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How to Start Building Business Credit

Business Credit, also referred to as Corporate Credit, is credit that is obtained in a Business Name with business credit the Business builds its own credit profile and credit score linked to the business EIN number… not the owner’s social security number and with an established credit profile and score, the business will then qualify for credit.

This credit is in the business name and based on the business’s ability to pay, not the business owners. Since the business qualifies for the credit, when done right business credit is obtained with no personal credit check required from the business owner. And, the business owner isn’t personally liable for the credit the business obtains.

EVERY highly successful business has business credit. This is how the largest privately and publicly owned companies obtain credit and capital to grow…without the CEO or owner needing to personally guarantee the credit and financing but even startups can obtain the same type of credit… it’s just about understanding the proper steps.

Business credit provides a lot of exclusively unique benefits. For one, a credit profile can be built for a business that is completely separate from the business owner’s personal credit profile. This gives business owners DOUBLE the borrowing power as they have both Personal and Business credit profiles built.

Business credit can be built quickly business credit scores are based   only on how the business pays it’s  bill. A business must first get approved for Initial credit, usually from VENDORS, once credit is approved, the business uses the credit to make purchases. Once invoiced, if the business pays the invoice quickly it IMMEDIATELY is issued a HIGH credit score.

Vendor credit accounts can be obtained IMMEDIATELY. High-limit revolving store accounts can be obtained within 60 days. Fleet and cash credit can be obtained within 120 days and auto vehicle financing can be obtained within 6 months or less.

When it comes to credit, businesses have a much greater need for higher CAPACITY than a consumer does… This is why approval limits are much higher on business accounts versus personal accounts. Per SBA, credit limits on business cards are usually 10-100 times higher than consumer credit.

Here are some recent approvals:

Apple                    $7,500 and $12,500

Universal Fleet  $4,500

Tractor Supply   $5,000

BP                           $8,000

Fuelman Fleet   $16,000

Exxon                    $15,000

Office Depot      $15,000

Costco                  $20,000

Sears                     $15,000

Best Buy              $40,000

RJS Fleet              $40,000

When done correctly Business Credit can be built without a personal credit check… and without putting your SSN on an application, no inquiries on your report, business credit can quickly be obtained regardless of personal credit quality and there is no personal credit reporting of business accountsUtilization won’t affect your consumer FICO score.

Most business credit can be obtained without the owner taking on personal liability, or a personal guarantee. This means in case of default, the business owner’s personal assets can’t be pursued. Business credit also increases the value of your company and, business credit gives you a competitive advantage.

Almost any business can get business credit as long as it has an EIN number and entity setup. You don’t need collateral, you don’t need financials, you can be a startup, personal credit quality doesn’t matter and you just need to know the proper building steps.

ANYONE can pull your business credit reports without your permission. Clients, prospects, potential buyers, even competitors can see YOUR business info. This means they can see… Payment history, High credit limits, Employees and revenue, Past payment performance and much more.ALL lenders and credit issuers also review your business credit reports to determine if you’ll be approved or denied, the rates and terms you’ll pay and how much you’ll get approved for.

Vendor credit is sometimes refereed to as trade credit. This type of credit is extended from one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment and is often used by business organizations as a source of short-term financing.

Trade credit is the largest use of capital for a majority of business-to-business sellers in the United States. For example, Walmart, the largest retailer in the world, has used trade credit as a larger source of capital then bank borrowing. Trade credit for Walmart is 8 times the amount of capital invested by shareholders and is the second largest source of capital for Walmart, retained earnings is the largest.

Trade Credit is usually offered with terms including Net 1, Net 15, Net 30, and Net 60. These forms of trade credit specify that the net amount is expected to be paid in full and received by seller within that 10, 15, 30, or 60 day time period.

The word net in this sense means “total after all discounts”. An example includes a company such as Quill letting you purchase items on a Net 30 term. You make the purchase using your credit, and are given an invoice with Net 30 terms.

This means you have 30 days from the day the services are rendered or your items are shipped to pay your balance in full, minus any discounts. So, if you purchased $100 worth of office supplies, you need to pay back the $100 within 30 days of your items being shipped.

 

Legally speaking, net 30 means that you as the buyer will pay the seller on or before the 30th calendar day (including weekends and holidays) of when the goods were dispatched by the seller, or the services were fully rendered. Transit time is included when counting the days.

If you pay after that 30-day period, you’ll typically be charged interest for not meeting the terms. If you pay late, you’ll also damage your business credit scores if the account reports to a business reporting agency.

Net 30 terms are the most popular form of trade credit. Net 10 and Net 15 terms are widely used as well, especially with contractors and service-oriented businesses. Net 60 terms are not as common due to the longer pay-back term, but are sometimes issued.

Trade credit is VERY popular in the United States but, of the millions of vendors who issue credit, over 97% of them do not report to the business credit reporting agencies. When using trade credit to build your business credit profile, it’s essential you find vendors that will give you credit without a personal credit check and report your credit to the BUSINESS credit reporting agencies.

The first step to using trade credit and vendors to build business credit is to find sources who will give you credit for your business, even if you have no credit reporting now. Most major retailers will offer EIN credit in your business name only but, only a VERY small few will issue you this credit if you have no business credit established already… unless you’re willing to provide a personal guarantee or credit check.

If you do use your SSN when applying, the vendor will pull your personal credit and an inquiry will be placed on your personal credit report. Then, both your personal and your business credit will be used to make the approval decision. You’ll also be attaching a personal guarantee, so in the case of default your personal assets can be pursued.

To obtain vendor credit without a personal credit check or guarantee, you’ll need to find trade vendors who will give you credit for your EIN… even when you have no established credit now. Once you find these vendors, it’s essential to make sure they report the credit to the business reporting agencies. The VAST majority of vendors don’t do this, so the credit issued then won’t help you build your corporate credit.

Vendors who will give you credit when you have none reporting now, and report to the business reporting agencies, are very rare. They’re so rare that when you do find them, you may need to buy some items you normally wouldn’t buy from sources you wouldn’t normally buy from.

These sources in return provide you MASSIVE benefits including taking a risk in issuing you credit, even though you have no track history, helping you ease cashflow and giving you “trade lines” to help you establish initial business credit.

Once you get credit with vendors, use the credit, and pay the bill, the account is reported to the business reporting agencies. Some vendors report credit weekly, others report monthly, and others may report quarterly. It’s a great idea to ask vendors when and how often they report so you know what to expect.

 

One of the easiest and most useful vendors you’ll find to help build business credit is Quill. Quill sells office supplies and many other useful products for businesses. Quill offers Net 30 terms, and will approve you even as a startup. You should order $50 or more to have your credit reported to Dun & Bradstreet.  They review your D&B and Experian reports, and may require a couple of initial purchases first if you have no credit reporting now.

To get approved with Quill, visit their website www.quill.com and select $50 or more worth of items and place them in your shopping cart. Go to checkout, and choose to open an account. Select to be invoiced, and do NOT enter your credit card information upon checkout and you’ll be notified by email that you are not approved, or that your item has been shipped.

Uline is another great starter vendor that offers shipping and packaging supplies. They issue Net 30 terms and report your credit to D&B. They will want you to have your D-U-N-S number from Dun & Bradstreet before you apply.

They will ask for 3 references upon enrollment. You may need to pre-pay for your first couple of orders before you get approved. To get approved with Uline, visit their website wwwuline.com and select items and place them in your shopping cart.  Go to checkout, and choose to open an account. Select to be . invoiced, and do NOT enter your credit card information upon checkout and you’ll be notified by email that you are not approved, or that your item has been shipped.

Grainger is another great starter vendor. Grainger sells industrial supplies and they issue Net 30 terms and report to D&B. Grainger is notorious for offering nearly all applicants a $1,000 line-of-credit and you must apply with them by phone 800-323-0620.

Seton will issue net 10 terms to businesses that have no prior established business credit. They sell all types of safety signs, labels, asset tags, first aid kits, and thousands of other products. They report your credit to D&B.

Visit www.seton.comand put items in your cart that you want to purchase. Go to checkout, and choose to open an account. Select to be invoiced, and do NOT enter your credit card information upon checkout. You’ll be notified by email that you are not approved, or that your item has been shipped.

Gempler’s is a leading provider of work supplies and offer over 35,000 different products. They issue Net 30 terms and report to D&B. You must order $50 or more of items to have your account reported.To get approved, call 800-382-8473 and ask for a credit application. Complete your credit application, but leave the SSN field blank and You’ll get a notice by email or phone that you’ve been approved within 48 hours.

Gempler’s is one of the hardest of these vendors to get approved with. They will typically want you to have some type of credit already established before they’ll approve you. They are also the only one mentioned that requires you complete a paper application and they are one of the only sources that actually ask for your SSN… even though you don’t have to provide it to them.

You’ll need to get credit with at least 5 vendors to have enough trade lines to start getting revolving credit in most cases. REMEMBER, you MUST pay your bill on time or early. For your credit to get reported, you have to pay it AFTER the invoice is issued… that’s when the Net term starts and If you pay it before that, you won’t get credit on your business reports.

Pay your bill promptly AFTER receiving your invoice. Most sources will let you pay online, or by phone, using a checking account or other credit card. Allow 30-90 days for your credit to report, 60 days is the average time for credit reporting.

Monitor your business credit reports to watch your trade lines get reported… and your scores established.

Your scores directly reflect how you pay your bills:

80 Paydex = Pay prompt

90 Small Business Risk Score = Pay as agreed

So ALWAYS pay early or on time

Once 5 accounts are reporting to D&B, Experian, and Equifax combined, you can then start getting credit with most stores. You can then grow your credit to qualify for fleet credit, cash credit cards, and auto vehicle financing.



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