You need a business
structure. Corporations are best. LLC's are second to
corporations when accessing credit. A sole proprietorship is not going to
Start with a
corporation that's at least four years old.
more funding than LLC's.
LLC's protect assets
more effectively than corporations. This is why banks prefer to loan
money to a corporation. They like the idea of reaching out to access
assets in case you don't pay the loan.
If you are building
corporate credit, then you can't have privacy. This means the banks
want your name on the state records identifying you as the principal of
If you can't point to
your business credit profile, it's because you don't have one.
The types of business
financing available: Start up loans, micro loans, line of credit,
investor loans, land loans, hard money loans and credit cards. There's
also the business plan loan and the financial plan loan.
Ask your tax advisor
about using your IRA or 401K funds to start a business.
A landline telephone
number is critical for registering with 411.
Banks and credit
unions require a good credit score, low debts, a business plan and a
business credit history. When acquiring a shelf company, you will need
to build that credit history after acquiring the company. Any existing
credit history or business credit score will be wiped out within ninety
days of acquiring a shelf company. As a result, don't acquire a shelf
company with an existing credit score. Instead, acquire a shelf company
with no credit score and then build it yourself. You will avoid
problems and possible back taxes. You will also pay much less for the
Licensing on the
State, County and Municipal level is mandatory to clear the compliance
hurdle with the bank.
A bank account must
exist for the business. The business bank account should have at least
three digits($1000) on deposit.
Your personal credit
is important if you are to serve as a guarantor for the corporation.
A business loan
offers a lower rate of interest than a personal loan.
A business loan is
achievable after five open trade accounts.
The three credit
reporting agencies for business are Dun And Bradstreet, Experian and
Order products and
supplies from businesses that report to the above mentioned credit
The business credit
score is between 0 and 100. Shoot for a score of 80 by paying off
obligations early. A score of 75 is a high score.
Obtain a net 30
account with those companies, buy stuff and pay it off early.
Buying trade accounts
is illegal. Don't do it. This is buying a fake account that makes
positive reports on a fake trading account.
A business plan
separates your personal credit from the credit involving your business.
If the business goes under, you don't need to lose your home. There's
no need to post your home as collateral.
Bridge financing is a
loan for temporary and immediate needs of the business. It costs more
than conventional financing and the interest rate is higher (12%-15%).
It is often used to acquire commercial real estate, and accompany hard
Export financing is
used to produce an item that's used abroad.
A factoring house is
a lender who will purchase your products at a discount. This discount
of % to 7% below invoice, and then sold at the market rate. You and the
factoring house will split the profits.
Start up loans are
available through the Small Business Administration. Many of those
loans are called microloans. They are smaller loans, under $35,000, and
they have a term of three(3) to seven(7) years. Although, SBA loans may
go up to $2 million for long periods.
Trade credit is a
purchase of materials or products from another business with a thirty to
sixty day window for repayment. You sell the finished goods to the
customer, collect the funds and pay the vendor his due.
Business credit cards
offer the added advantage of not requiring a personal guarantee.
The major business credit card issuers are American Express, Chase and
Discover Card. The payment history is reported to Equifax
Business, Experian and Dunn & Bradstreet. To obtain a business
credit card, they need the following:
license/state filing for compliance
Business Credit Score
If you must serve as
a personal guarantor for higher balances, then your personal credit
score will be required.
Anything on your
business credit report may be corrected, if inaccurate.
Questions to ask
yourself before applying for a small business loan:
For unsecured lines
of credit, check your cell phone provider. Open an account in the
Commercial lines of
credit increase flexibility in your business plan. This means that
the balance may be paid down or increased as you need to.
estate loans are for expansion of your office, retail floor, or
A bridge loan is
considered a short term loan to handle daily operations until cash flow