Building Business Credit

While obtaining business credit cards, small business loans and a business line of credit is the common objective for many small business owners there is a growing demand for learning how to qualify without having to use personal credit or a personal guarantee.

I’m happy to see that more and more business owners are embracing the idea of completely separating your personal credit from business credit. Many of our new members were never aware of the danger that co mingling the use of credit profiles for personal and business can jeopardize the protection of the corporate veil plus limit the amount of funding their business can obtain.

 Here are twenty steps to building corporate credit without using a personal guarantee. Please note that I’ve used examples from my own business credit practice.

1. Incorporate your business and obtain a Federal Tax ID#- your Tax ID number will be the number that identifies your business and information. It’s just like how your social security number will identify who you are for personal credit.
2. Complete corporate conformity (411 listing, verifications, business license, etc.) –vendors, lenders and banks will do their due diligence prior to extending credit to your company. Don’t expect to receive credit by skipping these key fundamental steps.
3. Select the right business classification codes – avoid selecting codes that will trigger a red flag with the business credit bureaus and lenders. This can stop your business credit building efforts dead in its tracks.
4. Set up a complete profile with Dun & Bradstreet – Simply obtaining a DUNs number doesn’t cut it you will need to furnish additional information on your profile to give creditors a complete picture of your business. Remember there are companies like First Equity that offer no personal guarantee business credit cards but by invitation only. They purchase targeted lists from the business credit bureaus which you want your company to be on.
5. Add existing positive trade references – use business credit builder programs which can help you build business credit fast so if you have the references take advantage of it.
6. Apply for vendor lines of credit – getting business credit can be simple with companies that specialize in startup companies or businesses with no credit.
7. Pay invoices ahead of the due date – you can increase your paydex score to 90 or higher by simply paying your invoices 10-20 days ahead of the due date. A big plus on your files!
8. Build solid payment history – while account types and trade lines are a factor keep in mind that a payment track record is the final ingredient. Don’t think that one paid invoice will make your business capable of acquiring no personal guarantee credit lines or credit cards.
9. Monitor your business credit file – a no brainer and a good habit to adopt for your personal files as well.
10. Get listed with multiple business credit bureaus –target specific business credit bureaus that cater to your industry on top of the big three.
11. Set up a small business bank account –before selecting a financial institution for your banking make a list of the financial products you may need. Consider a credit union or community bank because they are much more flexible in today’s economic environment.   
12. Establish a minimum ‘low 5’ bank rating – know what your banks are looking for in business credit lines.
13. Obtain secured business credit cards
14. Open a small business credit line
15. Establish a diversity of credit – build a strong business credit profile by obtaining different account types. This includes trade credit, revolving credit, loans and leases.
16. Keep proper financials
17. Establish a well written business plan – A business plan is your blueprint that outlines every necessary component for the success of your business. Enough said!
18. Maintain personal credit scores at 680+ – when applying for no personal guarantee credit a lender or creditor may still require a personal credit check.
19. Build large trade lines with multiple tiers of credit –you can request for a credit limit increase usually after six months of good payment history. Before applying for larger tiers of credit be sure to know what the requirements for approval are.

20.  Stay informed! – join forums, social networks, read articles, subscribe to blogs and consider joining memberships like the business credit insiders circle.

Following these steps will provide your business opportunities to establish business credit in the name of your business while protecting your personal credit and personal liability.

To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>

Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in Business Week, The Washington Post, The San Francisco Tribune, Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.