Business Credit Building

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

If you are looking for $50,000 or $250,000, following these simple steps, you can build your own corporate/business credit.  

Just over 4 years ago I got an interesting e-mail from a business credit building expert. The very short e-mail talked about an innovative way to build business credit by creating a Nevada “shelf” Corporation that was “aged” a few years and using it to build hundreds of thousands of dollars in business credit.

To prove their point they sent a list of everything that they would do, and all I needed to do was pay their 4-figure fee. During that week, the expert that I talked to and the Google searches of his name gave me the confidence to wire the money and get started. At that time this was the largest online purchase I had made dealing with someone I had never met.

Then 6 months went by and nothing happened. I was assured that the process was taking time and I’d soon have my new corporation with credit… Many more months passed by. I had given up. Then I took the notes out and started researching the process myself. Oh, yeah, I also got my money back! I know that I was one of two people who got a 100% refund from what turned out to be a scam. The process was actually “legit” however the individual in charge of the operation seems to posses very few brain cells, and the ones that were ‘active’ allow him to talk, but not much else.

You don’t need to pay anyone to build business credit. You can do it yourself. My suggestion is that you build business credit while your company is new. DO NOT WAIT until you *need the money*!!!

The best way I can say it is like this: BUILD YOUR BUSINESS CREDIT when you DON’T need the money.

I’ll now describe what I learned in the process and how I built my own business credit:

From the research and actively pursuing the process of building business credit, I setup Business Credit Building and now I am ready to install the next step in the process by adding a forum where people can exchange business credit building ideas. As part of that aide to my fellow business community, I’ll try to help explain a few myths, answer some questions and help you get started building business credit.

In the course of building your business credit you’ll see all kinds of claims –everything from information manuals that are in the teens, per dollar terms, to “kits” that cost $10,000 dollars plus.

My strategy is to do the following:

• Use my resources to build your initial business credit.
• With or without the credit, build your business. Always remember that I advocate “ZERO” use of credit in personal or business life. Pay everything, NET 30!
• Once you build upon the initial business credit, you can explore additional bank and credit card business credit.

Keep in mind that the vast majority of your business credit, as a start-up, will come from vendors. Over my 12 years of online work I’ve had $25,000 credit for hosting to just a few hundred for office supplies. All that is important to have as “stand by needs” while building a business. However, don’t get into the habit of needing credit all the time. It will significantly eat into your earning over time and you start to pay internet on interest. At this time I have worked into a “zero” debit structure for my business work. I will extend the use of credit only when there is a “proven cash-flow” building opportunity, where I can use credit and build operations.

Starting out, around $50,000 in credit was used at various points in the business expansion to

There are only two examples that clearly provide that opportunity:

• Financing a large advertising campaign *after* testing has proven that it works.
• Making a purchase of assets –from another business to a domain name.

Business Credit Building TIP #1: Get virtual operations started before “real-world operations” begin!

Yes, you read that correctly –Even with something as extreme as your own pizza restaurant, my suggestion is that you start working on your credit facilities right from the start. How can you do that? Well, the first step in your new restaurant should be to setup your concept online. So, while your location is getting ready, you can work on the virtual part of it, and start building credit.

You may have to do something like this to get your first credit reference –Perhaps, it’s the menu. Print it at a small commercial printer and let the owner know that you need a credit reference. Pay the bill immediately and you will be able to get a good reference. Then work on at least 5 more. You actually need only 5, but have an extra just in case the credit bureau cannot contact one.

Once again, in the setup-phase of your business, you’ll have periods where you do a lot of planning. Make credit building part of that plan and aim to have $50,000 or even $100,000 right from the start of operations to make the “cash flow” much smoother as you work with vendor credit to make your dreams grow.

When doing this in the States, you’ll be able to incorporate in your state of residence, even filling forms online, for as little as $100.00. The States of Nevada and Delaware tend to be the most often used places for incorporation. There are more Fortune 500 companies registered in Delaware than any other, due to it’s positive regard to corporate welfare. If you are overseas, and would like to form a Delaware or Nevada corporation, your first step is to find an agent that works with either state’s corporations.

If you are living in any other states, you’ll need to carefully evaluate the costs and benefits of registration in your how state versus a Nevada or Delaware corporation.

Regardless of the path you take, consider some type of formal business arrangement –there are several apart from a corporation. AND keep your finances apart from your personal items. This part requires that you setup at least a general banking account (checking account in the States) and a general purpose account. I use a checking and savings account, with a check card attached to the checking account.

Some of the Benefits of the Corporation or Business Entity you’ll form:

• Tax benefits –consult your business, accounting professional about it.
• Separation of business and personal finances.
• Separation of business and personal credit.
• Overall professional operational environment.
• Being able to include many of your travel, meal and business expenses in the corporate account.

If you are unfamiliar with these statements, just consult your accountant, or find one, to better understand what your potential benefits are and how to take advantage of them.  Hiring such a professional will greatly pay off down the road as your build your business.  Keep in mind that such expenses, used as part of the business, are corporate expenses!
Now that your corporate structure is working, it’s time to build credit:

Business credit for those of you who are new to the arena, is credit given in the name of your business, and often it is given without you giving a personal guarantee. This is often the case with vendor credit. However, getting bank credit without a personal guarantee is not realistic. Banks want collateral.

In the USA, most often a business tax id is all that is necessary to get commercial (vendor) credit. After you form your corporation, this is the next step that you will need to do –establish a tax id. If your country does not collect corporate taxes, feel special and go to the next step.

The business tax id is rather important because it allows you to create bank and credit account(s) without using your personal information, such as a personal tax id.  It is the personal tax id that is used by the credit bureaus.  In the USA, that is the Social Security number.  However, with a corporate tax ID, you can use that in place of the social security number.  In your country, the setup will not be all that different.

Now that your corporate or business is legally setup, and you have your tax ID, it’s time to find a few places to establish credit:

The easiest places to establish credit are general stores and trade stores.  For example, Staples, Home Depot, Best Buy, Office Max –any office supply chain and business supply chain –warehouse type of sales center will work fine.

With such companies you’ll be able to establish $500 to $5,000 dollars in business credit.  Keep in mind that you can get all of this done before you have your FIRST $dollar$ in revenue!  Then if and when you need it, you’ll have all the credit you need.  Keep in mind to save all of your receipts and present them to your tax professional at the end of the month.

PART TWO:  Exact details on the Step by Step Business Credit Building… Please see link here tomorrow or the day after.

Success & Carpe Diem,

Rich Sage