Monday, December 17, 2007

How to Build Business Credit

Building good business credit is just as important as maintaining good personal credit. For most business owners, business credit may even be more important than personal credit! With a combination of good business credit and good personal credit you will be able to obtain the best terms and conditions each time your business needs financing.

But what if you don’t have good personal credit? Is it still possible to obtain business credit and business financing? Of course! However, it is harder to do. Because most lenders will want to look at both you business credit and your personal credit, you will have to build up your business credit so it is able to support your business lending needs regardless of your personal credit. It is definitely possible, but you must plan on taking the time and following the necessary steps in order to obtain business financing without a personal guarantee and regardless of you personal credit.

The process of building business credit must be followed if you plan on obtaining financing without a personal guarantee. Here are a couple of the requirements that a business owner must have in place to start the successful process of building corporate credit.

Business Entity: You must have a business entity established in order to build credit. it is preferable that you build corporate credit to a corporation or LLC.

Business address: You will need to have a physical business address.

Business Phone: Are you running your business from your cell phone? If so, don’t plan on setting up business credit. You will need a local land line phone number listed in 411 in order to establish you business credit file properly.

Business license: Is your business required to have a state or local business license to operate? You will need to find out and obtain one if needed.

Bank Rating: What is your bank rating? You should have a proper bank rating in order to obtain the best possible business financing.

Duns Number: You will need to have a duns number so your trade account can report your payment history.

Trade references: You will need at least 5 trade references to obtain your business paydex score. Make sure to set up account with companies that are set up to report your good payment history to the business credit bureaus.

Does it sound like a lot of work? It is, but it is not anymore work than any legitimate business owner should already have or plan on having if they want to be successful in business.

Your goal should be to build an 80+ paydex score and favorable duns rating. Let me dispel a common myth, just because you have an 80 or higher paydex scores doesn’t mean that banks suddenly become donation centers! Your paydex score only reflect how your company pays its bills. There are other ratings and scores that you will also want to have established so your business will be able to obtain financing on it own.

Most business owners are not aware that Dunn and Bradstreet has a “high-risk” status. If you skip a step in the set up process of your business credit or try to short cut the process your business credit file could be put into this category. It is very difficult to dispute or have the “high-risk” status removed from your file. Since no lenders will ever lend to a business in this category each business owner must have the appropriate knowledge of what to do and when to do it when it comes to building business credit.

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