. You do not need any of the other stuff, but you do need the number and it doesn’t cost anything.
This is more important than you may realize. These days, when a potential creditor is researching a business, they may actually spend a good deal of time online. If the website is unprofessional or if there isn’t one at all, it doesn’t look good.
Along these same lines, the email address needs to have the business URL in it, rather than being one from a free service like Gmail or Yahoo.
Open a separate business banking account. Run all your business expenses through this account, and pay yourself a salary from it. If you are not currently in the practice of using a separate account for your business, this one may take some time.
It serves two purposes however. Not only does it help establish your business as a separate entity for the purpose of building business credit, but it also makes it easier to separate business expenses from personal expenses at tax time.
When it comes to business credit, just like any relationship, you need to monitor how things are going occasionally. This will let you know when there are issues you need to address, and motivate you as you watch you credit score grow.
Credit monitoring is necessary for another reason also. You have to have a certain number of accounts reporting before you can move on to each tier. If you aren’t monitoring your business credit, you will not know when you are ready to move on down the business credit road.
Monitor your credit by getting a free copy of your credit report each year and joining a credit monitoring service.
Once you have done the work to separate your business from yourself, you can start with the vendor credit tier. As you make your payments on time and they report those payments to the credit agencies, your business credit will grow.
As your business credit grows, you can apply for cards in the next tier, retail credit. When you have enough accounts reporting, you can build up the courage to ask out the fleet credit tier. I am sure it would love to be your Valentine if you use these steps to romance it.
Once you have forged a happy relationship with it, you can travel along the business credit road together to the cash credit tier. After that, life is a highway and a whole world of business funding is yours for the taking.