There is a right way and wrong way to do almost everything. The same is very true for building strong business credit scores with the three national business credit reporting agencies: Experian Smart Business Reports, Equifax Small Business Financial Exchange and Dun & Bradstreet.
For example, many businesses set up as sole proprietors and operate for years under the mistaken assumption that they can, and have, built business credit scores. This mistaken assumption is actually fostered, in part, by the business credit reporting agencies themselves because they will give a sole proprietorship a credit file and even assign business credit scores.
So if that is true, then what makes it a mistaken assumption? Well, in the case of sole proprietorships and partnerships, all loans and credit lines extended by lenders, banks, business credit cards, vendors, etc. are tied directly to the owners personally. As an owner or partner you are 100% personally responsible for the repayment regardless of what happens to your business. You are “doing business”, but are not truly ”a separate business".
In order for your business to build business credit scores that are completely separate from you personally, your business must either be an incorporation (INC or S-Corp) or a limited liability company (LLC). These business formations create a stand-alone "entity" which lenders and credit providers then treat as a entity that is separate from you personally. Now, when you build business credit scores, the loans and lines you receive are not tied to your social security number and will not show up or report on your personal credit reports.
The following is another common misconception about business credit, “I already have a PayDex score with Dun & Bradstreet, so I have built business credit”. It is true that Dun & Bradstreet is a valuable part of the equation to building business credit scores, but they only represent one-third of the overall task. Experian Smart Business and Equifax Small Business Financial Exchange are of equal value and they serve different markets.
If your goal is to obtain loans or lines from a bank then Equifax may be the most important component of your credit building process. Equifax operates the Small Business Financial Exchange. The Exchange is primarily where banks share business data between themselves. So, if you do not build strong business credit scores with Equifax, you may be eliminating your chances for true bank financing.
Many business credit card providers, leasing companies, vendors, and even commercial landlords rely heavily upon Experian BIS (Smart Business Reports) data when it comes to making approval decisions. Building business credit is not complete without having a strong Experian Smart Business profile and score.
Our Business Credit Building System walks you through getting your business credit files opened with all three national business credit reporting agencies. It gives you step-by-step instructions for setting your business foundation "the right way", the first time. The instructions are comprehensive, very clearly spelled out, and the methods have been proven by over 50,000 business owners before you.
Most banks and commercial lenders have a checklist of 20 items that your business must have completed to be considered “in Compliance”. The problem is that business owners simply aren't aware of these items and, even if they were, don't know how to go about properly addressing them.
On the surface, most of these 20 Compliance Items would appear to be simple tasks but, unfortunately, that isn't always the case. As an example, one of the verifications that most lenders and credit providers perform is to call directory assistance and ask for the listing under your legal business name. If there is no listing then you'll more than likely be declined. But having your business properly listed with 411 directory assistance under its exact legal name is a simple task. Isn't it? It can be much harder than you think.
Is your business phone a VOIP, or a virtual system, or a cell phone? Call your local 411 now and ask for your business under its legal name (your business name as listed on your State filing). 411 calls route from your local service provider to the carrier for the phone you are calling from, such as AT&T routes to AT&T, Verizon to Verizon, etc. Let’s say you have AT&T and you call 411 to find that your business is listed. Now use a friend’s phone that has Verizon, Cox, or any other local provider. Is your business still listed? What about a lender who calls to verify from an outside area code? They would more than likely dial 1-XXX-555-1212. Be sure to test for that too because, in many cases, those calls route to the national directory assistance database and not to the local service provider.
Included with our service is a free submission to the national directory assistance database along with detailed methods on how to ensure that all your local area carriers have a listing for your business.
Ok, we've covered one very "seemingly simple" business compliance item. There are 19 more that seem just as easy when, in reality, it can make all the difference to have someone walk you through each and provide specific instructions on how to properly complete them. And just as important, how to complete them for all lenders no matter what state they are in. Missing just one of these items can result in your loan request being declined and, unfortunately, most credit providers will just send you a declined letter rather than take the time to go over which items you failed to complete and how to correct them.
The Business Credit Building System shows what these items are, how to complete them, and how to verify that the lender will see them as completed. We call this the foundation and it is critical to get all the items completed before we begin building strong business credit scores.
The SBA reported that vendor credit was the single largest source of small business lending in the United States. There are over 500,000 vendors (companies) who extend lines of credit to their business customers.
So what exactly is vendor credit? Vendor credit is when a company, like an office supplies provider, allows your business to get the products it needs now but pay for them later. Vendor credit terms are typically Net 30. This simply means you must pay the bill in full within 30 days of the initial order or reciept of goods. Of course there are also Net 15, Net 60, Net 90, and even Net 120 payment terms. It just depends on the situation.
Why does your business need vendor credit? There are two key reasons. The first one is cash flow. Vendor credit gives your business access to the products and services it needs "now" while allowing you to defer the payments for later. This conserves cash flow for your more critical short-term expenses and gives you time to generate the revenue necessary to cover the original bill. Secondly, if the vendor reports your good payment history it will help you to build strong business credit scores. So, the key is in the reporting.
An upside to vendor credit is that it is normally tied only to your business and not to you personally. However, a downside is that there are over 500,000 vendors that extend business credit, but only about 6,000 that report to the national business credit reporting agencies. You will want to select vendors that report.
The good news for you is that after researching hundreds of vendors, we have compiled a list of the ones who both extend business credit lines and report. You can access these vendors inside our Business Credit Building System. Even better, these vendors have informed us of what it takes for your business to get approved and we provide you with direct access to that information.
For your business to optimize your business credit scores it is going to need 5 vendor lines of credit that report. Throughout the process of applying for business credit it is important that you avoid getting too many "declines", as those inquires will show on your business credit reports. That means you need to be prepared before you apply, and a big part of this is knowing ahead of time what a vendor requires for approval. That is exactly what our Business Credit Building System does for you.
Regardless of where your business is at, or the status of your personal credit, if you follow the steps in our system your business can obtain the 5 vendor credit lines it must have to build strong business credit scores. Vendor credit is the engine that drives your initial business credit building success and a major foundational component of the process thereafter.
Once your vendor credit lines are established and reporting, then business credit cards and other types of business loans will begin to open for you. Finding and applying with the right reporting vendors is critical to your success and not a task you should take on alone. We're here to help.
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