Published By Janet Gershen-Siegel at December 9th, 2020
Can you still get recession corporate credit? Yes! Of course you can!
Recession corporate credit is credit in a company’s name. It doesn’t tie to an entrepreneur’s personal credit, not even when the owner is a sole proprietor and the sole employee of the business.
Consequently, an entrepreneur’s business and consumer credit scores can be very different.
The number of United States financial institutions and also thrifts has been decreasing slowly for 25 years. This is from consolidation in the marketplace as well as deregulation in the 1990s, reducing obstacles to interstate banking. See: https://www.fundera.com/blog/happened-americas-small-businesses-financial-crisis-six-years-start-crisis-look-back-10-charts
Assets concentrated in ever‐larger banks is problematic for small business proprietors. Big banks are a lot less likely to make small loans. Economic slumps mean banks end up being much more careful with lending. Luckily, business credit does not rely upon financial institutions.
Because company credit is independent from individual, it helps to protect an entrepreneur’s personal assets, in case of litigation or business bankruptcy.
Also, with two distinct credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles purchasing power.
Another benefit is that even startups can do this. Going to a bank for a business loan can be a recipe for frustration.
But building business credit, when done right, is a plan for success.
Consumer credit scores are dependent on payments but also additional considerations like credit usage percentages.
But for corporate credit, the scores actually merely depend on whether a small business pays its debts on a timely basis.
Building small business credit is a process, and it does not happen without effort. A company needs to actively work to establish small business credit.
That being said, it can be done easily and quickly, and it is much quicker than establishing individual credit scores.
Merchants are a big aspect of this process.
Undertaking the steps out of sequence will lead to repetitive rejections. Nobody can start at the top with recession corporate credit.
A small business has to be Fundable to lenders and merchants.
Therefore, a small business will need a professional-looking web site and e-mail address. And it needs to have site hosting bought from a vendor like GoDaddy.
Plus, business phone numbers ought to have a listing on ListYourself.net.
Likewise, the company telephone number should be toll-free (800 exchange or comparable).
A business will also need a bank account dedicated only to it, and it must have all of the licenses essential for operation.
These licenses all must be in the perfect, correct name of the business. And they need to have the same company address and phone numbers.
So keep in mind, that this means not just state licenses, but potentially also city licenses.
Visit the IRS website and get an EIN for the business. They’re free. Select a business entity such as corporation, LLC, etc.
A small business can get started as a sole proprietor. But they should change to a sort of corporation or an LLC.
This is in order to limit risk. And it will take full advantage of tax benefits.
A business entity will matter when it pertains to taxes and liability in the event of litigation. A sole proprietorship means the owner is it when it comes to liability and taxes. No one else is responsible.
Start at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a company in 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 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 manner, Experian and Equifax will have activity to report on.
First you should build trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a corporate credit score.
And with an established business credit profile and score you can begin to get more credit.
These kinds of accounts 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 preliminary credit when you have none now. Terms are typically Net 30, versus revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must 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 have to be paid completely within 60 days. In comparison with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.
To kick off your business credit profile properly, you should get approval for vendor accounts that report to the business credit reporting agencies. Once 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 a minimum of effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.
This is how to get started with recession corporate credit.
You want 3 of these to move onto the next step. 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 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. And credit accounts of any sort will help you to better even out business expenditures, thereby making financial planning easier. These are providers like PayPal Credit, T-Mobile, and Best Buy.
Know what is happening with your credit. Make sure it is being reported and address any inaccuracies as soon as possible. Get in the practice of taking a look at credit reports. Dig into the particulars, not just the scores.
Update the data if there are mistakes or the details is incomplete.
So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Mistakes in your credit report(s) can be fixed.
Disputing credit report mistakes commonly means you precisely itemize any charges you contest.
Always use credit smartly! Never borrow more than what you can pay off. Monitor balances and deadlines for repayments. Paying off punctually and fully will do more to increase corporate credit scores than just about anything else.
Establishing recession corporate credit pays. Great business credit scores help a business get loans. Your loan provider knows the small business can pay its financial obligations. They recognize the business is for real.
The company’s EIN connects to high scores and loan providers won’t feel the need to require a personal guarantee.
Recession corporate credit is an asset which can help your company in years to come. We can help you get started toward growing corporate credit. The COVID-19 situation will not last forever.