Entrepreneurs today find that acquiring business lines of credit can become essential to expand day to day operations. Without the use of credit lines, a business owner may find oneself at risk of becoming illiquid when attempting to expand their business. On the other hand, they may be overshadowed by their competitors if they choose not to take advantage of opportunities in the market. No matter what type of business one owns, the more capital and credit one has access too, the greater their chances of success. Business Credit Sherpa works with its clients to assist them in obtaining business lines of credit.
We direct our clients to our handpicked Credit Wise National Advisor team which can be used for any purpose, and, most notably, DO NOT REPORT TO YOUR PERSONAL CREDIT. This means that our clients that obtain business lines of credit may use them without fear of damaging their personal credit score. This peace of mind allows our clients to draw on credit lines more effectively and confidently. All of our business line of credit products are “same as cash”. We do not encumber our clients with vendor trade lines with restricted uses (i.e home depot card, shell card, dell card).
Our clients find that by outsourcing their time to our experts, that they are able to concentrate on other important tasks necessary to grow their business. Many also find that the earlier they begin the process of obtaining business lines of credit, the better they are hedged to take advantage of opportunities in the market. Please visit our facebook Fanpage to get access to our training webinar to learn more
Separating business credit from personal credit is imperative to the survival of a business and for the sake of personal finances. If a business fails and personal credit is tied to it, then the business owner’s personal finances suffer. By separating business and personal credit, one does not bring down the other if one or the other fails.
However, if you are a sole proprietor, your business credit and personal credit a closely linked in the eyes of lenders and banks. That is why it is a must that steps be taken to protect your personal and business finances through separation. For instance, late mortgage payments could affect your ability to acquire new credit for your business, but separation would prevent this domino effect from happening.
Small Business Funding
One of the reasons why personal and business credit is tied together in many cases is because the business owner must finance their startup and they turn to their personal credit to do that. In turn, small business loans are typically acquired under personal credit as is the business credit card and, sometimes, individuals use their personal credit cards to start their business. The reason is because the business has no credit, so the bank has nothing else to go on. By taking steps in the beginning to separate business and personal credit, personal finances never have to be a factor.
The way to completely separate the two, however, is through the business’s structure. A sole proprietorship means that the financial burden of the business falls completely on the owner. There is no line drawn between personal and business finances. Structuring as a Limited Liability Company (LLC), which limits personal liability, or incorporating the business to eliminate all personal liability, will give it a legal structure that will keep personal finances out of the picture.
Nonetheless, wee suggest that you consult a competent attorney to recommend the best legal structure that best suits you and your goals to position. Incorporating means specific requirements must be met within your state and potentially be more expensive than setting up an LLC. There are also specific requirements and instructions that must be followed when applying to be an LLC and all of those requirements will depend upon the law in the state in which the business is to be established.
Establishing Business Credit
After establishing business structure, there are some steps to be taken that include establishing accounts with vendors that will grant credit without the use of personal credit information. UPS, FedEx, and other such companies will do this. On-time payments are then reported to the credit bureaus Dun & Bradstreet, Business Credit USA, TransUnion, Corporate Experian, and Small Business Equifax. You will also need to register with these credit agencies.
When registering with Dun & Bradstreet, you are given a 9 digit D-U-N-S number that identifies your business, as well as instructions from them on how to establish your business’s credit rating. This D&B credit profile will benefit you when you need to acquire a business loan, business credit card, lease equipment, when cash is tight, when you want to make sure your lenders are giving you fair deals, when you want to forego Cash On Delivery and pay on 30 days, and there are some entities, such as the US Government, that require you to have a D-U-N-S number in some cases.
Your business must also be in compliance with all business requirements, such as having a business license, registering for a certificate of good standing with the Secretary of State, operating off of an Employer Identification Number and not your social security number, listing a landline phone in the telephone directory under the business name, having a website, and having a business email address. Doing all of this makes acquiring small business funding much easier so that you can establish credit for the business without using personal credit.
Also when establishing business credit, you should not have just one business credit card. Instead, work to acquire three, such as a regular business card, a card from a warehouse club like SAM’S Club, and Club Discover Card. No card should be linked to your personal credit so that on-time payments can be reported to the business credit bureaus and not on your personal credit reports.
You can then gather your business plan, financial statements, and all relevant documents to take to a bank to acquire financing when you need it. A solid business plan and all supporting documents have to make a solid loan package for the bank to even bat an eye at it. The goal is to move to the top of the list for review by the bank’s credit committee. That way you can acquire the small business funding you need and further establish your business credit.
Manage Your Debt
Once everything is in place, you then need to manage your debt. This means paying each business credit card bill on time, making loan payments, and doing what is needed to increase cash flow. It is the initial establishment of business credit that can be so difficult and not so much paying the business credit card bill or the business loan. Just make sure that none of your debt ever over leverages the company because that could result in missed or late payments that could hurt business credit. Unfortunately, when some hurt their business’s credit, they turn to their personal credit to save it. But it is when a business owner is responsible and patient from the beginning that the two can remain separated.1
If you’re reading the last part of this article, we know that you’re serious about setting your business apart we invite you to register for our next webinar. You can go here to register: Business Credit Webinar
: Finding the right bank for your business is a lot like finding a mechanic for your car. You need some objective information first, and the best way to determine whether or not to use a particular bank is to answer the following ten questions. You can use them as your starting point, but remember to dig deeper if you can.
Is the bank healthy with strong financials? Today’s economic climate has caused a recent dramatic rise in bank failures, and you might want to check into the health of any bank you are seriously considering. Don’t pick a bank that you might see the government bailing out six months from now.
Does the bank have a business division focused on lending to small and medium-sized companies? What percentage of the bank’s business is geared towards this market? Look to see if your bank has a number for a business division. You’ll get much more information if you connect with the
right person who can answer your more detailed questions.
Is the bank on the SBA’s current list of top small business lenders? This information can be found on SBA’s most recent study of small business lending activities. Entrepreneur Magazine created a great website on business-friendly banks, broken down nationally and by state. Is the bank familiar and comfortable with your industry? Does the bank lend to your type of business, and what industries does it specialize in? When you contact a business loan officer on the phone, explain your business. Tell them what you do, how long you’ve been doing it, and how fast you are growing. Let her know what you are looking for in a bank, both the relationship you would like to have and the line of credit you want. If they don’t work with people in your industry, ask for bank recommendations. Local banking markets are very well aware of what types of loans their competitors are offering.
Does the bank offer the mix of services and products you want? What kind of services and products do you need? Traditional loans or lines of credit? Credit card or direct deposit? This is the next question after confirming the bank does business in your industry.
Does your desired loan amount fit within the bank’s lending limits? What is their average small business loan? Can the bank grow with you as your financial needs increase? Many banks have different divisions for the different sizes of companies. Smaller banks may have a ceiling on how much they can loan to one business, while larger banks will have a minimum for the loan they give.
Can you secure a meeting with the right person? Get introduced or referred to the bank officers who make the lending decisions. It is great if their superior takes an interest in you, or if your referral is someone they respect. While this won’t guarantee you a loan, it can get you preferred treatment. Is the banker willing to meet with you at your company? Will your banker take time to meet you at your business? If your business “shows” well, a meeting at your company can be a positive.
Does the banker have local lending authority? Some of the largest national and international banks leave lending decisions to each branch. If it’s possible, connect with the person at the branch who is responsible for the overall lending decisions. Connecting personally with them can give you a benefit if you become a preferred customer.
How long has the loan officer been with the bank? What is their level of expertise in working with small and mid-sized businesses? Check their background in both the business and their skills with working with loans in your industry. Most of the time, the person who appears the
most authoritative has the least lending power, so do your homework on who you talk to if possible.
If you need help building business credit or funding solutions, we invite you to register for our complimentary webinar today.
Get our complimentary ebook, “The 8 Questions You Must Ask Before Working With Any Business Credit Building Company!” Use this e-book to learn how to get $25,000 or even $250,000 to fund your business Today!