Tag: PAYDEX

Does a High PAYDEX Drive Down My Business Insurance Premiums?

Did YOU Know That Your Business Credit Score Can Affect the Cost of Your Business Insurance?

A business credit score tends to not be necessary to apply for an insurance policy. But insurers may ask to access your business data after you apply. High credit scores correspond with low premiums and vice versa. That doesn’t mean you should ignore financials in favor of improving your credit score. Rather, if you improve your company’s credit history by paying down debt or working on payables management, then this could help you save money on business insurance premiums.

Get Ready Before You Apply

Getting ready to apply for business insurance is like preparing to apply for financing. You need to know certain details about your business. If you must have certain coverage before signing a lease or contract, understanding the required coverage will also be key before applying. Doing your due diligence beforehand will save you time and maybe even money.

Part of due diligence is looking for an agent. Make sure you work with an agent who understands your business needs and the best options for you. Then the process can go much more smoothly. It is best practices to find an agent specializing in your industry. Their expert advice can be helpful in the process.

Your Credit Could Affect What You Pay for General Liability Insurance

Data your insurer uses revolves around correlation. Poor credit tends to mean a higher risk. Insurance is all about probability, and the data shows a higher chance of frequent claims and overdue payments, when insurers cover someone with bad credit.

What If You Don’t Have Business Credit Yet?

Having no business credit score won’t prevent you from buying general liability insurance. And it won’t keep you from getting a decent premium. But a good business credit score might get you solid discounts. So, it makes sense to start building PAYDEX and other business credit scores.

Are Your Business Insurance Premiums Affected by What’s in Your Business Credit Reports?

Many business owners have no idea their insurance rate is affected by their credit report. But let’s consider personal credit for a moment. And, since Experian business scores (in part) come from personal credit scores, it does apply to your business credit.

Statistics show that people with high personal credit scores file fewer claims than those with low credit scores, and those with higher scores are less likely to have traffic accidents and traffic violations. Additionally, history in a credit report can show if a business or an individual will pay insurance premiums on time or at all. For that reason, federal law lets insurance companies look at items from your credit report. Carriers do not have to tell you they are using your credit report.

How Insurers Use Your Business Insurance Credit Score

Rates are based on a narrow set of information in your credit report. Carriers can only use those specific types of information; this information together is your insurance credit score. The insurance credit score does not include your FICO score.

The score does include items like the pattern of monthly bill payments, collection activity, total number of outstanding loans, and total number of credit cards. Under the law, your rates cannot increase if you do not have enough credit history to calculate a credit score. If you want to see what your personal insurance credit score is, you can buy a copy of the report from True Credit, a division of Transunion.

It’s smart to review your insurance credit report and make certain everything in it is correct. It is important that you do this to get the best rate you can find.

Using Insurance Credit Scores for Business Insurance

Only some items on your business credit report are considered when you apply for business insurance. The insurance credit score only considers areas of your credit report which apply to the insurance industry. It is against the law to deny an insurance policy based on a lack of credit history.

The items your business carrier will look at include:

  • Number of business credit cards
  • Number of outstanding loans and other debt
  • Average time in which your company pays its monthly bills
  • Collection activity, if any; and
  • Length of credit history

Items that insurance companies CANNOT use when checking an insurance credit report include:

  • Amount of credit available
  • Number of credit inquiries in your company’s credit file
  • Type of credit history or not enough credit history to develop a score
  • Types or issuers of credit cards and debit cards your business carries

Does it Matter So Much if You Don’t Think You Need a Lot of Insurance?

It matters because you can’t get by with no business insurance! Every small business owner needs certain insurance policies to protect them in case the worst happens.

Differing industries will have different degrees of risk. Examine your risks and put together a business insurance plan based on that information. Shop around and find the right carrier for your small business. There are nine basic types of business insurance every small business may need to protect a business.

#9. General Liability Insurance

Every business needs general liability insurance. It will cover:

  • third-party bodily injury
  • third-party property damage
  • advertising injury (accusations of libel, slander, copyright infringement, etc.)

The type of your business, its size, assets, and corporate structure will determine the amount of coverage you need. But this policy won’t cover motor vehicles.

#8. Commercial Property Insurance

If you have a physical address, you should carry commercial property insurance to cover losses of business or personal property. This type of policy usually covers damage to the structure and inventory or property within it from damage from storms, fire, theft, or vandalism. Dovetailing with commercial property insurance, it might also make sense to look at a business owners’ policy (BOP) depending on the size and assets of your business.

Insurance companies will sometimes offer a BOP to small and medium-sized businesses. A BOP policy will usually combine general liability, property insurance, and business interruption coverage. You can often add riders to such a policy. It can be more affordable to bundle the coverage you already need.

#7. Business Interruption Insurance

If property sustains damages, you may not be able to keep your business open during repairs. Hence business interruption insurance can help cover financial losses. It can cover your employee payroll, taxes, operating expenses, debt repayment, and sometimes the cost of a temporary location. Many business owners used business interruption insurance during the height of the Covid-19 pandemic when they had to close their doors.

#6. Workers’ Compensation Insurance

If you hire employees to work in your business, you’re legally required in most states to get workers’ compensation insurance. Workers’ comp protects you and your employees if they’re injured or become ill at work. It can cover an employees’ medical expenses and lost wages while recuperating. If an employee agrees to accept workers’ compensation as part of their hiring package, they often waive the right to sue you for an incident at work.

#5. Commercial Auto Insurance

If you use a vehicle for business purposes, then you need commercial auto insurance. Because if you get in an accident while doing business-related work, your personal car insurance may not cover it. Some insurers will require separate policies for dump trucks and semis.

#4. Product Liability Insurance

If you manufacture or sell any type of product, you can be held liable if that product injures someone, damages their property, or makes them sick. Product liability insurance can help cover associated medical costs, replacement of the purchased product, and even legal fees and settlement costs if your business is sued. Distributors and sellers can be the subject of product liability lawsuits, so, they should consider this form of coverage.

#3. Cyber Liability Insurance

If your business is the subject of a data breach and customer information was accessed or stolen, cyber liability insurance can:

  • Notify anyone impacted by the breach
  • Give them credit monitoring
  • Cover the costs of informing the public (if necessary)

Some insurers call this data breach insurance. Anyone who stores customer information electronically should get it, as your general liability policy won’t cover this.

#2. Professional Liability Insurance

If you run a business where you offer professional advice or are responsible for completing projects—such as a doctor, lawyer, or architect—you need to carry professional liability insurance. It’s also called errors and omissions insurance. This policy can protect you and your business if you’re accused of negligence (or were negligent), missed deadlines, undelivered services, or breach of nondisclosure/copyright insurance. Doctors and other professionals often must carry a specialized type of professional liability—malpractice insurance. But even plumbers, realtors, and event planners can use professional liability coverage.

#1. Commercial Umbrella Insurance

At times, it can be more affordable for a small business to purchase an umbrella policy, instead of increasing the limits of an underlying policy. An umbrella policy may also cover business risks that an underlying policy excludes. Hence, if the policy limits of your general liability policy are exhausted, umbrella insurance can step in to cover whatever remains. But umbrella policies can’t and won’t cover everything.

Does a Home-Based Business Need Insurance?

You may be wondering if any of this can apply to you. You may not have a physical business location. But your homeowners’ insurance will only cover some of any damage to business property. And most if not all the other insurance policies apply, too.

Other Types of Insurance to Consider

A small business may do well to consider key person insurance. With key person insurance, if there’s one person—this could be you—key to the operation of your business, the business won’t grind to a screeching halt if that key person were out for a long time (say, with Covid). This coverage can help cover any associated monetary losses for a certain time until your business replaces this person, or they return to work.

Two other types of consider are commercial crime insurance, and equipment breakdown coverage. Crime insurance can protect your business if you’re robbed (even by an employee). It can help cover financial losses other types of insurance may not. Equipment breakdown covers damage to or the loss of your A/C systems, boilers, furnaces, and computers and other electronics, if damaged by power surges or they break down.

If you’ve got employees, then you may be thinking about offering employee benefits. Often, depending on the size of your business, you must provide disability insurance, health insurance, and other insurance, like life insurance, to help protect your employees. But with good business credit, you may be able to save on all these types of insurance.

Finally, Pay Attention to Your Policy

It’s best practices to take time to revisit your policy, especially if you change parts of your business and need new coverage. Experts say you should search every three years or so for a new policy. This is to make sure you’re not only staying current on your coverage but getting the best rate.

Business Insurance and Business Credit: Takeaways

The strength of business credit scores like PAYDEX can affect the price of your policies. Insurance carriers tend to look at open debts and collections, and how quickly your business pays its bills. Paying on time and keeping accounts out of collections can help both your business credit scores and what you’ll pay for premiums—for any type of business insurance.

The post Does a High PAYDEX Drive Down My Business Insurance Premiums? appeared first on Credit Suite.

Everything You Need to Know About Your PAYDEX and Other D&B Reports

PAYDEX is important to your business credit.  In fact, the D&B PAYDEX is one of the most common tools used by lenders to determine credit risk.  There are a couple of reasons for this. First, Dun & Bradstreet is one of the largest and most commonly used business credit reporting agencies.   Next, the PAYDEX score is the most like the personal FICO score, so it is easy for lenders to understand. 

The PAYDEX is Important, But It’s Not the Only Thing the Dun & Bradstreet Has on You

Though the PAYDEX is the most commonly used, there are other reports that Dun & Bradstreet issue that can be helpful to lenders.  You need to know about all of them, because you never know what all a lender will look at. 

Learn more here and start building business credit with your company’s EIN, not your SSN. 

The Quick and Dirty on the PAYDEX

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. In business credit terms, it is the most similar to the personal FICO score. This is why it is the most popular business credit option among lenders. 

In addition to the PAYDEX, D&B issues the following options for lenders. 

PAYDEX and Your 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 past data to try to predict what will happen in the future. 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. It is 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 like 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. They assess how likely a business is to continue to pay obligations according to the agreed-upon terms, and how likely it is to experience financial stress in the next twelve months.

Learn more here and start building business credit with your company’s EIN, not your SSN. 

D & B Rating

A D&B Rating helps lenders assess a business’s size and credit potential. Dun & Bradstreet bases this rating on details in your company’s balance sheet and 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 ratings show company size only based on the total number of employees.  Consequently, these ratings are assigned if your company’s file does not contain a current financial statement. Employee Range (ER) Ratings apply to specific lines of business that are hard to put into categories under the D & B Rating system. These kinds of businesses receive an Employee Range symbol based upon the number of employees and that is all.

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.

Now, How Do You Get Started Building Your PAYDEX?

The first step is to ensure your business is set up properly to separate it from yourself.  You don’t want business credit accounts reporting to your personal credit. They need to report to your business credit only.  How do you make this happen? Glad you asked. 

Your Business Needs Separate Contact InformationPAYDEX Credit Suite

The first step in setting up a foundation of fundability is to ensure your business has its own phone number, fax number, and address.   Then, when you apply for credit accounts, use that information and not your personal information.   

That doesn’t mean you have to get a separate phone line, or even a separate location.  You can still run your business from your home or on your computer if that is what you want.  You do not even have to have a fax machine.  

In fact, you can get a business phone number and fax number that will work over the internet instead of phone lines.  In addition, the phone number will forward to any phone you want it to so you can still use your personal cell phone or landline.   Whenever someone calls your business number it will ring straight to you. 

Faxes can be sent to an online fax service, if anyone ever happens to actually fax you.  This part may seem outdated, but it does help your business appear legitimate to lenders. 

You can use a virtual office for a business address. How do you get a virtual office?  What is that?  It’s not what you may think.  This is a business that offers a physical address for a fee, and sometimes they even offer mail service and live receptionist services.  In addition, there are some that offer meeting spaces for those times you may need to meet a client or customer in person. 

You Must Have an EIN

The next thing you need to do is get an EIN for your business.  This is an identifying number for your business that works similar to how your SSN works for you personally.  Some business owners use their SSN to apply for business accounts. This is what a lot of sole proprietorships and partnerships do.  However, it really doesn’t look professional to lenders.  It can cause your personal and business credit to get mixed up.  When you are looking to increase fundability, you need to apply for and use an EIN. You can get one for free from the IRS.

Incorporating is Absolutely Necessary

This is the most important step separating your business from yourself.  Incorporating your business as an LLC, S-corp, or corporation is necessary to fundability as well.  It lends credence to your business as one that is legitimate and it  offers some protection from liability. 

Which option you choose does not matter as much for business credit and  fundability as it does for your budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.  What is going to happen is that you are going to lose the time in business that you have.  When you incorporate, you become a new entity. You basically have to start over.  You’ll also lose any positive payment history you may have accumulated. 

This is why you have to incorporate as soon as possible.  Not only is it necessary for fundability and for building business credit, but so is time in business.  The longer you have been in business the more fundable you appear to be.  That starts on the date of incorporation, regardless of when you actually started doing business. 

A Separate Business Bank Account Is Vital

You have to open a separate, dedicated business bank account.  There are a few reasons for this.  First, it will help you keep track of business finances.  It will also help you keep them separate from personal finances for tax purposes. 

Learn more here and start building business credit with your company’s EIN, not your SSN. 

There’s more to it however.  There are several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance.  In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit card payments.  Studies show consumers tend to spend more when they can pay by credit card. 

How Do You Establish a PAYDEX Score? 

Once you are certain your business is established as an entity separate from you as the owner, you need a DUNS Number. This 9-digit number is a unique identifying number that works to establish a business credit file with D & B. A DUNS (Data Universal Number System) works to keep accurate and timely data on over 250 million businesses around the globe. You want your business to be one of them.

From an identification standpoint, it makes a lot of sense. With the use of this identifier, errors can be kept to a minimum. As a result, Dun & Bradstreet will never confuse your business with someone else’s.

Dun & Bradstreet requires that you register your company for free on their site to get a number. There are a few other ways to get a DUNS if your business belongs to a special class.  These include if it is a US government contractor or grantee, your company is Canadian, or you are working as an Apple developer. 

Registration is fast and simple. Once you have said yes to their Terms and Conditions, you are taken straight to a dashboard where you either ask for a DUNS number or you look up to see if your business is already listed. If it is already on the big list, then you click on your company’s name to make any needed changes. 

Understanding the PAYDEX and How Dun & Bradstreet Works Is Important

By understanding what the D&B PAYDEX is, how it works, and how lenders use it, you can have a better feel for how fundable your business is.  The PAYDEX is one measure of business credit, and business credit is just one piece of a business’s overall fundability. 

While other aspects of fundability are important, business credit is the one that is easiest to control.  All you have to do is make your payments consistently on-time. If you do that, you PAYDEX will be fabulous and you will be able to get whatever funding you need to run and grow your business. 

The post Everything You Need to Know About Your PAYDEX and Other D&B Reports appeared first on Credit Suite.

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.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

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.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

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

establish PAYDEX quickly Credit Suite

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.

Check out our best webinar with its trustworthy list of seven vendors to help you build business credit.

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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