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Your Business Needs a Credit Line – Here’s How to Get One or More

Published By Janet Gershen-Siegel at September 5th, 2017

As a small business owner, you probably can’t put your hand on enough capital, at least not immediately. And if you are new, then it’s even harder. There will always be more ramp up costs than you think. So if you have ever wondered where to establish business credit, and how to actually get a credit line, it comes from really two areas. One is business credit cards and loans, and the other is trade credit.

For both types of credit line, it helps to have good business credit. And if you do not have what is considered a good business credit score, or if your company is new and has not yet established its own credit, then creditors will look at your personal credit score.

You want them looking at your business credit score.

Building Better Business Credit

As with personal credit, it seems as if the companies which don’t need credit are the ones which are more likely to get it. But that is banks and creditors doing better and more responsible business for themselves – if your company is at risk of defaulting, they either want to give you more expensive terms, or not extend any credit at all.

Here are a few tips on building and improving better business credit.

Separate your company credit from your personal credit

One way is to change your business entity. That is, to either incorporate or become a limited liability company (LLC). Get a separate identification number from the IRS, too, in order to really demonstrate there is a difference.

Get a DUNS number from Dun & Bradstreet

A DUNS number is necessary in order for D&B to start tracking your business’s credit. Dun & Bradstreet requires that you register on their site before they will give you a DUNS number. Registration is simple and, once you have said yes to the Terms and Conditions, then the next screen is a dashboard. This is where you either ask for a DUNS number or you can look up to see if your business is already in the listings. If your company is already in the listings, then click on your business name to make any needed changes.

Business Credit with a Personal Guarantee

Another means of establishing business credit is by going to your bank and establishing business credit lines or cards with personal guarantees. This means you are personally responsible in case the business defaults or any loans or bills go into collections. Hence if your company is in a high risk business or a seasonal one, you might find your car on the line.

Make sure when you get these kinds of business credit cards, they have the personal guarantee removal feature built right in. Keep your credit utilization at one third of your credit ceiling or less (that is, don’t use more than about one third of your total available credit). Make certain to pay on time every time.

Apply for Third Party Guaranteed Lending

You can use an SBA loan for funding. Repaying this kind of a loan will help you build your business credit score. Or you can apply for a business credit card from a specific store. Often, these store credit cards do not need a personal guarantee. Make sure to choose a store where your business makes a lot of purchases. And don’t forget about those timely payments!

Business Credit Cards and Loans

If your business credit score is good (or if it has improved), then go to your local bank and ask for a credit line. If you use a particular bank for payroll, you can try that one. If not (or maybe you’re a one-person shop and you don’t really have payroll at all), then you can also take your request to the bank where you do all your personal banking. Because they already know you, and if they have seen you pay your credit cards on time and keep a good balance in your accounts, they may be more interested in giving your small business a line of credit even without guarantees or a serious credit check. No matter which kind of lending institution you try, go in with good credit as that will make your terms more favorable and it can generally mean the difference between any credit line and none.

Trade Credit

This is similar to getting a store credit card. Talk to the local companies where you do frequent business. This can be everything from the office supply store for your file folders to the restaurant where you get lunch and coffee supplies. If you have been paying on time, ask if you can have trade credit with them, where they extend you supplies and you pay them back much like you would with a credit card. These kinds of arrangements virtually never need guarantees or credit checks. As with all other forms of credit, be sure to pay everything off in a timely fashion.

Keep your small business afloat with a credit line.

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