How to Build Business Credit in Ten Days
Business Credit Benefits
There are many advantages of establishing business credit. A credit profile for a company may be created that is entirely different from the owner’s personal credit profile, effectively doubling borrowing capacity. These business accounts have much higher credit limits and capacity than consumer credit. Business credit can be established easily, with an initial profile taking just 30-90 days to set up. Company credit can be established without a personal credit search if done correctly. Company credit can be accessed easily regardless of personal credit history, and business accounts are not reported to personal credit bureaus. Most commercial credit can be secured without the owner taking on legal responsibility or providing a personal warranty, which ensures that the business owner’s personal properties cannot be sought in the event of default. Since your business credit reports are viewable by everyone, getting business credit establishes your credibility with prospects, customers, rivals, suppliers, credit issuers, and others interested in purchasing your firm. Almost every company can get business credit if it has an EIN number and is set up as a legal entity. Building company credit does not necessitate the use of collateral or financials. To create business credit, your company can be a startup; what you need to know are the correct steps to take.
Business Credit Types
Vendor credit, retail credit, and cash credit are the three major forms of business credit. Vendor credit is the first line of credit for a company, and it is used to establish a credit profile and score. Vendor credit is usually offered on a net 30 basis. Many department chains, such as Lowes, Amazon, Apple, BP, and Walmart, offer Customer Credit. Cash Credit is used on Visa, Mastercard, and American Express credit cards, which can be used everywhere.
3 Steps to Build Your Initial Business Credit Profile
A corporation, like a client, begins by establishing a new credit profile. The company begins with no credit history. The company is also granted new credit, and is reported to the corporate credit rating agencies. The business then uses the credit, pays the bill on schedule, and establishes a good business credit record. The company can apply for additional credit if it continues to use the credit and pays its bills on schedule.
Step 1: Your Credibility
It’s critical to follow credit issuer requirements when creating an initial company credit profile. Your personal credit isn’t being used for clearance, and you haven’t developed any company credit. This ensures that the information on the application would be the only item considered for consideration, so it must be very strong to be approved.
Corporate Entities
Any agency form may be used to establish business credit. Your company must be a distinct legal entity, not a sole proprietorship or corporation, if you actually wish to separate business and personal credit. You may be “doing company,” but you are not actually a business until you have a different business body (Corporation or LLC). Such companies, on the other hand, do not negate your personal liability by design.
Business Name
Your registration not bearing the same legal name as what is on file in state archives is one of the most common grounds for rejection. It’s important that you spell out the company’s name exactly. Any registered DBA filing you will use should be included with your full company name. Check that your company records, certificates, and bank statements all have the same name as your firm.
EIN
Regardless of whether or not you have employees, the company must have a Federal Tax ID number (EIN). Your company has an EIN, similar to how you have a Social Security number. This is one of the two things that vendors would approve of. Take the time to double-check that your company is identified with the same Tax ID number by all agencies, banks, and trade credit vendors.
Business Address
Your company’s physical address must be a true brick-and-mortar structure with a deliverable physical address. A home address, a PO Box, or a UPS address are not acceptable business addresses. Any lenders will refuse to lend money until this criterion is met.
Phone Number
You must have a designated business phone number that is listed under the business name with 411 directory assistance. Lenders, dealers, insurers, and even insurance companies can check 411 to see if the company is included. This is the second important factor that initial credit vendors consider before approving a credit application. You must have a business phone number rather than a home or mobile phone, and the company should have both an 800 and fax number. You can use Voice Over IP numbers, but not a home or mobile phone.
Website and Email
Credit providers can do internet research on your business, and it is better if they learn more from your website. A professional email address, such as yourname@yourcompany.com, is also recommended. These are very inexpensive and simple to set up. Your business would seem untrustworthy if it does not have an email address or a website.
Licensing
To see if any licenses or permits are available to run your form of company, contact the State, County, and City Government offices. If you are not certified as you should be, do not apply.
Business listings
Take the time to double-check that all major authorities (the state, the IRS, the bank, and the 411 national directory) have your company classified in the same manner and under your exact legal name. Take the time to double-check that any payment you receive (power bill, phone bill, landlord, etc.) contains the correct business name and is sent to the correct business address.
Step 2: Your Business Credit Reports
Experian Commercial, Dun & Bradstreet, and Equifax Commercial all have business credit reports. To begin, get a copy of your company credit records to see what is currently being published. You should also deny any misleading or negative facts.
Experian
For a copy of your Smart Business survey, go to: http://www.smartbusinessreports.com/. A study will set you back between $49 and $99 dollars. Check to see how many trade lines are reporting, whether you have a company credit score, if you have an active Experian Business Profile, and if there have been any new inquiries.
Equifax
Your Equifax Small Business Credit Report is available for order at: http://www.equifax.com/small-business/credit-report/en sb. Equifax Small Business takes longer to build a file than D&B or Experian, which is why it’s necessary to register with credit companies who report to Equifax.
Dun & Bradstreet
Obtaining a Dun & Bradstreet number (D-U-N-S #) kicks off the process of creating a credit profile for the company with them. Your D-U-N-S #, which you can get for free at http://www.dnb.com/, can also let your company borrow without a personal guarantor. D&B will charge you $2,000 or more for “rolling” this into a kit. You may also sign up for DNBi SelfMonitor to keep track of your credit as it’s being built. D&B Self Monitoring subscriptions range from $39 to $99 a month.
Read and Understand Your Reports
Consumer credit assessments are not the same as business credit reports. The majority of studies have five different risk ratings on them, each measuring risk in different ways. The Paydex ranking, which is the most important score in the business world, is focused entirely on payment history, which is somewhat different from customer ratings.
Personal Credit Scores
Personal Credit Scores are based on 5 factors:
Payment history 35%
Utilization 30%
Length of Credit History 15%
Accumulation of New Credit 10%
Credit Mix 10%
Dun & Bradstreet’s Business Paydex Score
These scores are based on Payment History
Expect payment may come early 100
Payment is prompt 80
Payment comes 14 days beyond terms 70
Payment comes 21 days beyond terms 60
Payment comes 30 days beyond terms 50
Payment comes 60 days beyond terms 40
Payment comes 90 days beyond terms 30
Payment comes 120 days beyond terms 20
Business Credit Reports
Business Credit Reports list: Details on payments the business has made for each individual account; full payment record; upper credit limit; how much the business owner currently owes on each account; how much is past due; what the terms of the account are; when the account was reported and last updated; payment details for each account; current assets; liabilities; working capital; net worth, and sales. Payment information for each transaction is used in business records, as well as extensive commentary showing payment trends. These publications vary from customer reports in appearance and feel, so thoroughly search them to help determine your market risk.
Step 3: Get Approved for Vendor Credit
2 Ways to Start Business Credit
D&B Credibility offers one way to start a business credit profile and they will try to convince you that it is the only way, even though it’s not. They will charge upwards of $2,000 to put trade lines on your report using your current creditors. These only report to D&B and take time. They choose what can and can’t get added, and most cannot get added. You don’t get any new credit; only the same creditors are added. The other method of establishing company credit is close to that of establishing consumer credit. Obtain approval for new borrowers who can file reports with the credit rating agencies. You get actual credit that you will use to grow your company, and your business credit profile and score are established from that business credit report.
Obtain Vendor Accounts
When you don’t have any previous business credit records, you’ll need to start with vendor accounts to create credit. Even if you are a startup company, these are accounts from suppliers that offer you initial credit. This credit is reported to business rating agencies, so you’ll get actual credit while still building business credit.
Vendor Accounts
When a corporation (vendor) provides a line of credit to your enterprise on “Net 15, 30, 60, or 90” day terms, it is known as a vendor line of credit. This ensures you can buy their goods or services up to a certain dollar limit and pay the bill in full within 15, 30, 60, or 90 days. If you’re on Net 30 terms and buy $300 worth of merchandise now, you’ll have to pay that back over the next 30 days. You can get goods and services for your business and delay payment for 30 days, easing cash flow, and some suppliers will accept your company for Net 30 payment terms based on as little as an EIN number and 411 listing verification. You must first apply for and be granted an account. Then you put the credit to work, costing more than $50. Finally, you pay the bill on time or early; keep in mind that your key business credit score is purely dependent on how you pay. In 30-50 days, or up to three reporting periods, those accounts will report to the business reporting agencies. You must first apply for and be granted an account. Then you put the credit to work, costing more than $50. Finally, you pay the bill on time or early; keep in mind that your key business credit score is purely dependent on how you pay. In 30-50 days, or up to three reporting periods, those accounts will report to the business reporting agencies.
Start Vendor Accounts
With starter vendors, you must create a business credit profile and score. Even if you have no credit, no score, or no trade lines, starter vendors will give you initial credit. Most supermarkets, such as Staples, will not give you an initial starter allowance, so do not bother.
True Starter Vendors
Laughlin Associates
Laughlin Associates is a firm that specializes in organizational configuration and compliance. Your 411 listing and EIN are the only things available for Laughlin to report to Experian. With Net 30 terms, Laughlin reports in 30-60 days.
Quill Office Supplies
Quill Office Supplies specializes in the sale of office, packing, and cleaning supplies. D&B is the company’s parent company. If a D&B score has been created, you must first put an initial order. You will need to put up to three orders of $50 or more for them to accept you if you have no prior credit history.
Gempler’s/Office Depot
Gempler’s and Office Depot all market office supplies and report to D&B. Place an initial order of $50 and choose the “Invoice me” option to establish credit with this firm. They will pull credit after choosing this alternative. If you are not eligible for Net 30 terms, prepay for your order and continue to purchase using the “invoice me” option until you are approved.
Reliable Office Supplies
Office supplies and promotional items are sold through Reliable Office Supplies. D&B, Experian, and Equifax are the companies that this corporation reports to. Place an initial order, then insist that your order be invoiced or credited to your organization, and your credit will be pulled. Continue buying and asking to be invoiced or billed if you are not approved. The more orders you place, the more likely you are to be approved for Net 30 terms.
Uline Shipping Supplies
Shipping, packaging, and manufacturing equipment are all available from Uline Shipping Supplies. You must have your DUNS number so Uline reports to D&B. Two references, as well as a bank reference, will be needed. To get accepted for Net 30 rates, the first few orders will need to be prepaid.
Things to Remember.
To establish your initial credit, you may need to get any vendors you won’t use too much. Do not use your Social Security number on all applications. The trick to a decent credit score is to pay your bills on time. You should not begin with store credit because you will be turned down. Wait until you have five accounts registered before applying for cash and wait until you have ten accounts recorded before applying for cash.
