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12 Reasons to Have Business Credit

12 Reasons Having Business Credit Is a Must for Every Successful Company and How Not Having it Can be Disastrous for Your Business

Business credit is credit in a business name that’s linked to the business’s EIN number. This is credit a business owner can obtain that is not linked to their SSN. When built correctly, the SSN isn’t even supplied on the application meaning there is no personal credit check to obtain this kind of EIN credit

Applying for Consumer Credit

  • When you apply for something such as an auto loan, the lending institution pulls your personal credit using your name, address, and social security number
  • This information is sent to the consumer credit reporting agencies, and they supply the lender a credit report with all information they have relating to someone with a similar name, address, and SSN
  • With this type of credit an inquiry is then put on your consumer credit report, and your report is used to make the lending decision
  • Plus the credit you obtain will then be reported to the consumer reporting agencies
  • When you apply for something such as a business loan, the lending institution pulls your business credit using your name, address, and EIN number
  • This information is sent to the business credit reporting agencies, and they supply the lender a credit report with all information they have relating to a business with a similar name, address, and EIN
  • With this type of credit an inquiry is then put on your business credit report, and your business report is used to make the lending decision
  • Plus the credit you obtain will then be reported to the business reporting agencies
Applying for Consumer Versus Business Credit

  • It’s important to note that when applying for financing and credit using your business credit, you should NOT supply your social security number on the application, even though it will be requested
  • When you do this, NO personal credit can be pulled because the lender can’t pull your personal credit without your SSN
  • This forces them to only pull your EIN credit as you supplied your EIN not your SSN
  • This means you will be approved ONLY on the merits of your BUSINESS credit report… your personal report isn’t even reviewed
What Benefits Does Having Business Credit TRULY Provide? 
  • Business Credit Has No Direct Affiliation to Personal Credit
  • Business credit has no impact on the business owner’s personal credit
  • When done properly, business credit is obtained without the SSN being supplied on the application
  • This means there is no credit check from the business owner to get approved
  • This also means that anyone who has bad, even horrible personal credit can still be approved  for business credit
  • Business credit reports to the business credit reporting agencies, not the consumer reporting agencies
  • As business credit is used it has no adverse impact on the owner’s consumer credit because it’s not reported to consumer agencies
  • This means utilizing the account, even over 30%, won’t have any adverse impact on the personal credit scores
  • And there are no inquires on the personal credit when you apply for business credit as long as you don’t supply your SSN
  • 10% of your total consumer credit score is based on inquiries
  • So if you are using your personal credit to apply for business loans and credit, your scores will go down as a result of those inquiries
  • Plus those inquiries can remain on your credit for an extended period of time affecting your ability to borrow more money
  • Some unsecured business lending sources won’t even lend you money if you have 2 inquiries or more on your personal credit reports within 6 months
  • 30% of your total consumer credit score is based on utilization
  • So if you use your personal credit to get credit cards for your business, if you use those cards you will lower your scores
  • Using more than 30% of your limit WILL result in a score decrease
  • So if your limit is $1,000, having a balance above $300 lowers your scores
  • This means 40% of your total score is damaged just by applying and using the credit you obtain using your consumer scores
  • With true business credit, 0% of your score is affected 
Business Credit Scoring

Business credit scores are based only on whether the business pays its bills on time

  • As a result, a business owner can obtain credit much faster using their business credit profile versus their personal credit profile
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 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 Scoring
  • Consumer credit scores are made up of 5 factors and take years of well disciplined borrowing to get really good scores
  • Business credit scores are mostly based on payment history, so as long as you pay bills as agreed… you will have an excellent score
  • And it only takes 2-3 reported accounts for you to establish a score, and most vendors have your account reported to the business reporting agencies in 30-90 days
  • This means you can build a business credit profile and have an excellent credit score in a VERY short time period
Anyone Can See YOUR Reports

With consumer credit, someone HAS to have Permissible  Purpose to pull your personal credit… basically they must have your consent to review your reports

  • Only certain institutions such as banks, auto dealers, mortgage brokers, and others licensed to lend money and approved for credit pulling capabilities can pull your consumer credit report
  • But with business credit, this information is made public, which means ANYONE who wants your business information can easily and cheaply get it
  • Think about some of the people who can see your reports as they wish whenever they want:
  • Customers
  • Clients
  • Suppliers
  • Others who you might do business with
  • Competitors 
Here is some of the information they can easily see about your business
  • Amount of tradelines (payment experiences)
  • Credit scores
  • High credit limits
  • Past payment performance
  • Employees
  • Revenues
  • And much more is available to ANYONE who wants it
  • Pull your own credit reports to see what others are seeing about your company right now.
  • Would you want to do business with a company with a similar profile?
  • What does your profile say about you… are you established?
  • How will your customers, clients, even competitors think about you with this information?
  • Keep monitoring your reports regularly to see what others can see about you
  • And keep building your business credit so you can have a credible image portrayed for anyone who wants to see your credit in the future… especially those who lend money or issue credit
Don’t Risk it All!
  • When you put your SSN on a credit application, you are almost always providing a personal guarantee
  • This means you are personally liable for your business debts
  • So if you were to default on one of these obligations, the creditor will pursue your business assets first, then they’ll come after your personal assets including…
  • Your home
  • Your cars
  • Your stocks and bonds
  • Your bank accounts
  • And any and all other assets
  • Business owners don’t expect to fail, but unfortunately, 90% do fail

It makes no sense to put you and your family’s financial future in jeopardy when you know going in that you have a 90% possibility of ruining it
Remember, many times the reasons a business might fail have nothing to do with you, or things you can control… such as shifts in the economy
So don’t risk it all if you don’t have to

There is no question, starting and running a business IS risky. This is why most conventional banks make it so hard  to get a loan. So DON’T use a personal guarantee unless you have to. With many business loans you will need to, but with credit you DON’T need to as long as you build business  credit

The Value of Business Credit When Selling Your Business

  • Anyone who has sold or bought a business will tell you of the importance of business credit
  • Now that you know how easy extensive credit and financial information is to get for a company, if you were a buyer wouldn’t you get it?
  • Would you want to buy this company from what you see on the business report?
  • Is the company “established”, do they pay their bills, do they look like a successful company?
  • If you could choose from two companies to buy that were the same in every way except business credit, which one would you buy?
  • The one with a very limited or no credit profile
  • Or one with a credit profile that reflects good payment performance…
  • And one with available credit 
  • Business credit is essential in getting a good evaluation of a business 
Business Credit IS Used for Lending Decisions

  • When a business owner applies for financing or credit, their business credit IS reviewed
  • Not having business credit established will get an owner DECLINED for financing
  • But there is no Fair Credit Reporting Act in the business world that requires those who review your credit to notify you that they did, or that it was used in their lending decision 
  • So even though it’s always reviewed, most business owners have no idea that it is
More Borrowing Ability

  • Another benefit of business credit is that it more than DOUBLES borrowing ability
  • You already have consumer credit, now you can have a whole other credit profile with business credit also
  • This means it’s the only way to get multiple Staples cards, Office Depot, Lowes, Walmart, Target, and so on… in most cases
  • When you have access to more store and cash credit cards, you also have access to a lot more useable money
  • Plus per SBA business credit limits are 10-100 times that of consumer limits
  • Obtaining business credit radically increases your available credit as a result
  • An average Staples card limit on the consumer side might be $3,000, but in the business world it might be closer to $30,000
  • Businesses have a need for higher limits… and higher limits they get with business credit
  • This is another reason it’s very hard to scale a business using personal credit only
Business Credit Building is FAST!

  • Business credit can be obtained VERY fast
  • You can get approved for initial vendor credit to help your business grow within 1 week
  • That credit will typically report within 30-90 days
  • Once reported you will then have reported tradelines which in turn give you an established business credit profile and score
  • Once your profile is established in 90 days or less, you can then start getting real useable revolving store credit cards
  • Within 120-180 days you can then get real cash credit such as Visa, MasterCard, Discover, and AMEX credit you can use anywhere
Business Credit for Startups

  • Business credit is perfect for startups
  • Most conventional and private lenders won’t lend to companies without financials and who have been open 2 years or more
  • The most popular cash flow type of financing requires one year in business and steady revenue
  • Most consumer credit card approvals are based on personal income
  • But with business credit, even a startup can get loads of new credit without any of these items
Business Credit With No Financials

  • Business credit is perfect for businesses who don’t have or want to show financials
  • Let’s face it, we write off all expenses in a business we can
  • This leaves a smaller net profit, which is what most lenders and investors look at most
  • Business credit doesn’t look at financials, or bank statements
  • A business even with no cash flow can be approved for high limit cards, helping them grow their cash flow
  • And tax returns aren’t looked at either, so even if the business shows a loss they can still be approved
Business Credit With No Collateral

  • Most business lending requires collateral
  • This is because most businesses fail, and the risk of repayment of lent money is VERY high
  • This is why most conventional lenders make it so hard to get money, they aren’t setup for this type of risk
  • This is also why SBA requires ALL business assets, and even personal assets, be used as collateral
  • Business credit is one of the only ways to get money without providing collateral to offset the risk

Competitive Advantage 

  • 90% of the general population knows nothing about business credit
  • Now that YOU do, you have a HUGE competitive advantage
  • It’s much easier to grow a business with access to credit
  • You can test advertising easier and make some mistakes without risking it all
  • And you can do this without putting your personal finances in jeopardy 
Business Credit Success In The Real World

  • EVERY highly successful business in this country has business credit
  • Most of these companies used their business credit to get as big as they are today
  • Contrary to what many believe, business credit is NOT only for big companies
  • ANY company can build business credit!
  • Big companies are typically the ones who enjoy the benefits of business credit the most because they have CFOs who know how to obtain and use business credit, where most small businesses don’t
  • But YOU absolutely CAN get your hands on the exact same credit these larger companies have… IF you know the formula to obtain it
 Business Credit Benefits

  • It’s okay not to have business credit because you don’t know about it
  • But once you do know about it, steps MUST be taken to build the company’s credit profile
  • Just like a consumer with bad credit often doesn’t rebuild their credit as they should and they just “get by”… until they eventually need a home or car…
  • No business can succeed long-term without building their credit
  • Plus it’s just MUCH easier to grow with credit than without it
The Business Credit Building Process Outlined

  • Get Approved for Vendor Credit
  • Net 30 terms are common with most vendor credit sources
  • This means they will give you credit on “net 30” terms, giving you 30 days to pay the bill you owe in its entirety 
  • Some companies will require you buy their products while others won’t
  • Some companies will have you pay for your first couple of orders, others won’t
  • Some companies report your credit very quickly and it reports quickly, some don’t
  • Look out for all of these things when applying with vendors
Get Approved for Revolving Credit

Most major retailers do offer revolving business credit. To get approved they will want to see that you do have:

  • Established payment experiences
  • An established credit profile with at least one preferably two reporting agencies
  • Positive credit scores with the reporting agencies that your credit is being reported
  • Some starter revolving accounts include:
  • Radio Shack
  • Lowes
  • Home Depot
  • Staples 
  • Office Depot
Get Approved for Cash Credit

  • Once you have a total of 10 payment experiences you can then start getting approved for cash credit sources
  • It’s also recommended that you have at least one account with a $10,000 high credit limit so your cash limits are as high as possible
  • You can even contact us if you do have good personal credit or has a partner who does to get unsecured credit  in which approvals are based on personal credit but report to business to help expedite your timeframe to get to cash credit