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How to Start a Business with No Money and Bad Credit

Published By Janet Gershen-Siegel at February 20th, 2018

Learn How to Start a Business with No Money and Bad Credit

Do you know how to start a business with no money and bad credit? We can help you build business credit, even if your personal credit is not so hot.

This is through building business credit.

Building business credit means that your firm gets chances you never felt you would. You can get brand new equipment, bid on buildings, and cover the company payroll. And you can do this even when times are a bit lean. This is specifically helpful in holiday business enterprises, where you can go for several months with merely hardly any sales.

Because of this, you should really tackle developing your business credit. Enhance and maintain your scores and you will have these opportunities. Do not, and either you do not get these opportunities, or they will cost you a lot more. And no small business owner wants that.

You will need to understand what affects your company credit before you can make it better.

How to Start a Business with No Money and Bad Credit: Credit History Length Matters

This is basically how long your business has been using company credit. Needless to say newer firms will have short credit histories. While there is not too much you can particularly do about that, do not stress.

Credit reporting agencies will also inspect your personal credit score and your own background of payments. If your own personal credit is excellent, and particularly if you have a reasonably lengthy credit history, then your personal credit can come to the rescue of your company. That is, you did not just get your first credit card not too long ago.

Naturally the reverse is also right. So if your personal credit history is poor, then it will impact your business credit scores until your company and consumer credit can be separated.

How to Start a Business with No Money and Bad Credit: Your Payment History is Important

Tardy repayments will affect your company credit score for a good seven years. If you pay your small business (and personal) debts off, as quickly as possible and as completely as possible, then you can make a very real difference when it concerns your credit scores. Make sure to pay on schedule and you will experience the benefits of promptness.

How to Start a Business with No Money and Bad Credit: Your Personal Credit Can Influence Your Business Credit

Are you having a bad business year? Then it could wind up on your personal credit score. And just in case your small business has not been around for too long, it will directly affect your business credit.

How do you fix this? By building business credit.

How to Start a Business with No Money and Bad Credit: Build Business Credit

Business credit is credit in a small business’s name. It doesn’t connect to an owner’s personal credit, not even when the owner is a sole proprietor and the solitary employee of the small business. Truly, it is the best method of how to start a business with no money and bad credit.

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

The Benefits

Due to the fact that small business credit is independent from individual, it helps to protect a business owner’s personal assets, in the event of court action or business bankruptcy.

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

Another advantage is that even start-ups can do this. Visiting a bank for a business loan can be a formula for frustration. But building small business credit, when done the right way, is a plan for success.

Individual credit scores are dependent on payments but also additional factors like credit use percentages.

But for company credit, the scores actually just hinge on if a small business pays its invoices timely.

How to Start a Business with no Money and Bad Credit Credit Suite

 

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Growing company credit is a process, and it does not occur automatically. A company must actively work to develop company credit.

Nonetheless, it can be done readily and quickly, and it is much more efficient than developing individual credit scores.

Vendors are a big aspect of this process.

Doing the steps out of order 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.

Business Fundability

A business has to be fundable to lending institutions and merchants.

That’s why, a company will need a professional-looking web site and email address. And it needs to have site hosting bought from a merchant such as GoDaddy.

Plus, company telephone and fax numbers must have a listing on 411.com.

In addition, the business telephone number should be toll-free (800 exchange or similar).

A small business will also need a bank account dedicated purely to it, and it must have every one of the licenses essential for operating.

Licenses

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

So bear in mind, that this means not just state licenses, but possibly also city licenses.

Dealing with the IRS

Visit the Internal Revenue Service web site and get an EIN for the small business. They’re totally free. Pick a business entity like corporation, LLC, etc.

A company can start off as a sole proprietor. But they will probably wish to switch to a sort 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 comes to tax obligations and liability in the event of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.

Sole Proprietors Take Note

If you run a company 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 business name. Consequently, you can find yourself being directly responsible for all small business financial obligations.

Also, per the IRS, using this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 possibility for corporations! Avoid confusion and noticeably lower the chances of an IRS audit at the same time.

Starting the Business Credit Reporting Process

Start 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 business into 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 sites 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.

In this way, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you should build trade lines that report. This is also referred to 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 start to get credit in the retail and cash credit tiers.

These kinds of accounts have the tendency 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 off, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are commonly Net 30, instead of revolving.

So, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, such as 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 fully within 60 days. In contrast to 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 kick off your business credit profile properly, you ought to get approval for vendor accounts that report to the business credit reporting agencies. 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.

Vendor Credit Tier – It Helps

Not every vendor can help in the same way true starter credit can. These are vendors that will grant an approval with hardly any effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

This tier is vital for how to start a business with no money and bad credit.

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 confirm you are reliable and will pay promptly.

How to Start a Business with no Money and Bad Credit Credit Suite

 

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Accounts That Don’t Report

Non-Reporting Trade Accounts can also be helpful. While you do want trade accounts to report to at the very least one of the CRAs, a trade account which does not report can nonetheless be of some worth.

You can always ask non-reporting accounts for trade references. Additionally credit accounts of any sort should help you to better even out business expenditures, thus making financial planning less complicated. These are companies like PayPal Credit, T-Mobile, and Best Buy.

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 companies which include Office Depot and Staples.

Just use your SSN 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 need to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

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

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

Shell might 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 an approval.

How to Start a Business with no Money and Bad Credit Credit Suite

 

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly handling the credit you’ve gotten up to this point? Then move onto the cash credit tier. These are businesses such as Visa and MasterCard. Just use your SSN 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).

Additionally, 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 often MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.

Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and take care of any inaccuracies as soon as possible. Get in the habit of checking 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 90% less than it would cost you at the CRAs. See: www.creditsuite.com/monitoring.

At D&B you can monitor at: www.dandb.com/credit-builder. At Experian, you can monitor your account at: www.smartbusinessreports.com/Landing/1217/. And at Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business. Experian and Equifax cost about $19.99; D&B ranges from $49.99 to $99.99.

Update Your Record

Update the details 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. And for Equifax, go here: www.equifax.com/business/small-business.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any errors in your records. Mistakes in your credit report(s) can be fixed. But the CRAs often want you to dispute in a particular way.

Get your 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.

Disputes

How to Start a Business with no Money and Bad CreditDisputing credit report errors commonly means you send a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always send copies and keep the original copies.

Fixing credit report inaccuracies also means you specifically itemize any charges you contest. Make your dispute letter as clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

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

You can dispute inaccuracies on your or your 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 telephone number is here: www.dandb.com/glossary/paydex.

A Word about Building Business Credit

Always use credit sensibly! Never borrow more than what you can pay back. Monitor balances and deadlines for payments. Paying in a timely manner and fully will do more to raise business credit scores than almost anything else.

Establishing small business credit pays off. Excellent business credit scores help a company get loans. Your lender knows the company can pay its financial obligations. They understand the business is for real.

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

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

How to Start a Business with No Money and Bad Credit: Looking for Some Ideas?

And we would be remiss if we didn’t give you any business ideas! Here are seven great ones from Shopify which we loved.

How to Start a Business with No Money and Bad Credit: Takeaways

Once you understand what impacts your small business credit score, you are that much nearer to creating better business credit which will help you learn how to start a business with no money and bad credit.

Now go get ‘em, tiger!

2 Comments

  1. Karla Rowland says:

    Over the past few weeks I have watched as one by one the old negative items on my report have dropped off and my score went up and up. I thank you for all the hard work they have done on my behalf and will continue to recommend your services to everyone.

  2. Rick says:

    This article didn’t explain how to start a business with no money or bad credit. The steps.

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