Continued: Business Credit Building…

Regardless of your desire to build $50,000 or $250,000, following these steps over a few months will help establish the credit that you need, some of it even *before* you get your business operations started. This is vital corporate capital that you cannot live without.

Having your share of business credit can make the difference between success and failure, no matter how well you have planned at the start!

This is a TWO PART Article –Please start here for the full story. Follow this link for the Business Credit Building website.

Having Credit vs. Running Day by Day: A Successful Mindset…

Please don’t misunderstand what I am advocating here. I am not teaching you how to “charge to the max” on all the business credit that you develop!! Not even close. What I am suggesting and what I hope you’ll learn is that it is far better to establish credit facilities when you don’t need them as oppose to trying to build credit at the last minute, under dire circumstances.

The reason I advocate following the above plan is because as a small business start-up, or a fast growing company, you’ll find out that the faster you grow the LESS money you will have for vital needs or even strategic needs.

Let’s go through a checklist of Business Credit Building needs that you’ve completed and others that you need to undertake to “make your” dream a reality…

Keep in mind that retailers like Staples will give you a $1000 limit simply because your tax id shows a clean credit profile. Companies like Staples will report monthly to credit bureaus that focus on businesses, resulting in more and more offers in your postal mail box. Keep in mind that while you are building your credit profile it is important to pay your bill ON TIME, but do not pay off the entire balance. After all, *credit* companies make their money on providing credit. So, for the first six months, carry a small balance as you build your credit. Make 100% certain that you’re paying the monthly bill well ahead of time. You may need to keep as much as a 20% to 33% balance at the end of the month for a few months. Since the interest you pay is a business expense, this effort is well worth it for the long-run.

Are you ready to build $10,000, $50,000 or even $100,000 or more in credit?

At this point, you’re at a cross-roads, because using your company, and tax ID, you can get the below done, with about $10,000 to $50,000 in various credit facilities:

• Establish corporate credit cards
• Establish department store credit cards
• Start to establish vendor credit (many of these vendors will become your credit references, when you move on to the steps below) Keep in mind that this is the bulk of credit that you’ll get.

You’ll be able to do many of the above tasks with out any business ‘facilities’ like a dedicated business phone or address. Just use your home phone number and location. However, if you need to raise over $100,000, to as much as $250,000 or more in business credit, I strongly urge you to proceed with the below, more advanced parts of your business credit building exercise:

• Use your home address to get started, depending on your type of business
• Register a phone (regular one) in the name of the business. Not a cell/mobile phone
• List your business in the phone book (free listing is fine) and yellow pages (optional)
• Often, when you are doing business in one state, you’ll need to get a “State Business License”
• Again, depending on the type of business, you may need local or city licenses
• Establish at least one bank account –my suggestion is to create three accounts at business friendly banks
• Establish a corporate savings account or money market account
• Build a website with a domain name for the business and create your first email address
• Create a Dunn and Bradstreet (D & B) Number –the free account creates a D&B number in 20 days.
• Contact your credit references and inform them that you need their “good word” –a good reference. Yes, *ask* them for it!
• Create at least 3 bank accounts at business-friendly banks.
• To this point, you’ve had to make personal credit guarantees to get your finances. At this point, focus on credit facilities that DO NOT require a personal guarantee. When you have about 5 such trade references, you’ll not be part of the “high risk” credit profiles.

Using a Physical Address:

It’s fine to get started with your home address. However, stay away from using a P.O.Box or postal drop off location right at the start. After you get your credit lines established, you can switch to a postal address in addition to you physical location.

Creating Your DnB Number:

When you go to Dunn and Bradstreet and create a DnB number, you’ll be confronted with their sales pitch for you to pay a lot more and get your credit profile done quickly. I passed up this option. Creating a DnB number and getting a credit profile is actually free. In fact, if you try to “greatly speed up” this process, there is a problem — your vendors may not be ready to give a credit reference. My suggestion is to take the free route and make sure the vendors are ready to report to DnB.

Keep in mind that Dunn and Bradstreet supports a membership in about 67 countries, and you are most likely covered. Again, a quick glance at Dunn and Bradstreet and you can find out.

Business Phone Number:

One of the first checks made by the credit bureaus is your phone number. They will check to make sure that you have a listing in a real-world phone directory. Once you have your office phone number, make sure to get listed in a directory such as 411 or similar type of business phone directory in your country. Obviously, a cell/mobile phone will not work too well for this.

Building Your Web Site:

This is more and more important, especially for your trade references.

My advice is to do the following:

• Get your basic website setup. I recommend HostGiant, a low-cost, good value provider.
• Install WordPress on your hosting account. And find a professional theme. There are thousands of themes that are free. I have written a good START UP tutorial that you can use to get your online operations going.
• Write some content to explain what you do.

This will provide some “comfort” for your 6 trade references that you are series about getting your success moving.

WHY Three Bank Accounts are Needed?

If you need a very large loan for a start up business, you may not get approved. However, if you spread your loan needs between 3 banks, you are far more likely to get smaller loans approved.

Where to get Credit References:

You’ll find two types of credit references –the first are the contacts, i.e. vendors that you work with. You need them to establish your 75+ D&B (Paydex Score by D&B) credit score.

The next type of reference is automated, and reported by the large companies, such as mobile phone companies, overnight express shipping companies, office supply stores, and various business to business companies. You should be able to create a list 4o to 50 such companies easily.

“Aged” or “Shell” Corporations:

This is an advanced technique to purchase a corporation that is from 2005 or 2006, has the correct paperwork, and no negative history.

By doing that you can get around the question of your company being a “start up” that is less than 2 years old. You’ll also be able to get more established business clients like a local or national government. Having an older corporate will greatly speed up your business credit building process as well.

Here is an organization that can provide “aged” corporations: www.nevada.org

Providing a Personal Guarantee:

The idea that you can walk into a bank and fill some paperwork and your corporate details and get a loan is absurd. The bank is not going to provide anything without your personal guarantee!

You may find one or two banks, department stores, etc. that may provide a credit card without a personal guarantee, but don’t expect a bank to provide a loan on those terms. They may provide you a line of credit with out financial information from the company, but they will never provide such facilities without a personal guarantee.

You’ll find out that the store cards, office supply type of credit cards are the easiest corporate credit you can get. Make sure to establish your phone number and “setup shop” in your own home to get started applying for the store cards.

The more advanced and larger credit lines require a little more time. However, since you started all of this before you got most of your operations going, you can spend about an hour on this task weekly and get you job done. By working on it for about six months to a year, you will see that you can build $100,000 or more business credit.

Carpe Diem & Success,

Rich Sage

Do keep in mind:
I am merely a Sage, and the above information is just that –It’s not legal or accounting advice. I’ve provided this for informational purposes to help you find direction to your own research…