HOW TO BUILD BUSINESS CREDIT AND SECURE FINANCING FOR YOUR STARTUP OR GROWTH VENTURE by Ty Crandall and Hemda Mizrahi
Business credit and financing expert Ty Crandall joined me on “Turn the Page” to discuss how you can master both personal and business credit—and secure financing for your business, even when commercial banks say “no.”
If you have your own business, or are looking to start one, Ty offers additional tips in this post!
THE BENEFITS BUSINESS CREDIT
Ty shares the following reasons that he encourages companies to build business credit:
1. Business credit separates personal and business liability. As a business owner, by applying for credit using your Employer Identification Number (EIN), rather than your Social Security Number (SSN), you can obtain business credit with no effect to your personal credit. When you apply for business credit, no inquiries are placed on your consumer (personal) credit report, and business credit reports only to the business reporting agencies. You can acquire business credit without a consumer credit check (regardless of the quality of your personal credit).
2. Business credit card limits are 10 to 100 times higher than that of consumer credit.
3. Your can build business credit quickly, securing vendor credit immediately. Major stores grant credit in as little as 60 days, and fleet and cash credit in 120 days or less.
4. Business credit is the only solution in which you, as a business owner can obtain credit even if you don’t have collateral, verifiable cash flow, or good personal credit. So even a startup business can build business credit. You can create an entity in United States and build business credit, even if you aren’t a U.S. citizen.
5. Business credit is used in almost all business lending decisions. The quality of a business’s credit determines if the business can obtain a loan, the amount of the loan it gets approved for, and the terms of that loan.
6. Anybody can pull a business’s credit report without that business’s permission. This means that prospects, clients, potential investors, lenders, credit issuers, and even competitors have easy access to what’s listed on your company’s credit report.
HOW TO BUILD BUSINESS CREDIT
Ty suggests that you can build business credit by following these steps:
1. Ensure the business is setup credibly, with a real physical business address, or virtual business address, a professional website and email, business phone number, fax number, and toll-free number. Your local number should report to 411. You’ll also need the appropriate licensing in your state, county, and for your industry.
2. Obtain and review your business credit reports with Dun & Bradstreet, Experian, and Equifax Commercial. Monitor your business credit reports as you build credit and dispute any inaccurate accounts with each reporting agency.
3. Attain vendor accounts from companies like Uline and Quill. These types of vendor accounts report to the business credit reporting agencies, so you can get credit even as a startup. As you use that credit and pay your bills, you’ll establish your initial business credit profile and score.
4. Once you have 3 accounts reporting to the business reporting agencies, you can start to get approved for credit with major stores. Do not include your SSN on a business application in order to ensure that your business credit (rather than your personal credit) will determine your approval. Some major retailers will give you “net 30” accounts in the beginning until you have a total of 6 accounts reporting on your business credit reports. Many other retailers will start giving you revolving credit in this step.
5. After you’ve obtained 6 accounts, you can start applying to get revolving credit with most major retail stores. Once you’re up to10 total accounts, you’ll qualify for fleet and cash credit as well, and be eligible for some of the best terms on business loans.
Ty notes, “Just as you do with consumer credit, continue using your business credit and pay your bills early or on time. As you do this, you’ll get approved for more and more credit with higher and higher credit limits.
SECURING BUSINESS LOANS
Ty advises, “A business that has cash flow, credit, or collateral can also qualify for a business loan. With collateral you can secure some of the lowest interest rate financing options available in the business world, rates that are even lower than those of a SBA loan. And you won’t need cash flow or good credit to get approved! Types of acceptable collateral include equipment, inventory, account receivables, purchase orders, a 401K, and stocks.
If you have good personal credit or have a guarantor who does, you can get approved for 0% unsecured financing up to $150,000, even as a startup. If you have cash flow of $10,000 or more monthly, you can quality for cash flow financing.”
I invite you to learn more by reading Ty’s books, Perfect Credit and Business Credit Decoded, and by downloading Credit Suite’s free, 4-step guide to building business credit at www.creditsuite.com/ein.
Listen to my conversation with Ty to receive more of his guidance on mastering personal credit, business credit, and business financing. Here’s to the start and growth of your business!