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The Eye-Opening Truth about Business Credit Funding

Published By Janet Gershen-Siegel at December 17th, 2017

The Eye-Opening Truth about Business Credit Funding

Get the Awesome Truth About Business Credit Funding – the Excellent Form of Financing So Many People Don’t Know About!

What is the truth about business credit funding? Where’s the honesty? With so much conflicting information out there, it’s no wonder that there’s confusion!

Building business credit means that your company acquires opportunities you never considered you would. You can get brand new equipment, bid on realty, and deal with the company payroll. And you can do so even when times are a bit lean.

This is particularly helpful in seasonal business enterprises, where you can go for several months with solely minimal sales.

Due to this, you should focus on developing your company credit. Enhance and maintain your scores and you will have these opportunities. Do not, and either you do not get these chances, or they will cost you a lot more. And no company owner wants that.

You will need to recognize what affects your small business credit before you can make it better.

The Truth about Business Credit Funding: Do not Let Your Credit Utilization Rate Damage Your Small businesstruth about business credit funding Credit Suite2 - The Eye-Opening Truth about Business Credit Funding

Your credit utilization rate just shows the amount of cash you have on credit. And it is then divided by your overall available credit. Lenders generally speaking do not wish to see this go above 30%. So for every $100 in credit, do not borrow on in excess of $30 of that.

If this percentage is increasing, you’ll need to spend down and pay off your debts. Do so ahead of borrowing more.

The Truth about Business Credit Funding: Credit History Length Matters

This is in essence how long your business has been making use of company credit. Naturally newer firms will have brief credit histories. While there is not a lot you can specifically do about that, do not panic.

Credit reporting bureaus will also review your personal credit score and your very own history of payments.

If your individual credit is good, and in particular if you have a relatively extensive credit history, then your personal credit can come to the rescue of your corporate. That is, you did not just get your first credit card fairly recently.

Obviously the opposite is also right. So if your private credit history is bad, then it will have an effect on your business credit scores. That is, until your company and personal credit can be split.

The Truth about Business Credit Funding: Your Payment History is Important

Late repayments will have an effect on your company credit score for a good seven years. Pay your business (and personal) debts off, as quickly as possible and as fully as possible. And then you can make a very real difference when it comes to your credit scores.

Make sure to pay on schedule and you will enjoy the rewards of promptness.

The Truth about Business Credit Funding: Your Personal Credit Can Affect Your Business Credit

Having a bad business year? Then it could end up on your personal credit score. And just in case your small business has not been around for too long, it will directly impact your company credit. That being said, you can unlink the two by taking steps to separate them.

For example, if you get credit cards solely for your small business or you open business checking accounts and various other bank accounts (or perhaps get a business loan).

So then the credit reporting bureaus will start to address your consumer and small business credit on an individual basis. Also, be sure to incorporate, or at least file a DBA (doing business as) status.

You can also pay for your company’s invoices with your business credit card or checking account. And make sure it is the company’s full name on the bill and not your own.

The Truth about Business Credit Funding: The Credit Reporting Bureaus Can Just Plain Get it Wrong

Just the same as every company around, credit reporting bureaus like Equifax and Experian are only as good as their records. If your business’s name is like another’s, or your name is a lot like another company owner’s, there can possibly be some mistakes.

So keep track of those reports, and your company report at Dun & Bradstreet, PAYDEX. Stay on top of these reports and dispute charges with records and clear communications.

Do not just allow them to stay incorrect! You can fix this! And while you’re at, it you should also be checking the credit reporting agency which only handles personal and not business credit. And that is TransUnion.

If you do not know exactly how to pull a credit report, do not worry. It’s easy.

The Truth about Business Credit Funding: Business Credit Building – How to Do It

Small business credit is credit in a company’s name. It doesn’t connect to an entrepreneur’s individual credit, not even if the owner is a sole proprietor and the sole employee of the small business.

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

The Benefits

Since small business credit is separate from personal, it helps to safeguard a small business owner’s personal assets, in case of a lawsuit or business bankruptcy.

Also, with two separate credit scores, an entrepreneur can get two separate cards from the same vendor. This effectively doubles buying power.

Another advantage is that even startups can do this. Going to a bank for a business loan can be a recipe for disappointment. But building small business credit, when done correctly, is a plan for success.

Individual credit scores are dependent on payments but also various other components like credit utilization percentages.

But for business credit, the scores actually only depend on if a company pays its bills on a timely basis.

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What frustrates you the most about funding your business? Check out how our free guide can help.

The Process

Growing company credit is a process, and it does not occur without effort. A company will need to proactively work to establish business credit.

Nevertheless, it can be done readily and quickly, and it is much speedier than building consumer credit scores.

Merchants are a big part of this process.

Undertaking the steps out of sequence will lead to repetitive rejections. No one can start at the top with company credit. For example, you can’t start with store or cash credit from your bank. If you do you’ll get a denial 100% of the time.

Company Fundability

A business must be reliable to credit issuers and vendors.

Consequently a company will need a professional-looking web site and email address. And it needs to have site hosting from a company such as GoDaddy.

Additionally business phone numbers need to have a listing on ListYourself.net.

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

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

Licenses

These licenses all have to be in the identical, correct name of the business. And they need to have the same company address and phone numbers.

So note that this means not just state licenses, but possibly also city licenses.

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Dealing with the Internal Revenue Service

Visit the IRS web site and get an EIN for the business. They’re free of charge. Choose a business entity such as corporation, LLC, etc.

A company can get started as a sole proprietor. But they will more than likely want to switch to a kind of corporation or partnership.

This is in order to diminish risk. And it will make best use of tax benefits.

A business entity will matter when it pertains to taxes and liability in case of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. No one else is responsible.

Starting the Business Credit Reporting Process

Begin 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 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 websites for the small 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.

By doing so, Experian and Equifax will have activity to report on.

Vendor Credit

First you should build trade lines that report. This is also referred to as vendor credit. 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 getting retail store and cash credit.

These varieties of accounts have the tendency to be for the things bought all the time, like 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 commonly Net 30, instead of revolving.

Hence if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Repay what you use, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit – It Helps

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

Uline Shipping Supplies

Uline Shipping Supplies is a true starter vendor. You can find them online at www.uline.com. They offer shipping, packing, and industrial supplies, and they report to D&B.

You must have a D-U-N-S number. They will ask for 2 references and a bank reference. The first few orders might need to be prepaid to first get approval for Net 30 terms. Also, you may have to buy some items you don’t need.

Marathon

Check out starter vendor Marathon. Marathon Petroleum Company provides transportation fuels, asphalt, and specialty products throughout the United States. Their comprehensive product line supports commercial, industrial, and retail operations. This card reports to Dun & Bradstreet, Experian, and Equifax. Before applying for multiple accounts with WEX Fleet cards, make sure to have enough time in between applying so they don’t red-flag your account for fraud.

Your SSN is required for informational purposes. If concerned they will pull your personal credit talk to their credit department before applying. You can give a $500 deposit instead of using a personal guarantee, if in business less than a year. Apply online. Terms are Net 15. Get it here: www.marathonbrand.com.

Grainger Industrial Supply

Grainger Industrial Supply is also a true starter vendor. You can find them online at www.grainger.com. They sell safety equipment, plumbing supplies, and more, and they report to D&B. You will need a business license, EIN, and a D-U-N-S number.

For under a $1,000 credit limit they will approve virtually anybody with a business license.

Accounts That Do Not Report

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 still be of some worth.

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

Retail Credit

Once there are 3 or more vendor trade accounts reporting to at least one of the CRAs, then progress to retail credit.

Use the company’s EIN on these credit applications.

Fleet Credit

Are there more accounts reporting? Then progress to fleet credit. Use this credit to buy fuel, and to fix and maintain vehicles. Make sure to apply using the small business’s EIN.

Bank Credit Cards

Have you been sensibly handling the credit you’ve up to this point? Then move to more universal bank credit cards.

These are usually MasterCard credit cards. If you have more trade accounts reporting, then these are feasible.

Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and fix any inaccuracies ASAP. Get in the habit 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, Equifax, and D&B for a lot less than it would cost at the CRAs.

Update Your Record

Update the information if there are inaccuracies 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.

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What frustrates you the most about funding your business? Check out how our free guide can help.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Errors in your credit report(s) can be corrected. But the CRAs typically 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 errors commonly means you specifically detail any charges you contest.

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

You can dispute mistakes on your or your small 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 contact number is here: www.dandb.com/glossary/paydex.

A Word about Business Credit Building

Always use credit sensibly! Don’t borrow beyond what you can pay off. Keep an eye on balances and deadlines for payments. Paying off punctually and fully will do more to increase business credit scores than pretty much anything else.

Establishing company credit pays. Great business credit scores help a small business get loans. Your loan provider knows the company can pay its financial obligations. They understand the business is authentic.

The business’s EIN attaches to high scores and loan providers won’t feel the need to request a personal guarantee. 

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

The Truth about Business Credit Funding: Takeaways

Once you know what influences your corporate credit score, you are that much closer to building enhanced corporate credit. Learn more here and get started with the truth about business credit funding.

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