Published By Janet Gershen-Siegel at March 25th, 2019
Who needs trucking business credit? We can help you get it.
Why, exactly, do you need business credit for trucking? We’ve got the answers here – business credit works for all business and not just brick and mortar companies!
If you’ve got an EIN, then the Internal Revenue Service states you’ve got a business. Yet if you only have personal credit, then you’ll be responsible for your company’s debts, and its tax obligations. You’ll even be on the hook for its bankruptcy, if that happens.
You do not want this. Split business from personal credit and it will not be a problem.
And in particular, fleet credit will specifically help your trucking business. And gasoline credit cards will, too. We all know how expensive it is to fill up the tank these days.
Business Credit is credit you get in a business’s name. With business credit the business builds its own credit profile and credit score. With an established credit profile and score, the business will then get approval for credit.
Since the company qualifies for the credit, in many cases, a company owner doesn’t have to go through a personal credit check. The firm can use its credit to qualify for retail credit cards.
These come from retailers just like BP, Sunoco, Exxon, Shell, Ford, RGS Fleets, Walmart, even MasterCard, Visa, and AMEX. Additionally the firm can use its credit to get approval for fleet credit for maintenance and repair of business vehicles including semi trucks.
And the company can also get approval for credit lines and loans.
A credit profile can be established for a company which is absolutely distinct from the firm owner’s personal credit profile. This gives company owners double the borrowing power as they have both personal and business credit profiles.
A business owner can get credit much more quickly working with their business credit profile versus their personal credit profile.
Approval limits are much greater on business accounts as opposed to personal accounts. According to the SBA, credit limits on business cards are typically 10 – 100 times more than for consumer credit.
Dun & Bradstreet’s Business PAYDEX scores are based on payment history.
However personal credit scores are based on 5 factors:
When done right, you can build business credit without a personal credit check and irrespective of personal credit quality, without any personal credit reporting of business accounts.
Most business credit can be gotten without having the owner assuming personal liability, or a personal guarantee.
Therefore in the event of nonpayment, creditors can’t attach the business owner’s personal assets. When a business owner applies for financing, their business credit is under review. Not having business credit built will get an owner a denial for funding.
There are no regulations requiring lending institutions to inform the business owner for their reason for rejection, so most never know.
Almost any firm can get business credit so long as it has an EIN number and business entity set up. You don’t need collateral or financials. Your firm can be a startup. You only need to know the correct building steps.
All highly-successful firms have business credit; it’s a “rite of passage” to ever reach true success.
A company starts establishing a brand-new credit profile much the same as a consumer does. The business begins with no credit profile. The firm gets approval for new credit that reports to the business credit reporting agencies.
Then the business makes use of the credit and pays the bill promptly. You have established a favorable business credit profile.
As the company continues using credit and pays bills on time it will qualify for more credit.
The assumption lenders, retailers, and creditors have of your firm is essential to your ability to establish strong business credit. Before applying for business credit a business must properly insure it meets or exceeds all lender credibility requirements.
There are more than 20 credibility points necessary for your company to have a solid, credible foundation.
It is essential that you use your precise company legal name. Your full firm name should include any recorded DBA filing you are using. Ensure your company name is precisely the same on your corporation papers, licenses, and bank statements.
You can develop business credit with just about any kind of business entity. If you truly wish to split business credit from personal credit your firm must be a distinct legal entity. Hence it can’t be a sole proprietor or partnership.
Unless you have a separate business entity (Corporation or LLC) you may be ‘doing business’ but not truly ‘a business’. So you need to become a Corporation or an LLC to split personal from business.
Regardless if you have employees, your business entity must have an EIN. Your EIN is used to open your bank account and to build your business credit profile.
So make the effort to confirm that all agencies, banks, and trade credit vendors have your business on file with the exact same EIN.
Your company address must be a genuine brick-and-mortar building, with a deliverable physical address. For retail establishments, it should not be a residential address, a PO Box, or a UPS address. Some lenders will not approve and fund unless these requirements are met.
However, virtual addresses are terrific business address solutions. For address only, you will receive mail and packages at a dedicated business address. For a virtual office, you get a professional business address, and dedicated phone numbers.
And you also get receptionist services and part-time use of fully furnished offices and meeting rooms.
And for a genuine office, you’ll have your own full-time personal office with front desk services, dedicated phone and fax, internet, full furnishings, conference rooms, and more.
You must have a dedicated business phone number listed with 411 directory assistance, under the business name. Lenders, vendors, creditors, and even insurance companies will validate your business is listed with 411.
A toll-free telephone number will give your firm credibility.
But you need to have a local company number for a listing with 411 directory assistance.
Lenders view 800 number or toll-free phone numbers as a sign of company credibility. Even if you’re a solitary owner with a residence-based company, a toll-free number makes you look like an even larger business.
It’s very easy and affordable to set up a virtual local phone number or a toll free 800 number.
A cell or residential phone number as your main business line could get you flagged as a non-established firm, which is too high a risk.
You can forward a virtual number to any cell or land line telephone number.
You will also need a business website. Credit providers will research your company on the internet. It is best if they learned everything directly from your firm website. Not having a website will significantly damage your chances of getting business credit.
There are many places online offering budget-friendly company websites. In this way, you can have an internet presence with an overview of your company’s services and contact details.
Plus, it is critical to get a business email address for your business. It’s not only professional, but dramatically helps your chances of getting business credit approval.
Establishing a business email address is just too simple and economical to overlook. When it comes to your business email, never use free email service providers like Yahoo and Hotmail. The email address should be at yourcompany.com.
Your business banking history is important to future success in getting bigger business loans. The date you open your business bank account is the day loan providers consider your business launched, no matter when you incorporated or achieved any other business milestone.
The longer your business banking history, the better your borrowing capacity is.
Having a high account balance is imperative in attaining an excellent Bank Rating. And a good Bank Rating is imperative for loan approval down the road. Try to keep a bank balance of $10,000 or more for a 5 Bank Rating.
In that way, you are likelier to be approval for loans eventually.
A typical error when establishing business credit is non-matching business addresses on business licenses. Even worse is not having the licenses you need for a trucking company to operate legally.
Contact the State, County, and City Government offices to see whether there are any necessary licenses and permits to operate your trucking business. This includes your commercial driver’s license. Your company filings must be listed correctly at the state, county, and city levels.
Plus your Internal Revenue Service filings must have correct listings.
Also ensure to verify that main agencies have your firm listed the same way and with your precise legal name. So these are the state, IRS, your bank, and the 411 national directory.
Also make certain every single statement you get has your company name listed correctly and comes to your company address.
Ensure your company is listed with Dun and Bradstreet. If it isn’t, then get a D-U-N-S Number. This number starts the process of developing your business credit profile with them.
Your D-U-N-S number will also play an important role in enabling your business to borrow without a personal guarantor. You can get your D-U-N-S number here: dnb.com. And you can also enroll for the DNBi SelfMonitor to monitor your credit. A subscription is $39-99/ month.
And check out creditsuite.com/monitoring for the lowest-price monitoring. We can save you 90%!
Our business finance suite includes monitoring.
Don’t want to take the plunge just yet? Then visit smartbusinessreports.com for a copy of your Experian Smart Business report. It costs $49 – 99. So learn how many trade lines are reporting. And see if you have a business credit score.
See if you have an active Experian Business Profile. And look at recent inquiries.
Buy a copy of your Equifax Small Business Credit Report here: equifax.com/small-business/credit-report. It is $99.95 for a full report.
This is the start of business credit for trucking companies.
It is when a vendor extends a line of credit to your firm on ‘Net 15, 30, 60 or 90’ day terms. This means you can buy their products or services up to a maximum dollar amount. And after that you have 15, 30, 60 or 90 days to pay the bill in full.
So if you’re set up on Net 30 terms and purchased goods today, then repayment is due in the next 30 days. Get products for your business needs and postpone payment on those for 30 days, thereby easing cash flow.
Some merchants will approve a business for Net 30 payment terms fast. So it’s often upon confirmation of as little as an EIN and a 411 listing.
Here are some vendors which will approve your firm for initial credit even if you have no credit now:
Be sure to apply first without using your Social Security Number. Some vendors will ask for it and may even tell you on the phone they need to have it. But submit first without it.
Take note: A Social Security Number is necessary for business loans but not for initial vendor credit building.
Some vendors demand an initial prepaid order before they can approve your business for terms. When your first Net 30 account reports your trade line to Dun and Bradstreet, the D-U-N-S system will automatically activate your file if it isn’t already.
This is also the case for Experian and Equifax.
Repay all Net 30 vendor accounts fully and promptly. Be patient and allow time for the vendors’ reporting cycles to get into the reporting systems.
It ordinarily takes 3 cycles of Net accounts reporting to develop credit scores. Most merchants and major retailers offer business credit, but do not publicize it.
Having said that, there is no benefit to the vendor to promote credit with no personal liability if a business owner agrees to assume that liability.
So they don’t advertise their business credit cards and often demand an SSN.
You need to have a total of at least three Net 30 day pay accounts reporting to move on.
After you establish 3 trade lines with vendor accounts, getting retail accounts is the next step. These are cards which a business owner can use. And you do not need to pay the full balance owing each month.
Retail credit approvals will begin coming from stores. You must get retail credit prior to you, the firm owner, can start getting Visa, MC, and Amex-type cards.
Most shops will not approve a firm owner for business credit unless the owner has an established credit profile and score. So this is just like in the consumer world. Use vendor accounts first to establish a profile and score. And then your company can get retail credit.
It often takes a mere 90 days or fewer to set up a score and profile with trade lines.
Many major stores offer business credit such as: Racetrac, the Fuelman MasterCard, Ally Car Financing, and Phillips 66/Conoco/76 Commercial.
Once 10 total accounts are on report, a company owner can then start applying for Visa, MC, and Amex-type credit. Approval amounts will be equivalent to the highest credit limit account on the business report.
For that reason, try to have 10 accounts with at least one of them having a $10,000 high limit. Continue using the credit. And keep applying for more. And ask credit providers to increase credit limits.
If you do so, your business credit will keep growing until you can get higher limit credit lines, ordinarily in 6 – 12 months.
Get more accounts. Then you can start to get approval for fleet credit and auto vehicle financing. You need at least one account with a $10,000 high credit limit to get approval for most fleet credit sources.
Plus you should have higher scores. So these are 75 or higher with Dun and Bradstreet. This score merely confirms you pay your bills on time. Fleet credit is for everything to do with company vehicles. You can use it at numerous locations.
So its uses include fuel purchases, and vehicle repair work and maintenance.
As you keep developing more business credit, you’ll get approval for more high-limit accounts. Many loans will require a personal guarantee and credit check for approval.
So you will need more than 20 reported accounts, and more employees. You will also need more revenue and profits to get loans without these. Being responsible with fleet credit will lead directly to getting vehicle financing.
So this is another feasible option. Unsecured credit is not secured with collateral. Good personal credit gets you unsecured credit cards with a personal guarantee; this ordinarily means a 685 score or higher.
Good business credit gets you unsecured credit cards without any personal guarantee.
The amount you can finance is often very high, as in $10,000 – 50,000. And you can get it in 1 – 4 weeks.
You can also get cash flow-based lending. These are short term loans of 6 – 18 months, with amounts as much as $1 million. The loan amounts are the same as 8 – 12% of annual revenue. And you get rates of 10 – 45%.
A 520 credit score is acceptable, but good bank statements are essential.
A revenue loan (or revenue-based loan) is an alternative type of loan. In contrast to a bank loan, you don’t need collateral or significant assets. And it contrasts to angel investing or venture capital. Because you don’t get cash as a swap for a piece of the business.
Rather, the loan (or credit line) is something you pay back as a percent of incoming revenue. See: https://en.wikipedia.org/wiki/Revenue-based_financing.
The lender (investors, actually) will take an equity warrant. So this means they have a fixed price if they wish to purchase stock in the firm. The price holds until an expiration date. And the business owner does not need to back the loan with their own personal assets.
No valuation is done on the company’s assets.
One way to get revenue-based financing is via crowdfunding platforms. Interest paid is often a tax deduction for the business. Costs tend to be more than with traditional bank loans. It’s not for very early stage startups, by definition.
But it could be a great choice for a company about 2 – 4 years old. This is if you have revenue coming in but banks still aren’t offering loans.
Our favorite provider is Fundbox. It’s a suitable alternative for short-term financing. The gist is you borrow on a line of credit. And you need to repay it every week for up to 12 weeks. You do so with automated deductions from your firm bank account.
$1,000 – $100,000 is on offer. There are no minimal credit score requirements.
Find them online at: https://fundbox.com/lines-credit.
You have a bunch of options for getting business credit for trucking companies.