Building Business Credit

Most businesses want to be able to borrow money when they

need it, without the owners having to personal guarantee the

loans. This means less risk to the owners. Hoping to get a

business loan without a personal guarantee is one thing and

actually obtaining it is quit another.

Too many business owners come to us last minute trying to

obtain additional financing. We are constantly approached by

business owners asking how to obtain business financing, and

more importantly, how to obtain it without a personal

guarantee! We watch as successful businesses are turned down

for financing because they haven’t taken the time to set up

the business credit properly.

More vital is after the business credit is set up, who should

the business contact to get financing? Let me also say one

thing, there is a common misconception, good business credit

will overcome bad personal credit. In most cases, this is

simply not true. It is important to have good personal credit

and good business credit.

Let’s face it, banks are not donation centers! They will be

looking at both the business credit and the personal credit

of the owners of the business. Just because a business owner

has great business credit doesn’t mean that the bank will

completely ignore the negative personal credit.

Part of building a good, solid business is taking care of

both business credit and personal credit. Although, building

business credit is totally different than building personal

credit. With business credit you will need to make sure that

you have a proper business entity set up. You will need to

make sure it is a real business. By that I mean it should

have the proper licensing and permits to operate in your

local jurisdiction. You will also need to have a real

address. Not a P.O. Box! You will need to set up the phone

number properly so that the business credit bureaus can

verify that you really are in business.

You will need to do business with companies that report to

the business credit bureaus. There are over 500,000 companies

that extend credit and less then 10,000 actually report to

the business credit bureaus. If you are doing business with

someone who doesn’t report it does nothing for establishing

trade references.

The best advice that I can give is start now! The point that

your business needs the money is not the time to start

building business credit. Start before you need it so when

you need it it is available. Remember, the most important

part of building and operating a successful business is

laying the foundation and business credit is part of that

foundation that needs to be set up properly in the beginning.

Let me give a couple words of warning!

1. Don’t try and buy

credit. There are a few companies that will try and sell

trade references for a large sum of money. This is a rip off

and as soon as the credit bureaus find out they will put your

company in “High Risk” status.

2. You don’t need to spend large sums of money on “Shelf

Corporations” or “Aged Corporations,” shelf corporations have

their place and can be a benefit, but you can also build

business credit and obtain financing to a brand new

corporation.

3. Don’t try and substitute good business credit for bad

personal credit. Spend the necessary time and money to repair

your personal credit while building your business credit.

Do yourself a favor and start building business credit the

right way so when your business needs financing you know

where to go to obtain it!

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