Building Business Credit

Most businesses want to be able to borrow money when they need it, without the owners having to guarantee the loans personally. This means less risk to the owners. But wanting to get credit for your business and actually getting it can be two different things.

One company recently approached us because over the past two years they had created a successful business, with over twenty employees. But they couldn't get a business loan because they hadn't taken the time to build a business credit profile and didn't know where to start.

You may have seen marketing hype about how a business credit profile can overcome a bad personal credit file. In most cases, however, it's important that small businesses have both good business credit, as well as solid personal credit on the part of the owners. This is especially true in the current environment where investors and venture capitalists aren't handing money out to just anyone who can breathe and has a business idea! Even established businesses will find it necessary in some cases to provide the business owner's personal guarantees on some loans or credit cards.

Building business credit is completely different from building personal credit, though your personal credit may be linked in some ways. For example, credit reporting giant Experian sells a business credit score that is based on both the risk of the business and the personal credit of the owner of the company.

In addition, you don't have the same credit protection laws with business credit that you do with personal credit. So you want to make sure you start out on the right foot, or it can be difficult to make corrections.

The key to properly establishing business credit is twofold:

1. Set up the proper business structure and take basic steps to ensure your business appears "real" and stable to the business credit bureaus. That means getting the proper occupational licenses, and a phone number that is listed with directory assistance in the businesses' name, among other things. Your business will generally need some form of corporate structure to effectively build a business credit rating.

2. Borrow or buy products and services from companies that will report your credit history to the major business credit reporting agencies such as Dunn & Bradstreet and Experian.

Unlike personal credit ratings, where you can have a small income yet get a top FICO credit score, the best business credit scores are reserved for large stable businesses, those with several million dollars in sales a year and 25?50 or more employees.

But don't let that stop you! By taking a few careful steps, you can start small and still build a decent business credit rating to get you the borrowing power your venture needs.

A few warnings:

1. Don't try to "buy" good credit! Some companies will offer to "sell" trade references for a large sum of money. This is a rip off and if the credit reporting agencies find out, they will purge those references.

2. Don't spend large sums of money on a shelf corporation from a company that "guarantees" you will be able to use it to get loans. More often than not, the company won't have the kind of credit rating you'll need to be successful.

3. Don't try to get business credit as a substitute for bad personal credit. If you have damaged personal credit, work on rebuilding it while you're building business credit.

Entrepreneurs are usually hard-working, creative and willing to get the job done. Fortunately, those are the same qualities that will help you through the process of building strong business credit. Get started now! For more information about building business credit, visit www.BusinessCreditSuccess.com

About The Author

Gerri Detweiler is considered one of the country's top credit experts. She has been interviewed for thousands of radio, television and print newstories including USA Today, The Wall Street Journal, The New York Times, Dateline NBC and many others. She has testified before Congress several times and worked on reform of the national credit reporting laws.

---

10 Ways To Protect Your Financial Identity Being Used For Someone Else?s Shopping Spree

Someone impersonating you could be spending your hard-earned money.Impossible! Not... Read More

Which Business Credit Cards with Reward are the Best?

Thinking of applying for a credit card with a reward... Read More

How To Get a Low Interest Credit Card

Consumers often have the first credit card that they ever... Read More

How to Avoid Credit Card Late Fees

Everyone hates late fees and being late will cost you... Read More

Tips For Getting Your First Credit Card

Most of us get a credit card on our name... Read More

Bad Checks, Bounced Checks, & NSF Checks

Negotiable instruments like checks and drafts have become an indispensable... Read More

Fixing A Credit Report

Fixing a credit report starts with seeing what's on it.... Read More

The Credit Card Surprise That You Need to Look Out For

Companies that issue credit cards want to make a profit.... Read More

Opting For A Credit Card? Check Out Certain Terms

You've just received a "pre-approved" credit card offer in your... Read More

UPS Delivers the Goods, Your Identity

Well now we add CitiGroup and UPS to the Identity... Read More

The Right Way To Credit Repair

If you have a bad credit rating, then you might... Read More

My Credit Card Application Was Rejected! Now What?!?

No doubt, you've probably gotten literally hundreds of credit card... Read More

To Repair Credit Is No longer Satisfactory - Learn How To Earn A Millionaires Credit In 30 Days...

To repair your bad credit does not necessarily mean that... Read More

10 Tips To Prevent Credit Card Fraud

Imagine opening your credit card statement one morning and discovering... Read More

Credit Report ? Look Out for Your Debit Report, Too

Most consumers are aware that there are companies that keep... Read More

Special Credit Information for Married Couples

If you are married, establish separate credit accounts.Try to finance... Read More

Rebuild Your Credit the Right Way the First Time

If you are one of the millions of people out... Read More

Start Building Credit Fast!

There are a couple of reasons for this. You can... Read More

Tips for Choosing a Credit Card Company

Credit Cards are essential for any consumer today. However, when... Read More

Credit Report ? Watch Out for Parking Tickets

The economic downturn of the last five years has affected... Read More

Credit Card Balance Transfers Can Help You Stop Putting Money Down The Drain

As you probably know, interest rates are at all time... Read More

Credit and Loan Help for Mortgage Loans

Mortgage loans are some of the most difficult loans to... Read More

Common Credit Score Myths

A lot of credit score myths about fico score ratings... Read More

Credit Repair Scam - How To Avoid Being A Statistic?

A good credit history is critically important for the consumer.... Read More

Save Money and Lower your Payments by Improving or Repairing Your Credit

Having a better credit score not only represents easier access... Read More

Different Types of Credit Cards and Features - Part 1

Just as there are too many credit card companies to... Read More

Useful Tips on Using Credit Cards

Here are some useful tips on using credit cards. Whether... Read More

Credit Cards For People With Bad Credit Scores

Sometimes life lands you in a situation that causes your... Read More

Discover the Parts of a Credit Report and What They Mean

So you ordered a copy of your credit report to... Read More

Credit Report Secrets: Do You Know What They Reveal?

If you've ever applied for a credit card or loan,... Read More

Credit Cards or Store Cards - Which Is Better?

Introduction In this article, a presentation is made of the... Read More

How To Read Your Credit Report

The Fair and Accurate Credit Transactions Act, signed into law... Read More

Five Reasons to Repair Your Credit Score - You Can Do It Yourself

There are multiple reasons that tell us why we should... Read More