Getting Business Credit![It's Not Exactly Easy]
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Most small business owners will tell you that they need to know two important things for their business to operate. How to get business credit and how to get capital.
In this market the idea of having credit for your business that is separate than your personal credit can be quite appealing. Unfortunately, it’s not as easy as most other companies or “gurus” would like you to think. |
In this market, you’ll have to spend a lot more energy to get business credit especially that which is unsecured and low doc / no doc. But with that said, with the proper knowledge and a good process, it is still possible to get business credit in today’s lending market!
So, how do you get business credit in today’s market?
The overall process is to first prepare your company in such a way that banks are willing to lend to you, then know what banks to go after. To determine how much credit you can obtain, consider how much revenue and sales your business makes. If your company is just starting out and you have no sales, then most likely, you will go for a no-doc loan (up to $50,000) or a business credit card with a smaller limit ($5,000 – $15,000 each). However, if your company has been established for a while and has sales and revenue figures (preferably two years or more of positive tax returns available), then you could apply for higher limits.
The overall process is to first prepare your company in such a way that banks are willing to lend to you, then know what banks to go after. To determine how much credit you can obtain, consider how much revenue and sales your business makes. If your company is just starting out and you have no sales, then most likely, you will go for a no-doc loan (up to $50,000) or a business credit card with a smaller limit ($5,000 – $15,000 each). However, if your company has been established for a while and has sales and revenue figures (preferably two years or more of positive tax returns available), then you could apply for higher limits.
Prepare your company
One of the first steps in getting business credit is to make sure your company is in compliance with your local, county and state requirements. Make sure you are in good standing with the secretary of your state and with your local town and county clerk. You can order a standing certificate from the division of revenue in your state to confirm you are in good standing.
Also, make sure your company has sufficient business credit history with the business credit bureaus (read more on this in our free guide). It’s the same concept as trying to get personal credit. If you have no personal credit history, it’s hard to get a loan, right? With business credit, it’s the same idea, you need some credit history to get a business loan too. Now I realize you may be wondering, how do I get business credit, if I first need business credit history to get approved? Well, there’s a process for that too. And it involves setting up small trade lines of credit that report payment history to the business credit bureaus (Dun and Bradstreet, Equifax and Experian).
Before you can setup small trade line credit (also referred to as Vendor Credit or NET 30 Credit), make sure you have a Business Credit Profile setup with Dun and Bradstreet (first step would be getting your DUNS Number). Then have anyone you do business with report to the business credit bureaus the fact that you pay on time. This is very important when trying to get a business credit card, business loan and/or larger business lines of credit. Essentially, you want to have small trade lines of credit established to build-up your business credit profile, before you apply for the bigger types of business credit (lines of credit, loans, etc).
Now that you have the foundation laid and have a presence with the business credit bureaus, determine what your business has to bring to the table. Ideally, you will have tax returns with solid revenues (I’m saying solid because this is a big variable among our readers, but think positive cash flow), assets and the person applying (CEO, CFO, or credit partner) would have good personal credit habits (and a good FICO score). Now assuming this is your case, it will be easy to move to the next step (note: the applicant does not have to be the business owner).
For those that don’t have profitable tax returns, assets or good personal credit; then you will have to take additional steps and will most likely have to do no-doc, unsecured applications.
Also, make sure your company has sufficient business credit history with the business credit bureaus (read more on this in our free guide). It’s the same concept as trying to get personal credit. If you have no personal credit history, it’s hard to get a loan, right? With business credit, it’s the same idea, you need some credit history to get a business loan too. Now I realize you may be wondering, how do I get business credit, if I first need business credit history to get approved? Well, there’s a process for that too. And it involves setting up small trade lines of credit that report payment history to the business credit bureaus (Dun and Bradstreet, Equifax and Experian).
Before you can setup small trade line credit (also referred to as Vendor Credit or NET 30 Credit), make sure you have a Business Credit Profile setup with Dun and Bradstreet (first step would be getting your DUNS Number). Then have anyone you do business with report to the business credit bureaus the fact that you pay on time. This is very important when trying to get a business credit card, business loan and/or larger business lines of credit. Essentially, you want to have small trade lines of credit established to build-up your business credit profile, before you apply for the bigger types of business credit (lines of credit, loans, etc).
Now that you have the foundation laid and have a presence with the business credit bureaus, determine what your business has to bring to the table. Ideally, you will have tax returns with solid revenues (I’m saying solid because this is a big variable among our readers, but think positive cash flow), assets and the person applying (CEO, CFO, or credit partner) would have good personal credit habits (and a good FICO score). Now assuming this is your case, it will be easy to move to the next step (note: the applicant does not have to be the business owner).
For those that don’t have profitable tax returns, assets or good personal credit; then you will have to take additional steps and will most likely have to do no-doc, unsecured applications.
This process of getting business credit does take a lot of work, but focus on what’s on the other side: Business Credit! Business credit that can be used to dramatically improve your business, fund your accounts receivable, increase your marketing (hence improving your profit), buy equipment/inventory or give you the money needed to expand!
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Advanced Tips for Business Credit Mastery
Are you interested in higher-level advice to boost your business credit score and access more beneficial credit lines? Exclusive content is available to members of AMAIA Business Coaching Webinars online… Need Some Personal Help? If you need additional help getting business credit, please contact us at [email protected] to schedule a free business credit consultation with an AMAIA Business Credit Coach . We will work with you personally to help meet your business needs. |