Published By Janet Gershen-Siegel at December 12th, 2017
Getting fast business credit means that your company attains opportunities you never considered you would. You can get all new equipment, bid on real estate, and deal with the company payroll, even when times are a bit lean. This is especially helpful in seasonal firms, where you can go for calendar months with merely negligible sales. We’ll show you how to get business credit fast!
Business credit is credit in a company’s name. It doesn’t connect to an entrepreneur’s consumer credit, not even if the owner is a sole proprietor and the only employee of the small business.
Accordingly, an entrepreneur’s business and individual credit scores can be very different.
Considering that business credit is distinct from personal, it helps to protect a small business owner’s personal assets, in the event of a lawsuit or business insolvency.
Also, with two separate credit scores, a small business owner can get two different cards from the same merchant. This effectively doubles purchasing power.
Another benefit is that even start-ups can do this. Visiting a bank for a business loan can be a formula for disappointment. But building small business credit, when done properly, is a plan for success.
Individual credit scores rely on payments but also various other elements like credit use percentages.
But for business credit, the scores truly only hinge on if a small business pays its bills promptly.
Building business credit is a process, and it does not happen automatically. A company must actively work to develop business credit.
Nevertheless, it can be done easily and quickly, and it is much more efficient than developing personal credit scores.
Merchants are a big component of this process.
Accomplishing the steps out of sequence will cause repetitive denials. No one can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.
A company needs to be fundable to credit issuers and vendors.
Consequently, a business 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.
And also, business phone and fax numbers must have a listing on 411.com.
Likewise, the business phone number should be toll-free (800 exchange or comparable).
A small business will also need a bank account dedicated solely to it, and it needs to have every one of the licenses necessary for operation.
These licenses all must be in the specific, appropriate name of the business. And they need to have the same business address and telephone numbers.
So note, that this means not just state licenses, but possibly also city licenses.
Learn more here and get business credit fast!
Visit the Internal Revenue Service website and acquire an EIN for the small business. They’re free of charge. Choose 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 diminish risk. And it will maximize tax benefits.
A business entity will matter when it involves tax obligations and liability in case of litigation. A sole proprietorship means the owner is it when it comes to liability and taxes. Nobody else is responsible.
If you run a small business as a sole proprietor, then at the very 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 find yourself being directly accountable for all business financial obligations.
Also, per the Internal Revenue Service, by having 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 substantially reduce the odds of an Internal Revenue Service audit as well.
Start at the D&B web site and obtain a totally 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 business. 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.
In this way, Experian and Equifax will have something to report on.
First you must establish trade lines that report. This is also known as 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 get credit in the retail and cash credit tiers.
These sorts of accounts often 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 to start with, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are frequently Net 30, rather than revolving.
So, 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 must 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 have to pay back what you borrowed or the credit you used.
To launch your business credit profile the proper way, you ought 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 repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.
Not every vendor can help like true starter credit can. These are merchants that will grant an approval with minimal effort. You also want 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 need to apply more than one time to these vendors. So, this is to prove you are reliable and will pay punctually. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/
Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can nonetheless be of some value.
You can always ask non-reporting accounts for trade references. And credit accounts of any sort ought to help you to better even out business expenditures, thus making budgeting easier. These are providers like PayPal Credit, T-Mobile, and Best Buy.
Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are businesses such as Office Depot and Staples.
Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.
One example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.
Are there 8 to 10 accounts reporting? Then move onto the fleet credit tier. These are companies like BP and Conoco. Use this credit to purchase fuel, and to repair, and maintain vehicles. Only use your SSN 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 better and a 411 small business phone listing.
Shell may say they want a specific amount of time in business or profits. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get approval.
Learn more here and get business credit fast!
Have you been responsibly managing the credit you’ve gotten up to this point? Then move to the cash credit tier. These are companies such as Visa and MasterCard. Just 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 such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or better. 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).
In addition, they want you to have an established small business.
These are businesses such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are typically MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.
Learn more here and get business credit fast!
Know what is happening with your credit. Make sure it is being reported and fix any mistakes ASAP. Get in the practice of taking a look at credit reports and digging into the details, 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.
Update the data if there are mistakes or the information 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.
So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Mistakes in your credit report(s) can be corrected. But the CRAs normally want you to dispute in a particular way.
Get your small business’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.
Disputing credit report inaccuracies usually means you send a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and keep the original copies.
Fixing credit report mistakes also means you specifically itemize any charges you challenge. Make your dispute letter as 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.
Always use credit sensibly! Don’t borrow more than what you can pay back. Monitor balances and deadlines for repayments. Paying on time and completely will do more to raise business credit scores than just about anything else.
Establishing business credit pays. Great business credit scores help a company get loans. Your loan provider knows the small business can pay its financial obligations. They know the small business is for real.
The company’s EIN connects to high scores and loan providers won’t feel the need to demand a personal guarantee.
Business credit is an asset which can help your business in years to come. Learn more here and get business credit fast!