I have the opportunity to speak with business owners across the United States and with all the misleading information floating out in cyber land it is typical to end up speaking with someone who has a distorted perception of what business credit actually is. I would like to provide answers to some of the most commonly asked questions.
What is Business Credit?
Business Credit is any credit line, trade line, loan or funding obtained under the business name that does not report on an individual’s credit report. So if a business receives a credit line of $5,000.00 and it reports only to the businesses credit records, that’s business credit. Even if an individual provides a personally guarantee as long as it’s not showing up on their personal credit report, that’s business credit.
Why should my business build its own business credit?
When you’re building a business your sole focus is on succeeding, you don’t pay attention to possible hiccups that could cause your business to fail. So when you’re asked to personally guarantee credit or funding, there are no red lights going off warning you of potential devastation. However, by placing your signature on that dotted line can reduce your credit score, increases your debt to income ratio, potentially raise your current and future APR’s, cause current creditors to reduce the amount of your credit lines, limit your borrowing capabilities for both personal needs and the needs of the business. If you are able to keep the businesses financial needs separate for your personal financial needs, one can’t affect the other. Additionally, if you are personally guaranteeing all the financial aspects of your business and it fails you could spend the next 10 years paying off the debts of the business.
Can my business really obtain credit?
Yes, your business can absolutely obtain credit. Business Credit Services, Inc. isn’t just out there promoting our product. We ourselves utilize our business credit building program. We don’t use clients as guinea pigs and hope everything turns out all right, like many of our competitors. Business Credit, also known as corporate credit or trade credit is the single largest source of lending in the world. However, many business owners are unaware or its overlooked since the majority of “so-called” expert’s are advising people to tap into their retirement or home equity to fund their business. Many business owners are now facing foreclosure after tapping their home equity to fund their businesses and are stuck in sub-prime loans that they can’t afford because their businesses profits are down due to the current economic conditions or their tapping of home equity has gotten them so far upside down in their homes they may not see equity for years.
A company’s representative told me that they don’t offer business credit.
This is a classic answer given by the low-man on the totem pole salesman, who has no knowledge or experience in the lending practice of businesses. Business credit is not something that everyone is walking in and asking for so it is possible that the person you initial speak with may have knowledge of how to initiate the business lending processes. It can take a lot of digging around a company before you will find someone who actually knows what you’re talking about and the individual that knows about business credit will supply a simple answer like: “Oh, yeah that’s easy to do”. There are times when you will need to be persistent, stay on top of finding someone who knows what business credit is and how to get the ball rolling and completed. This happened with the founder of Business Credit Services, Inc., David Gass. The business needed to lease a vehicle, the plan was to go through GMAC. David sent an employee with all the required business paperwork down to the dealership to set the wheels in motion and when it was time to sign the paperwork David was going to run down to the dealership. Well the employee went down to the dealership and the sales representative he connected with kept telling him that it was impossible to lease a vehicle in the name of the company. So David received a call from his employee telling him about the issue, David got on the phone and was informed by the sales representative that he had worked in the auto industry for 30 years and was absolutely certain that a company could not lease a vehicle solely in it’s name. After a brief conversation with David the sales representative asks his Sales Manager, the sales manager also says it can’t be done. David was persistent and advices the two that his company was built around business credit and that he knew for a fact that it was possible to lease a vehicle in the name of the company and to find someone within the dealership who knew how to get it done. Finally, the finance manager stepped forward and advised both the sales representative and sales manager that it was possible and quite simple, in the words of the finance manager “Oh Yeah, that’s easy. We do this a lot.” So sometimes it takes a little persistence to get business credit established with a company.
Can’t I establish business credit on my own?
You can absolutely go out and spend time and money trying to figure out how to establish business credit on your own. Studies show that it takes about 3-5 years for someone to figure out how to establish business credit. However, most of the legitimate business owners, I talk to, don’t have an abundance of free time on their hands to try and figure it out. Establishing business credit is completely different from establishing personal credit. There are no laws governing business credit reporting or bureaus. It is extremely easy to mess the whole process up and become red flagged not only as a business but as the company’s representatives.
So there you have it the most commonly asked questions that I receive from business owners about establishing business credit. Being an informed business owner is very important to the success of your business. If you would like further information about establishing business credit please feel free to contact me direct or visit www.bcscredit.com to learn more.
