Top 5 Things You Didn’t Know About Small Business Credit

There is so much about small business credit that is misunderstood. Many entrepreneurs do not even realize their company can have its own credit. Those that do realize it, often have a very skewed idea about how it works. Because we are so familiar with personal credit, we tend to assume business credit works the same way. While some aspects of the two are similar, there are some very important differences that most entrepreneurs do not know.

Everything You Don’t Know that You Don’t Know About Small Business Credit

Some of the most common misconceptions about business credit are related to how you get it. Even more are about what affects business credit and where the information on the report comes from. It is such uncharted territory that most do not even know what they don’t know.

Once you understand all the differences between business credit and personal credit, you can begin the work of building a solid company foundation for your biz.

5 Things You Didn’t Know About Small Business Credit

Here are a few of the most common misconceptions about business credit.

You Have to Work for Small Business Credit

It doesn’t build on its own through the course of regular company financial transactions. This is different than how personal credit builds. With personal credit, your payment information is simply reported to the personal credit reporting agencies (CRAs.) With business credit, it isn’t so simple.

It takes intentional effort from the way you set up your biz to the accounts you apply for first. You have to go into it with the intention of building business credit. You have to work for it.

It’s About More than Payment History

Unless your company is set up with the intention of separating it from the owner, business transactions will report to the personal CRAs. This means your corporate transactions and your personal transactions will be reporting on your personal credit. Everything will be all mixed up.

Not only that, but if you do not set things up properly, you could end up not having a business credit score at all! Even if you have credit in your company name, if your firm is not properly set up as a fundable entity, those accounts will be on your personal credit report. You may not even have a business credit report!

Your Personal credit CAN affect it

By nature, the way a company must be set up to build business credit means that your company’s accounts will not affect your personal credit. That is, if everything is set up properly. However, the reverse is not necessarily true. When lenders look at your credit, not only might they pull a personal credit report, but they can use other sources as well. The information gleaned from those sources, even if not firm-related, can affect their decisions.

You are probably asking yourself the question then, why even bother? If your personal credit can still come into play, what’s the point? There are a few reasons biz credit is important. First, it protects your personal credit. Like I said before, if your set up your company properly, your operational finances should not affect your personal credit score. This will ensure that if your biz suffers, your personal finances can still stay intact.

In addition, if personal issues are coming into play when you are trying to get company funding, strong business credit can help. It can mitigate negative personal information lenders may consider in their decision making.

Finally, if you do not have business credit, you will have to fund your dream on your personal credit alone. Personal limits are typically much lower than business credit limits. Conversely, company credit expenses tend to be much higher than personal expenses. This means that even if you are paying off your expenses each month, you are likely to hover near your limits consistently.

That will increase your debt-to-credit ratio, which will in turn lower your personal credit score. So even if you do everything right, you could end up damaging your personal credit if you try to use it to fund your company.

The Information Comes from Places You May Not Expect

Like I said, it’s not all just payment history. There are so many other things the CRAs look at and can report on. They gather information from a number of sources, and not all of them are lenders. For example, the Small Business Finance Exchange, or SBFE, gathers information from a variety of places. These include, among other things, public records. That means every lien, every parking ticket, and every bounced check has the potential to bite you.

You do NOT Have to Have Business Credit to GET It

This is perhaps the most difficult thing for some entrepreneurs to understand. It can seem at the onset that you have to have business credit to get business credit. An entrepreneur is often shocked when they try to apply for funding with biz credit and they are denied, because they pay their bills on time. They cannot figure out what is going on.

They then find out they actually do not have business credit. That is why they are continually denied when they apply for corporate credit cards. Then they wonder how on earth they are supposed to get business credit if they are denied funding because they do not have company credit.

Here is the thing. Once you have your company set up properly as a separate, fundable entity, you need to start working with starter vendors. These are vendors that will extend net terms on invoices without a credit check. Not only that, but they will also report your payments on these invoices to the CRAs. This will be the beginning of your business credit score. You do not have to have business credit to get corporate credit, but you do have to start with starter vendors.

Now That You Know

Now that you know this information, you probably have a ton of questions. Questions like:

How do I make my company a fundable entity separate from myself?
What’s the next step after starter vendors?
Where are lenders getting information about me?
How do I know what is on my credit report?

We can answer these questions and more. The first step is already done. Now you know what you didn’t know before.

How to Separate Your Company as a Fundable Entity

This part is easiest taken care of on the front end. However, it’s never too late. If you are looking for funding, you likely already have an established biz. You can take these steps now to begin building your corporation credit.

How to Separate a Company from Its Owner to Build Small Business Credit

Establish a separate phone number and address for the biz.
Formally incorporate as an LLC, S-corp, or Corporation.
Establish a separate company bank account.
Have a professional corporate website.
Have a separate corporation email address with the same URL as the website.
Get and EIN and use it instead of your SSN to apply for business credit.
Get a D-U-N-S number.

A few things to remember when it comes to these things are that you can get a virtual physical firm address pretty easily. Also, there are several ways to get a corporate phone number online that will simply forward to the phone number you already use. This means there is no need to get a separate phone.

Also, do not use a free hosting service. You need to pay for hosting. The same goes for email service. A free service such as Hotmail, Yahoo, or even Gmail will not work in this situation.

As for a D-U-N-S number, be careful. You really do need it because you cannot have a credit file with Dun & Bradstreet without it. Since they are the largest and most commonly used biz credit reporting agency, having a D-U-N-S number is a must. However, when you go to their website to get one, they will try to upsell you. The number is free, and you do not need anything else. Stay strong.

How to Use Starter Vendors to Build a Small Business Credit Score

Now, you know how to set up your company and you know you need to start with starter vendors, but where do you go from there? The business credit building process works in tiers. You start with the vendor credit tier, which is where the starter vendors are. Then, once you have 8 or 10 of those vendors reporting your positive payment history, you can move on to the retail tier.

The retail credit tier is where you find credit cards that can only be used at the retail stores that issue them. For example, an Office Depot credit card would be in this tier. After you have enough of these types of cards reporting your payment history to the CRAs, you can move on. Your small business credit should then be strong enough to apply for cards in the fleet tier.

The fleet credit tier is where you find the cards that you use specifically for fuel and auto repair and maintenance costs. These are cards from companies such as Shell and Fuelman. After you snag enough of these and have them reporting positive payment history, you can apply for cards in the top tier.

That is the cash credit tier. These are the cards that have higher limits, lower rates, and no exclusions on where you can use them or what you can use them for. If you use these cards responsibly, you will have access to all the funding you need to run and grow your business.

Small Business Credit and Company Loans

As you may have noticed, we didn’t mention biz loans much when talking about small business credit. That is because most traditional lenders are going to check your personal credit history even if you do have strong corporate credit. There is just no way around it. However, if you have strong company credit, it can only help you. It may mean the difference in approval for a $50,000 loan or a $100,000 loan, or 10% interest and 6% interest.

In addition, some non-traditional lenders will actually look at business credit and even report to the business CRAs such as Dun & Bradstreet, Experian, and Equifax.

Monitor Your Credit

This is important all the way through the process. First, you need to know which accounts are reporting to your small business credit. You also need to know how many. That’s how you will know it is time to start applying for cards in the next tier.

The problem is, you cannot get a free copy of your business credit report the same way you can with personal credit. You can purchase a copy of your report from the reporting agencies, but you have to pay each time you want to see what is on your report. At CreditSuite.com/monitoring, we can help you monitor your business credit on an ongoing basis for a fraction of the price. Not only will this help you to know when to move on to the next tier, but it will let you see if there are any mistakes or inaccuracies keeping your score from being the best it can be. If there is something there that shouldn’t be, or something not there that should be, you can get it corrected quickly.

Everything You Need to Know About Small Business Credit and Then Some

Now that you understand more about small business credit, what it is, and why you need it, you are likely to have more questions than just what we’ve covered. Here is one thing you can know without a doubt however. Strong small business credit it vital to running a healthy company. Our free guides, webinars, and dedicated staff are here to help you build and maintain small business credit every step of the way. Your business success and growth depend on it.

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How to Build PAYDEX Score Fast: And Other Dun & Bradstreet Reports You Need to Know About

If you know anything about business credit is it probably about the Dun & Bradstreet PAYDEX score. D&B is the largest and most commonly used business credit reporting agency. The PAYDEX score is the score from Dun & Bradstreet that lenders use most often. This is likely because it is the most comparable to the consumer FICO, so they feel like they can easily understand the information it is telling them. Follow these tips to build PAYDEX score fast.<

Build PAYDEX Score Fast, but Don’t Forget the Other D&B Reports

Your Dun & Bradstreet report is among the first things a lender will look at when determining whether to do business with you. They offer database-generated reports to their clients to help them decide if you, a potential vendor, supplier, or business partner, are a good credit risk.

A company will rely on the D & B Report about your firm to make informed business credit determinations and avoid bad debt. Dun & Bradstreet takes several factors into account in creating such a report. Let’s look at all of these factors in turn, starting with the PAYDEX. Afterall, you cannot understand how to build PAYDEX score fast without understanding what exactly the PAYDEX is.

PAYDEX Score

The PAYDEX Score is Dun & Bradstreet’s score that tells the lender how well your business has paid the bills over the past year. D & B bases this score on trade experiences documented by vendors. It ranges from 1 to 100. The higher the score, the lower the perceived risk.

We will discuss this more in depth later, but the quick answer to how to build PAYDEX score fast is to pay your business obligations on-time and consistently. The trick is getting those payments reported to D&B and not personal credit reporting agencies.

In addition to the PAYDEX, D&B uses the following.

Delinquency Predictor

To estimate how likely a company is to be late in paying debts, Dun & Bradstreet uses predictive models. They use predictive scoring, which takes historical data to try to predict future results. They do this by figuring out the potential risk of a future decision, then they compare the historical information to a future event. Thus, predictive scoring only represents a statistical probability, and not a guarantee.

Financial Stress Percentile

The Financial Stress Percentile compares companies in categories such as region, industry, number of employees, or number of years in the business. Financial Stress Score Norms determine an average score and percentile for similar firms.

Financial Stress Score

Dun & Bradstreet generates Financial Stress Scores to predict how likely it is a business will fail over the next twelve months. These scores range between from 1,001 to 1,875. A score of 1,001 represents the highest probability while a figure of 1,875 shows the lowest probability of business failure.

Financial Stress Risk Class

This is a rating from D&B that places business in classes from 1 to 5. Class 1 includes businesses least likely to fail, while class 5 includes those firms most likely to fail. Therefore, a D & B customer can rapidly divvy their new and existing accounts by risk and then determine how to proceed. If your business is shown as being Discontinued at This Location; Higher Risk; or Open Bankruptcy, you are going to automatically get a 0 score.

Financial Stress Score Percentile

This score has a 1-100 ranking where a 1 percentile is most likely to fail and a 100 percentile is least likely to fail. If D&B identifies a company as financially stressed, that indicates it has stopped operations following assignment of bankruptcy, voluntarily withdrawn from business operation with unpaid obligations, or closed up shop with a loss to creditors. It could also mean a company is in receivership, reorganization, or has made some sort of an arrangement for the benefit of creditors.

Supplier Evaluation Risk Rating

The Supplier Evaluation Risk Rating (also called a SER Rating) predicts how likely it is a company will get legal relief from creditors or end operations without paying creditors in full over the next twelve months. Once Dun & Bradstreet calculates the Financial Stress Score percentile for your company, they apply a second set of rules to calculate the SER Rating, on a scale of 1 – 9. A 1 means your company is least likely to fail to pay suppliers. A 9 is the opposite, showing the highest likelihood.

Credit Limit Recommendation

A D&B Credit Limit Recommendation includes two recommended guidelines:

A conservative limit, recommending a dollar benchmark if a company’s policy is to extend less credit to minimize risk and
An aggressive limit, suggesting a benchmark if a firm’s policy is to extend more credit with potentially more risk.

D & B bases these dollar guideline levels on a historical evaluation of the credit demand for similar businesses, with respect to employee size and industry. Dun & Bradstreet assesses how likely a business is to continue to pay your according to the agreed-upon terms, and how likely it is to experience financial stress in the next twelve months.

D & B Rating

A D&B Rating helps lenders swiftly assess a business’s size and credit potential. Dun & Bradstreet bases this rating on details in your company’s balance sheet, plus an overall evaluation of the firm’s creditworthiness. The scale goes from 5A to HH.

Composite Credit Appraisal

This number, between 1 through 4, makes up the second half of your firm’s rating. It reflects Dun & Bradstreet’s overall rating of your business’s creditworthiness. They analyze company payments, financial information, public records, business age, and other factors.

If your company does not supply current financial information, you cannot get a Composite Credit Appraisal rating of better than a 2. The 1R and 2R rating categories show company size only based on the total number of employees. Consequently, these ratings are assigned only if your company’s file does not contain a current financial statement. Employee Range (ER) Ratings apply to specific lines of business not lending themselves to categorization under the D & B Rating system. These kinds of businesses receive an Employee Range symbol based upon the number of employees and nothing else.

In general, when Dun & Bradstreet does not have all of the information they need, they will show that in their reports. However, omitted information does not necessarily mean your firm is a poor credit risk.

D & B Data

Finally, any report is only as good as the data it originates from. Dun & Bradstreet’s database includes over 250 million companies around the world. It includes around 120 million active companies and about 130 million companies which are out of business but kept for historical reasons. D & B continuously gathers data and works to improve its systems to ensure the greatest degree of accuracy feasible. Businesses should provide D&B with a complete financial statement to ensure as accurate a report as possible.

Build PAYDEX Score Fast: Practical Tips

While it is tremendously helpful to understand all the different reports Dun & Bradstreet can generate for your business, when it comes to getting funding you need to know how to build PAYDEX score fast. Keep in mind however, fast is relative. Will it take years like it does to build a personal credit score? No, it won’t. Will it happen overnight? That’s a resounding no as well.

It also will not happen on its own. You cannot passively do business and expect to build PAYDEX score fast. You have to take intentional steps toward building your business credit score. It’s a process, and it starts with how your business is set up. Some of these steps may already be done, as often they happen in the course of opening a business. Some of them however, may not have seemed necessary at the time. When it comes to building PAYDEXs however, they are absolutely necessary.

Regardless of where you are in the life of your business, it is never too late to take the steps necessary to build PAYDEX score fast.

Build PAYDEX Score Fast: Set Up Your Business as a Fundable Entity

Many times, in the early days of a business, business owners find it easy to run the business as an extension of themselves. They operate as a sole proprietorship, using their own address and phone number as contact information. There seems to be no reason for a separate bank account, and an SSN works just find when asked for.

To build PAYDEX score fast however, this will not work. Your business needs to be separated from yourself as the owner. It needs to appear to lenders to have fundability on its own merits, not yours.

Steps to Set Up Your Business as a Fundable Entity

Separate Contact Information

Contact information is an identifying factor. If you apply for credit with your personal address and phone number, that application is going to pick up you’re your personal credit report. Your business needs its own phone number and address. If you don’t have an actual location or separate phone line, you can still accomplish this. There are a number of options for phone numbers that will ring to your current line, and virtual offices offer a physical mailing address along with many other services.

Get an EIN to Use in Place of an SSN

This is easy to do and completely free. It can be done online at IRS.gov in a matter of minutes. The point is to use this number, instead of your social security number, to apply for credit in your business name. This way, the account will report your information to the business CRAs, including Dun & Bradstreet.

Incorporate Your Business

Whether you choose to incorporate as a corporation, S-corp, or LLC does not matter when it comes to fundability. Make that decision based on other factors, like how much liability protection you need and your budget. You do need to choose one though. Operating as a sole proprietorship will not work well if when building business credit.

Get a D-U-N-S Number

If your follow every single step and do not do this one, you will never build PAYDEX score fast. In fact, you cannot have a PAYDEX score at all if you do not have this number. It’s free also, and easy to get on the D&B website. However, they will try to sell you a ton of other services that you really do not need. Just get the number and move on.

Open a Separate Business Bank Account

Not only will this help you keep your business expenses separated from your personal expenses for tax purposes, but it will also help you when you apply for credit in your business name. Some vendors and lenders like to see a business bank account with a minimum average balance before extending credit.

Build PAYDEX Score Fast: Vendor Credit

Separating your business from yourself is not the whole story. That’s really just laying the foundation that you can build on. You have to stack the blocks, and they have to be stacked in order. You can’t just follow all these steps and then go apply for regular business credit cards with your business credit. It still doesn’t exist.

The key to building PAYDEX score fast is the vendor credit tier. This is how your will initially build your PAYDEX score so that you can apply for credit from those lenders that will want to see a strong score.

The vendor credit tier includes starter vendors that will issue invoices with net 30 terms without even checking your credit. Set up your account in your business name, and they will report your on-time payments to the business credit reporting agencies. It is important to note that not all of them report to all the CRAs, so be sure you find those that report to Dun & Bradstreet if you want to build PAYDEX score fast. The more of these vendors your have reporting, the faster your score will grow. Remember though, you have to pay on time.

Build PAYDEX Score Fast: Other Ways to Get Accounts Reporting

At the same time, you can talk to vendors you already do business with. In light of the fact that you already have a relationship with them, they may be willing to offer net terms without checking credit and report payments. Check with utilities too. They will sometimes report payments to D&B if you ask. The more accounts you get reporting, the faster your score will build. With each on time payment your score will only get stronger.

It is Possible to Build PAYDEX Score Fast with the Vendor Credit Tier

This process is not only important for building PAYDEX score fast, but really for building PAYDEX, or any business credit at all. If you do not separate your business from yourself, any credit accounts you get approval for will report payments to your personal credit. That doesn’t affect your business credit score. If you follow these steps however, you will be able to build your business credit score on each report, including your PAYDEX report, faster.

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5 Things You MUST Know about Business Tradelines

Business tradelines are the accounts on your business credit report. We are going to tell you everything you need to know about why you need them, how to get them, and how to use them to build strong business credit. And How to Get Them Without Already Having Business Credit Business tradelines, and terms like … Continue reading 5 Things You MUST Know about Business Tradelines

5 Things You MUST Know about Business Tradelines

And How to Get Them Without Already Having Business Credit

Business tradelines, and terms like it, are thrown around in the business world with the assumption that everyone knows what they mean. However, these assumptions can cause problems when they are wrong. Then you run into issues with people using terms in ways they are not meant to be, to mean things they do not really mean. As you can imagine, it can cause a lot of confusion.

Our goal is to clear up that confusion. We intend to lay out for you exactly what tradelines are, why you needed them, and what you don’t know about them that you definitely need to know.

What Are Business Tradelines?

The term in question, business tradelines, simply refers to accounts that report your payments to the business credit reporting agencies, or CRAs. That could be vendor accounts, business credit cards, or a select few other things. Most often the term refers to vendor accounts.

You buy stuff from these vendors, and they allow you to pay them at a later date. We call this net terms. It is different than revolving credit, because you have to pay the whole balance by a certain date.

That means they will bill you for the goods or services you buy from them, with the understanding you will pay within a certain amount of time. Most often, it is 30 days, or net 30 terms. Occasionally they will extend net 60 or net 90 terms.

If you know anything about tradelines, that is likely the extent of it. Now, here is what you don’t know.

5 Things You MUST Know About Business Tradelines That You Probably Don’t Know Already

This is the information that can get confused from source to source. We’re going to clear it up for you.

Not all Business Tradelines are Good for Building Business Credit

Tradelines are only good for building business credit if they report your payments to the business credit reporting agencies, or CRAs. These include Dun & Bradstreet, Experian, and Equifax. There are a few others as well, but these are the big three.

The thing is, not all of them do report payments. They are not required to do so, and many do not. You have to find those vendors that will report your payments if you are going to use them to build business credit.

Buying Business Tradelines is a Bad Idea

Since it can seem almost impossible get business tradelines without credit, someone somewhere at sometime had the idea to create companies, use them to obtain tradelines, then sell the tradelines to those who wanted fast business credit.

Essentially, these are shelf companies that have years’ worth of seasoned tradelines. They market to new business owners as a way to access funding they would not otherwise qualify for. It sounds great. You pay a lot, but you get the potential access to so much more.

The truth is however, that lenders are not dumb. They caught on to this ruse quickly, and though it is not technically illegal, it is very much frowned upon. If a lender catches wind of the idea that you may be using business credit that you did not actually build yourself, you could be blackballed. That means, not only would you not be able to get funding based on the credit you purchased, but it would block you every time you try to build credit on your own.

You Can Get Business Tradelines without Already Having Business Credit

This is the little-known secret to building business credit that you have been looking for. If you start with vendors in the vendor credit tier, known as starter vendors, you can get tradelines without having business credit at all. When they start reporting the CRAs, your credit will start to grow on its own without you having to spend a dime other than what you buy from the tradeline vendors that your business needs anyway.

Once you have enough business tradelines reporting from these starter vendors, your credit should be strong enough to start applying for credit cards in the other credit tiers. As you gather more accounts in each tier, you will be able to move on to the next tier.

2. You Need to Get Business Trade Lines in a Specific Order

I touched on this above. If you are using business tradelines to build business credit, you can’t just start applying for business credit cards right away. They will deny you every single time. You have to start with establishing tradelines with those starter vendors in the vendor credit tier.

3. Too Many or Too Few Tradelines Reporting Can Affect Your Business Credit Score

The problem with this is, the CRAs are pretty tight lipped on where the sweet spot is. That said, your best bet is to open only as many accounts in each tier as you need to move on to the next. Then, only close accounts if you absolutely must.

One thing we do know is that Dun & Bradstreet requires at least three tradelines reporting before it will even calculate a Paydex, which is the score lenders most commonly use. It is the most like the personal FICO score.

3 Tips to Establishing Initial Business Tradelines Without Established Business Credit

Along with the Vendor credit tier, which I will talk more about below, there are a couple of other options for getting initial business tradelines reporting your payments.

Ask Bills to Report

You pay things like utilities, rent, telephone, and internet each month already. These companies do not have to report to the CRAs, but some will. You’ll have to ask, but the worst they can say is no.

Work with Current Vendor Relationships

If you have been in business long enough to have vendors that you already have a good relationship with, use that to your advantage. Open a discussion about net terms on invoices and see what they will offer. You may be able to get some tradelines reporting without a credit check that way, and build to the next tier faster.

The Vendor Credit Tier

In addition to these options, the vendor credit tier is the best place to get started when it comes to building business credit. Many of the vendors in this tier will extend net terms and report payments, without doing a credit check. Instead, they will rely on length of time in business and income to determine eligibility.

Now you are probably asking yourself, who are these vendors. There are several, but some of the easiest to get started with include:

Quill

Quill sells office equipment, packaging, and cleaning supplies. They report to D&B and Experian. Because they report to two separate credit reporting agencies, you get two credit experiences with them. Place an initial order first unless you already have a D&B score. Then, if you order items every month for 3 months, they will typically approve you for a Net 30 account.

When you check out you will see the option to buy now and pay later. Use your business information to fill out the form. Don’t worry about it when they ask how long you have been in business. Because even new business owners often report approval. It can take a couple of hours to get approval. It may even take a couple of days if you apply on the weekend.

Uline

Uline sells shipping, packing, and industrial supplies, and they report to D&B. You must have a D-U-N-S number. They ask for 2 references and a bank reference. The first few orders may need to be prepaid to first get approval for Net 30 terms.

When you check out you will see the option for them to send you a bill. If you choose this option and check out successfully, you know you got approval.

Grainger

Grainger Industrial Supply sells safety equipment, plumbing supplies, and more. They report to D&B, and they require a business license, EIN, and a D-U-N-S number. If you have these things, you may get approval for a $1,000 line of credit.

What are The Other Credit Tiers?

If you are new to the idea of business credit, this is likely a question you are asking yourself as you read this. I keep talking about the other credit tiers, but what are they? The tiers work similar to stair steps, with the vendor credit tier being the bottom step. You cannot move up to the next step until you have enough vendor credit tier accounts reporting.

Once this happens, you can move up to the retail credit tier. These are cards that you can only use at the specific stores that issue them. For example, a Staples Card or a Best Buy Card would be in this tier. When you have enough of these types of accounts reporting, you can apply for cards in the fleet credit tier. These are cards from companies like Shell and Fuelman that are exclusively for costs related to fuel and auto maintenance and repair.

After you gain enough accounts in each of these tiers you can apply for cards in the top tier, the cash credit tier. These are the standard cards with lower interest rates, higher limits, and no limitations on where you can use them or what you can use them to purchase.

Be Sure Business Tradeline are Reporting to Your Business Credit

It isn’t a given that these tradelines will report to your business credit. You have to have to business set up properly for that to happen. What does that mean? It means setting up your business as a separate entity from yourself as the owner.

The first step in this process is to make sure your business has its own contact information. Your phone number and address are identifying factors on your personal credit. So, if your business shares the same information, things are not going to get confused and mixed up.

Other Ways to Set Up Your Business Separately from Yourself

Get an EIN. This is an identifying number for your business similar to your SSN. So use it instead of your SSN when applying for business credit.
Formally incorporate your business. A corporation, s-corp, or LLC will do serve the purpose, so choose based on your budget and liability protection needs.
Open a separate business bank account. This will not only serve to help separate your business from yourself, but it will come in handy at tax time as well.
Set up a professional business website. Pay for hosting. A free service won’t work. Also, get a business email address with the same URL as the website. Stay away from free services such as Yahoo and Gmail.
Get a D-U-N-S number. You cannot have a credit profile with Dun & Bradstreet without one, and since they are the largest and most commonly used business CRA, you need a profile with them.

If you set up your business in this way, and apply for credit using the business information and not your own, your tradelines should report to business credit and not personal credit. If you are already up and running and haven’t done these things, it’s not too late. Get started now.

Going Forward: Business Credit Monitoring

After you have business trade lines reporting to the business CRAs, be sure you keep an eye on your reports. So, they will likely not show the name of the companies reporting, only the types of companies. That means you need to keep track of your accounts and match them up so you know who is reporting what. You will also want to watch for any mistakes and get them corrected. We can help you monitor your business credit on a regular basis here.

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Everything You Need to Know About Accounts Receivables Financing

… And What to Do for Funding Beyond Accounts Receivables Financing

Accounts receivables financing is not something that you hear a lot about. There is a ton of information out there about loans, credit cards, and even lines of credit. No one really talks about financing your receivables though. That is, until you start trying to figure out how to get cash fast. If you need fast cash and you have open receivables, then A/R financing may be just what you need.

Don’t confuse accounts receivables financing with accounts receivables selling. They are two different things used for two different purposes. For example, selling your receivables serves as more of a means of getting older receivables off the books.

The buyer pays a premium and then tries to collect the full value of the receivable. The business owner never gets any more money than the original selling price. You get cash fast and you get the receivables off the books.

Accounts receivable financing is different. You can do it in a couple of ways. The first is, you can simply use the invoices as security for a loan. The other, is invoice factoring. This is a mix of selling and financing. In factoring, the factoring company pays you a portion of the value of the invoices. Then, they collect what they can, hopefully full value. They then keep their set, agreed upon fee, and send you the difference.

This means that the amount you get when you first factor the invoices may not be all you get. You will still get the difference in the amount collected less what you have already received and the factoring fee.

What Are the Benefits of Accounts Receivables Financing?

Accounts receivables financing is not the best choice for every business in every situation, but there are some times when it truly is the best option. Done correctly, there can be many benefits. For example:

Faster, less complicated process than what is typical with other types of financing
Accounts receivables financing premiums are often less than the interest rates and fees with traditional financing.
In some cases, it is easier to qualify for A/R financing because lenders look at the quality of your invoices rather than your credit history.
You get your money faster.
Accounts receivables financing can happen on an ongoing basis so as to bridge the cash gaps due to slow collections.

How Do You Qualify for Accounts Receivables Financing?

While all financing companies have their own qualification requirements, these can give you an idea of the minimum most require to be eligible for accounts receivable financing.

They must, of course, issue invoices to customers
There must typically be at least $50,000 in annual revenue
Usually they require that a business has been in operation for at least 6 months
Customers must be creditworthy, meaning they are likely to pay their invoices

It is important to remember that, while there are some instances where the financing company will take on the task of collecting on the invoices, the debt is still the responsibility of the business owner receiving the financing. Regardless of who is doing the collecting, if the invoice is not paid, the business owner is still responsible for the debt to the lender.

Where Can You Get Accounts Receivables Financing?

There are many lenders that offer this service. Here are just a few.

1st Commercial Credit

This lender has been around for 15 years. They offer invoice financing starting at .69% to 1.59% or Prime +2 and an administration fee. 1st Commercial Credit boasts a fast approval process, and they do not require financial statements for financing up to $350,000. You can set up your accounts receivables financing with them in as little as 3 to 5 days.

New Century Financial

New Century Financial offers invoice financing up to 90% of the original invoice. They claim streamlined, fast processing with no hidden fees.

Blue Elephant Financing

This company works with businesses that have government contracts. They offer account receivables financing related to FEMA, HUD, and other government contracts. Blue Elephant Financing prides itself on an easy application process and fast turnaround.

Capital Plus Construction Services

Capital Plus offers accounts receivables financing related to construction contracts specifically.

Star Funding

This company will not only do accounts receivables financing, but they will also help you collect on open invoices. This is a major plus for a lot of businesses. If you need or want collection help along with financing, Star Funding if for you. They also offer accounts receivable management services.

Seven Oaks Capital Associates

Seven Oaks also offers general accounts receivables financing services along with collection and management services. In addition, they can help you obtain credit information on those to whom you extend credit.

Of course there are hundreds of companies out there that offer these services. These are just a few to get you started.

A Word About Merchant Cash Advances

If you need a similar option but do not have a ton of open invoices, you might look into getting a merchant cash advance. This is similar to factoring invoices, but it works based on average credit card sales. Basically, you get an advance on your projected credit card sales.

Here’s how it works. First, you will submit information about your average daily credit card sales. Then, the cash advance company will tell you how much you are eligible for based on that average.

What Else Should You Be Doing?

Now, the allure for many small businesses is that this type of financing doesn’t require great credit. In fact, if your invoices are solid, the factoring company may not even do a credit check. If you have bad credit or no credit, that is a good thing. However, you need to think beyond the right now and consider the future.

Working to build business credit is vital because this type of financing will not work for every need.

Every Small Business Needs To Establish Business Credit

This is credit in a small business’s name. It doesn’t connect to an entrepreneur’s consumer credit. Here is why you need it:

Since small business credit is distinct from individual, it helps to safeguard an entrepreneur’s personal assets, in the event of court action or business insolvency.
With two distinct credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles buying power.
Even startup companies can do this. Visiting a bank for a business loan can be a recipe for disappointment. But building company credit, when done correctly, is a plan for success.
Consumer credit scores depend on payments but also various other elements like credit use percentages. For small business credit, the scores really merely hinge on whether a small business pays its debts punctually.

So where do you start? How do you establish business credit? It’s a process that has to be done in the right order. You have to actually work toward it. It doesn’t happen on its own.

How to Establish Business Credit

Accomplishing the steps out of sequence leads to repetitive denials. No one can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start with Business Fundability

A small business has to be fundable to credit issuers and vendors. This includes a number of things. The first, is that a business needs its own phone number and address separate from the owner. They each need to be listed with the directories. Do that here. It will also need an EIN. This is similar to a social security number, only for a business rather than an individual. You can get one free from irs.gov.

Then, the business has to be incorporated. A sole proprietorship or partnership won’t work for building business credit. Whether you choose to organize as a corporation, S-corp, or LLC will depend on the level of liability protection you want and on your budget. Any of them work for business credit building.

Another necessary step for your business to appear fundable is to have a separate business bank account. Do not mingle personal and business expenses in the same account. Not only does that not work for building business credit, but it makes for a tangled mess come tax time.

Lastly, and surprisingly to some business owners, your business needs a professional website. Along with this goes an email address that is separate from the owners. The website needs to look professional, which probably means hiring a professional to do it. A lender will be much less likely to take you seriously as a business if you have a poorly put together website in today’s business world. The email address needs to have the same URL as the website and not be from a free service such as Gmail or Yahoo. Also, the website needs to have website hosting from a paid supplier such as GoDaddy. Free hosting doesn’t work for this situation.

Get Accounts Reporting

Start at the D&B web site and obtain a free D-U-N-S number. A D-U-N-S number is how D&B gets a company into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

After you do this, you can start establishing tradelines that will report to the credit reporting agencies (CRAs). These are part of the vendor credit tier. They are starter vendors that will extend invoices with net terms without a credit check. When they report your payments, your credit score will begin to grow.

Find out our picks for the easiest starter vendors to start with here.

Retail Credit Tier

Once you have several vendor trade accounts reporting to at least one of the CRAs, then you can move onto the retail credit tier. These are companies like Office Depot, Staples, and Lowes. The reason you have to go through the vendor credit tier first, before applying for these store cards, is that they need to see a PAYDEX score to grant approval.

For example, Lowe’s likes to see a PAYDEX of 78. The only way to get this is to start in the vendor credit tier.

As you handle credit in the retail credit tier responsibly by making on time payments, your credit score will grow even more.

Fleet Credit Tier

After there are several accounts from the retail credit tier reporting on-time payments, your score should be strong enough to apply for cards in the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to purchase fuel, and to fix, and maintain vehicles

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 small business telephone listing. This is another reason why a business contact listing is important.

Cash Credit Tier

Once you work through the vendor credit tier, the retail credit tier, and the fleet credit tier, your score should be stable enough to apply for cards in the cash credit tier. These are companies like Visa and MasterCard, but not related to a specific retailer as in the retail credit tier.

Monitor Your Business Credit

As you go through the tiers, and even after you are beyond the cash credit tier, you need to know what is happening with your credit. Make sure it is being reported and take care of any inaccuracies as soon as you can.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: www.creditsuite.com/monitoring.

Accounts Receivable Financing Can Be a Great Option, But Don’t Stop There

Whether you are looking into accounts receivable financing because it is the best option for your needs or because it is the only option due to credit issues, you can work on building business credit in the meantime. Personal credit is just not sufficient for business expenses.

Our tried and true method for establishing and building business credit will ensure you have strong business credit. Then, your financing is only limited by you needs, and not by your options.

The post Everything You Need to Know About Accounts Receivables Financing appeared first on Credit Suite.

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No Credit Check Fast Cash Loans – 3 Things To Know About Cash Advance Loans

To make ends fulfill, you might require to use for a money development financing. This is an usual remedy, given that the majority of financial institutions as well as various other economic establishments provide these kinds of car loans.

Right here are 3 essential points you require to recognize while getting a cash loan lending:

Know what a cash loan financing is

A money breakthrough is a temporary lending varying from $100.00 – $1000.00. The lent quantity depends on your income– the bigger your income, the bigger your feasible finance quantity.

Optimize your on-line sources

Many loan-related sites have lending calculators that aid you calculate the expense of your settlements. These unique calculators variable in your finance’s rate of interest prices, enabling you to discover the most budget friendly lending.

You do not require to be the “suitable” consumer to obtain an authorization

With a cash advance cash loan lending, your credit score will certainly not be drawn, so it makes no distinction whether you have negative or great credit report. The car loan is based upon your capacity to settle promptly, your work. You must load out your application precisely as well as that you need to send all needed files.

With these 3 points in mind, you’ll have the ability to keep self-confidence and also positive outlook when dealing with your finance application.

To make ends satisfy, you might require to use for a money breakthrough funding. The lent quantity depends on your income– the bigger your income, the bigger your feasible finance quantity. These unique calculators aspect in your financing’s passion prices, permitting you to locate the most cost effective lending. With a cash advance cash money advancement funding, your credit rating will certainly not be drawn, so it makes no distinction whether you have negative or great credit history.

The post No Credit Check Fast Cash Loans – 3 Things To Know About Cash Advance Loans appeared first on ROI Credit Builders.

What You Should Know About Consumer Credit Reports

Customer credit scores records are commonly made use of by organisations to aid them determine whether to provide cash or offer various other kinds of advantages to a specific customer. Credit scores bureaus give credit score record details on customers to interested events, to allow them to evaluate an individual’s danger degrees or viability for a finance or various other objective. These customer credit history records reveal the standing of your credit report rating consisting of judgments, tax obligation liens, and also various other credit scores relevant info.

To buy a duplicate of your non-mortgage consumer debt record there are a variety of get in touch with information that you can make use of:

Equifax phone call: (800) 997-2493
Create: Equifax Information Service
P.O. Box 740241
Atlanta, GA 30374-0241

Experian (Formerly TRW) phone call: (888) 397-3742
Compose: Experian National Consumer Assistance
P.O. Box 2104
Allen, TX 75013-2104.

Trans Union phone call: (800) 888-4213
compose: Trans Union Corp. Customer Disclosure
P.O. Box 390
Springfield, 19064-0390.

You can likewise obtain a cost-free duplicate of your customer credit scores record if you have actually been transformed down for credit scores in the last 2 months. If you do have an issue with your customer credit score record you can fix it. If there is inaccurate info on your customer credit score record you must recognize the following:

1. You can typically have actually unreliable details gotten rid of from your credit score record at little or no charge by calling the relevent credit rating bureau.

2. Credit history repair service frauds that entail “data partition” or concealing negative credit rating are usually prohibited.

3. Credit history repair service business are called for to supply customers with total info concerning the solutions they will certainly supply. They need to not bill a cost till after solutions have actually been supplied.

If you are ever before asked to make up a credit score repair work solution prior to they have actually efficiently fixed your customer credit rating record, it is prohibited and also you ought to not pay them. Make sure to obtain a breakdown of what they will certainly do to assist you and also understand your legal rights.

Customer debt records are typically utilized by services to aid them choose whether to provide cash or supply various other kinds of advantages to a specific customer. Credit report bureaus give credit rating record info on customers to interested celebrations, to allow them to analyze an individual’s threat degrees or viability for a financing or various other objective. These customer credit score records reveal the standing of your credit scores rating consisting of judgments, tax obligation liens, as well as various other credit rating relevant info. You can likewise obtain a totally free duplicate of your customer credit rating record if you have actually been transformed down for credit history in the last 2 months. If there is inaccurate details on your customer debt record you need to understand the following:

The post What You Should Know About Consumer Credit Reports appeared first on ROI Credit Builders.