Getting the Credit You Deserve?

Have you ever wondered why so many businesses fail within 1-2 years… or even after 5 years in business?

To many business owners, this question is scarier than finding a burglar standing over your bed at night. So, here’s some common sense advice that can save your business, regardless of how long you’ve been in business.

First of all, building a solid business credit rating is possible regardless of your personal credit scores. Obtaining the right types of corporate credit is vital to: the protection of your personal assets, the risks associated with personal lawsuits affecting your business, and your business’ ability to weather economic changes that seem to occur overnight.

All business owners must make it a weekly priority toward developing relationships with the right types of lending institutions. You usually want to start your application process with out-of-state, national (or international) lenders… not your local or regional banking institutions; because these larger lenders typically won’t require a personal guarantee or your social security number.

However, there are many steps you’ll need to take before you start applying for any type of business credit. Ultimately, it’s in your best interest to find a competent professional that can help you navigate through the murky underworld of building a strong corporate credit rating… giving you a head start on your competition & also letting you focus on running your business’ day-to-day activities.

An excellent business credit score can help your company’s image, overnight. You need to be able to answer some very basic questions, before you apply for any business credit.

1. Is your business strauctured as a sole proprietorship, C-corporation, S-Corporation, Limited-Liability Corporation (LLC), Partnership, or Trust?

2. How long has your business been recognized by your State & Local government?

3. Has this company ever had any derogatory information provided to the most popular business credit reporting agencies, Dun & Bradstreet or Experian?

4. Does your company have the proper permits, licenses and registrations necessary to conduct business in your jurisdiction?

5. Does your business have a physical address?

6. Does your business have a landline telephone number that’s recognized by directory assistance?

7. Are your incoming telephone calls professionally answered in your business name, or is it answered as if incoming calls are personal conversations?

8. Does your business have a business checking account?

9. Does your business have an Employer Identification Number (also known as an EIN)?

If your answer to the first question was a sole proprietorship, partnership or trust; I urge you to re-establish your company as a corporation or LLC. I’m not going to provide you with legal advice, but many CPAs and attorneys highly recommend LLCs (Limited Liability Corporations) as a way of protecting your personal assets & estate… in the event of any lawsuits being filed against your company. As a sole proprietor, your personal assets are at direct risk of seizure or forfeiture when faced with most types of legal action. Additionally, most lending institutions will not require you to provide any personal guarantee when applying for credit in the name of an LLC.

A corporation can still face difficulties applying for business credit, if its been in business less than 2 years or if its had previous credit problems reported against it… although its not impossible to overcome. Here are some common fixes. You can purchase a “shelf” or “aged” corporation that’s been recognized by your State government for longer than 2 years. You can attempt to repair your business credit rating by writing dispute letters to Experian or Dun & Bradstreet, which isn’t always possible. A few corporate credit experts will sell you “shelf” or “aged” corporations, some of which already have strong credit ratings established in each entity’s name… saving you alot of hassles.

I cannot stress this enough… you MUST have a physical address (not a PO Box) if you want to establish a solid business credit rating. The same thing is said for telephone numbers & the way incoming phone calls are handled. You don’t have to act as if your company is a Fortune 500 company. You just need to put yourself in the lender’s shoes for a moment & ask yourself, “Would I lend money to a company that I can’t find a physical address for?” or “Would I lend money to a company that answers their mobile phone with your favorite musician’s answer tone & is answered in a non-professional manner?”. I hope your answer was a resounding “NO!”. If not, can I borrow $1,000,000? You can always find me wherever my mobile phone is at the moment. (Get my point?) And, don’t forget to get the proper paperwork to go into business & keep these documents current.

Moving on, business checking accounts are a must. Again, this proves stability to your potential lenders. Here are some possible solutions, if you’ve had checking accounts closed in the past. Pay off the outstanding balance (if any) that’s being reported by the bank, or open a checking account at a bank or credit union that doesn’t use the ChexSystems credit reporting system. Most credit unions don’t use ChexSystems, and you can always find a list of banking institutions in your area that don’t use ChexSystems… by simply doing a search on Google, Yahoo or MSN.

Corporate credit ratings are tracked using your business name, business address and employer identification number (EIN). It takes less than five (5) minutes to apply for an EIN at http://irs.gov which is the IRS’ website.

Next, you’ll want to obtain a D-U-N-S number from Dun & Bradstreet, the largest business credit reporting agency. You can apply for this without any fees at http://dnb.com which is the Dun & Bradstreet website, and you’ll usually receive this number within thirty (30) days. Do not apply for this number until you’ve prepared your self thoroughly, because any information you give to them… goes into your credit file… permanently.

After you’ve obtained your D-U-N-S number, you’re probably ready to start establishing some vendor credit. Vendor credit is where many business owners start establishing business credit ratings. Simply go to http://staples.com, http://officemax.com or http://officedepot.com to get started. Then, you’ll also need to fax your business telephone bill & the credit application to them… on your business letterhead (which you can create using your favorite word processing software). They usually don’t require any personal guarantees (if you’ve followed the outline above), and you’ll usually receive a starting credit line of $750.

Be sure to always pay your invoices before the grace periods begin. This is critical, especially on unsecured credit cards. Dun & Bradstreet issues what’s known as a Paydex score (your corporate credit score), and a score of 80 is very good… with 100 being the highest score you can achieve. Your Paydex score is issued once you’ve established a known vendor/credit relationship with at least five (5) creditors… and it reflects negatively on your credit score if you pay a bill after you’ve entered in the grace period & even worse if you pay after the due date.

Again, there are shortcuts that will help you get much more than $750 alot faster. I’ve seen hundreds of people start with vendor credit equaling $25,000-$50,000 and open credit lines of $50,000 up to $1,000,000… in as little as 45-90 days… by using a corporate credit expert’s knowledge of the application process & “shelf” corporations. In fact, the best corporate credit experts will usually already have “shelf” corporations for sale… with pre-established credit ratings & lines of credit.

In summary, I’ve given you most of the tools & information you need to obtain corporate credit lines. Are you going to let a “cash crunch” put you out of business? Are you going to try to establish a business credit rating yourself & build your credit slowly? Or, will you utilize the services of a knowledgeable corporate credit expert to establish your credit rating & secure large credit lines… overnight? The choice is yours.

Dana Snow