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Here’s a Quick Way to Build Business Credit

Published By Faith Stewart at October 8th, 2020

COVID-19 turned the economy on its head. Now, with things starting to open back up, businesses are wondering if they are even going to be able to make it.  Most are starting to see they need to have business credit if they don’t already. But, is there a quick way to build business credit before it’s too late? 

Find Out How To Get Funds Fast While Utilizing this Quick Way to Build Business Credit

The truth is, you can’t snap your fingers. It’s a process, and you have to work through it.  However, knowing why you need business credit and how to work that process helps.  While it may not be a quick way to build business credit in the terms of a great score magically appearing overnight,  it is definitely quicker than not following the process at all. 

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Check out our best webinar with its trustworthy list of seven vendors to help you build business credit, even in a recession.

Quick Way to Build Business Credit: Business Credit vs Personal Credit

quick way to build business credit Credit Suite2 - Here's a Quick Way to Build Business CreditThe simplest way to explain it is that business credit is like your personal credit, but it is in the name of your business.  That’s not to say there are no other differences, but that is the gist. Basically, if you do things right, you have a totally separate business credit report that is in the name of your business, not your name personally. Your personal accounts do not show up on this report, and your business accounts, that are on this report, do not show up on your personal credit report. 

Business credit reports come from Dun & Bradstreet, Experian Business, and Equifax Business.  When there is a problem with your business credit, it does not affect your ability to get funding based on your personal credit.  Conversely, problems on your personal credit do not affect your ability to get funding for your business based solely on your business credit.  

Quick Way to Build Business Credit: Why Is Business Credit Necessary?

Business credit is necessary for a number of reasons.  The most obvious is to help you get funding for your business.  However, it also helps protect your personal credit.  If your business accounts are reporting to your personal credit report, you are going to see some debt-credit ratio issues.  This is the ratio of your debt in relation to your available credit.  Since business expenses are generally higher than personal expenses, you’re likely to run balances at or near your limits consistently, which will have a negative affect on your personal credit score. 

Business credit typically makes you eligible for higher limit cards that are better suited for large business expenditures.  It also keeps these large expenditures off your personal cards and personal credit report. 

Quick Way to Build Business Credit: There Are No Magic Beans

So, now you understand why you need business credit, but you need to know how to build it in a crazy economy, and fast. The thing is, there are no magic beans when it comes to a quick way to build business credit. Remember what I said.  A great business credit score will not appear magically overnight like a beanstalk. You do have to actually work all the way through the process.  However, there are a few shortcuts you can try once your business is set up properly.  More on how to do that later.

Quick Way to Build Business Credit: How to Make it Faster

Okay, so let’s assume for a minute that you already have your business set up in a way that it is a separate entity from yourself.  This is how you get accounts reporting to your business credit report rather than your personal report. If you’ve done that, there are a few things you can do to get the ball rolling, and give it a little push even. 

Ask Current Vendors for Credit

The first step is to ask those vendors with which you already have a relationship to extend credit.  Since you are already working with them, they may be more willing to do so without requiring a credit check.  Be sure to ask if they will report payments to the business credit reporting agencies. If they will not, then it won’t matter if they give you credit or not.  Accounts not reported do not help build your credit score. 

Ask Utilities to Report

You already pay things like rent, telephone, internet, electricity, and water bills on a regular basis.  You can ask providers to report those payments to the business credit reporting agencies.  They do not have to do it. However, they might, and it can only help build your score faster. 

Establish Tradelines With Starter Vendors

After those two things, the next step is to open tradelines with starter vendors.  These are vendors that offer net 30 invoices without any type of credit check, and then they will report your payments on those invoices to the business credit reporting agencies.  

The kicker is starter vendors do not usually market themselves as such.  This makes them a little hard to find without some expert guidance. As a general rule, you need to have 3 to 5 vendor tradelines reporting to get a good solid start to your business credit score.  Here are a few of the easiest to get started with.

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Check out our best webinar with its trustworthy list of seven vendors to help you build business credit, even in a recession.

Crown Office Supplies 

Crown Office Supplies offers paper and other office supplies. They report to all three of the major business credit reporting agencies, which of course include D & B, Experian, and Equifax. It can be hard to find vendors which report to Equifax, so getting credit with Crown is a good move.

To qualify, you will need to be an entity in good standing with Secretary of State and an EIN number with IRS. A business address that matches everywhere (both online and offline), a D-U-N-S number, a business license (if applicable), as well as a business bank account are all necessary. Your business must be at least 60 days old. There is also a membership fee of $99 annually upon approval.

Uline

Uline sells shipping, packing, and industrial supplies.  They report to Dun & Bradstreet as well.  This means, you guessed it,  you have to have a D-U-N-S number. 

In addition, they ask for 2 references and a bank reference. The first few orders might need to be paid in advance to get approval for Net 30 terms.

Grainger Industrial Supply 

Grainger sells power tools, pumps, hardware and other things. In addition, they can handle maintenance of your auto fleet. You need a business license and EIN to quality, as well as a D-U-N-S number.

After you pay on several tradeline accounts that report for a while, you should have a solid foundation to start applying for other types of business credit.  Store cards are the easiest to get first and continue building your score.  Next are fleet cards, and then finally, the regular cards that are not limited by where they can be used or what they can be used to purchase. 

Quick Way to Build Business Credit: What to Do In the Meantime? 

So, let’s say you start this process, but you need funds right now. What can you do?  The credit line hybrid may be just the answer.  You can get approval with personal credit that is lower than what most traditional lenders require, and if you are set up properly it will report to the business credit reporting agencies and help build your business credit even faster.  

It allows you to fund your business without putting up collateral, and you only pay back what you use.  

Credit Line Hybrid: Qualifications? 

What does it take to qualify? I’m going to tell you, but don’t stop reading if you don’t meet all of the requirements.  There are ways around some of them.

First, your personal credit score should be at least 685.  Also, you can’t have any liens, judgments, bankruptcies or late payments.  Furthermore, in the past 6 months you should have less than 5 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  It is preferred that you already have established business credit, but not necessarily required.

Are you thinking there is no way you qualify? Stop thinking that.  If you do not meet all of the requirements, you can take on a credit partner that does.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you access funding, but you still get the benefits.  

Quick Way to Build Business Credit: Credit Line Hybrid Benefits

There are many benefits to using a credit line hybrid.  First, it is unsecured, meaning you do not have to have any collateral to put up.  Next, you don’t have to provide any bank statements or financials.  

Even better, typical approval is up to 5x that of the highest credit limit on the personal credit report, and often you can get interest rates as low as 0% for the first few months.  This allows you to put that savings back into your business. 

The process is pretty fast, especially with a qualified expert to walk you through it.  Also, with the approval for multiple credit cards, competition is created.  This makes it easier, and likely even if you handle the credit responsibly, that you can get interest rates lowered and limits raised every few months. 

The credit line hybrid is a fast way to get cash while working on a quick way to build business credit. 

Quick Way to Build Business Credit: What’s This About Setting Up?

Remember how I said earlier all of this only works if your business is set up properly.  That’s because unless your business is set up to be an entity separate from you as the owner that is fundable all on its own, your accounts will report to your personal credit.  There will be no separate business credit.   How do you accomplish this separation? 

Separate Contact Information

The first step is to make sure your business has its own phone number, fax number, and address.   That doesn’t mean you have to get a separate phone line, or even a separate location.  You do not even have to have a fax machine.  You can get a business number that will ring to your personal phone and a virtual address online quickly and easily. 

Apply for an EIN

The next thing you need to do is get an EIN for your business.  This is an identifying number for your business that works in a way similar to how your SSN works for you personally.  You can get one for free from the IRS.

You Have to Incorporate

Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability.  It lends credence to your business as one that is legitimate and offers some protection from liability. It also solidifies your business as a separate entity from yourself. 

Business Bank Account

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. The big one for building business credit is, you got it, it separates your business from you as the owner.

quick way to build business credit Credit Suite3 - Here's a Quick Way to Build Business Credit

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit, even in a recession.

Licenses

If a business does not have all the necessary licenses it needs to run, red flags are going to fly up all over the place.  Do the research you need to do to ensure you have all of the licenses necessary to legitimately run your business at the federal, state, and local levels. 

Website

These days, you do not exist if you do not have a website.  However, having a poorly put together website can be even worse.  It is the first impression you make on a lot of people.  Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service.  Furthermore, your business needs a dedicated business email address.  Make sure it has the same URL as your website.  Don’t use a free service such as Yahoo or Gmail. 

D-U-N-S Number

Lastly, you have to have a D-U-N-S Number.  It’s imperative.  Dun & Bradstreet is hands down the largest and most commonly used business credit reporting agency. You cannot have a score with them if you do not have a D-U-N-S number.  It’s free on their website

Remember Business Credit Is Just One Piece of Fundability

There is so much more to fundability than business credit.  It is a tangled web indeed.  If you are looking for a quick way to build business credit, keep this in mind.   Furthermore, if your business isn’t set up properly, nothing else you do to build fundability or business credit will matter. Get that done today.

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