Business Credit and How To Get It
I made a mention of establishing business credit on another thread and a few people asked me to start a thread about it. OK, here goes.
First, you need to know you have two types of credit available to you if you own a business. They are personal and business. If you don't own a business this thread isn't for you.
Everybody knows about personal credit because they have a credit report. I just had mine pulled the other day cuz we are refinancing the shack. Not bad numbers for an old man. Great credit to debt ratio too. While this isn't all that important for my business (I own an insurance agency) it does play into the picture. The better your personal numbers the better you look to the business credit bureaus.
Believe it or not, the big three, Experian, Equifax and Trans Union, are only a piece of the picture. All are heavily into personal credit but only one is as involved on the business side as they are on the personal side. More on that later.
You have probably heard of Dun and Bradstreet. Most small biz types think they only do the GM, Microsoft, IBM types. Wrong. They will do you (no pun intended) too. You just have to make sure you play by their rules which aren't too complicated.
That was a long first but I think it had to be said to lay the ground work. Here is the second. Formalize yoour business. By formalize I mean it has to be a corp, partnership, llc or some other form of government recoginzed business. That means you have a Fed Tax ID Number and a State Tax ID number if your state issues such.
I own three LLCs. You may not own any. No big deal. But if you are shooting for business credit your business probably should be one of the aforementioned. In fact, scratch probably and make it a "has to be" or D&B and the other horses won't even let you in the race.
Believe it or not, the bank account should be in your business name. I know a few people in my town who laugh at both business credit and a business bank account. They just don't like having the government looking over their shoulder. No, they don't sell drugs, one operates a lawn care business and the other is a tree trimmer. All cash.
Personally that's OK but think about it. By playing w/in the rules you get all kinds of benefits. Taxes aren't one of them but retirement programs, business paid health coverage, etc make up for what is perceived as no guv oversight. This of course is a topic for another thread so I will stop right here and only say make your business one of those mentioned and get a bank account in your business name.
Third, let's talk run ins w/the law. These are called public records cuz your case was adjudicated by some court. They will most likely show up on your biz record as well as your private credit record. If at all possible, try to stay out of trouble w/John Law. Traffic tickets and that sort of minor stuff is OK but domestic violence, drug convictions, child support, tax liens, judgments and acts of moral turpitude ain't.
I am not a preacher so I really don't care what you've done. But I also ain't a credit reporting agency that does care. Enuf said about that too.
Fourth, some people say your telephone number has to be listed in the 411 directory. The free one I used was List Yourself! -- Your Free 411 Directory Assistance Listing (Not an AFF ID). Even though we've been listed for years in our phone book and on the net on all of the major search engines and related sites, I went and did this anyway. Can't hurt cuz I want my biz number everywhere. The more people who call the more policies written.
Fifth and last one for today- business plan. This one alone probably frightens off more people than any other step. Make sure it is up to snuff. A one page paper saying I want to build as many web sites as possible won't cut it. You can find all kinds of free biz plan templates by doing a search with those keywords. Heck, maybe somebody on this forum will volunteer their's as an example.
There you have it for this round. That's a lot of stuff to read and digest. If you are missing one or more of the above, the choice is yours. You can do it or not do it.
As Arnold said, "I'll be baaack..."
Tom
First, you need to know you have two types of credit available to you if you own a business. They are personal and business. If you don't own a business this thread isn't for you.
Everybody knows about personal credit because they have a credit report. I just had mine pulled the other day cuz we are refinancing the shack. Not bad numbers for an old man. Great credit to debt ratio too. While this isn't all that important for my business (I own an insurance agency) it does play into the picture. The better your personal numbers the better you look to the business credit bureaus.
Believe it or not, the big three, Experian, Equifax and Trans Union, are only a piece of the picture. All are heavily into personal credit but only one is as involved on the business side as they are on the personal side. More on that later.
You have probably heard of Dun and Bradstreet. Most small biz types think they only do the GM, Microsoft, IBM types. Wrong. They will do you (no pun intended) too. You just have to make sure you play by their rules which aren't too complicated.
That was a long first but I think it had to be said to lay the ground work. Here is the second. Formalize yoour business. By formalize I mean it has to be a corp, partnership, llc or some other form of government recoginzed business. That means you have a Fed Tax ID Number and a State Tax ID number if your state issues such.
I own three LLCs. You may not own any. No big deal. But if you are shooting for business credit your business probably should be one of the aforementioned. In fact, scratch probably and make it a "has to be" or D&B and the other horses won't even let you in the race.
Believe it or not, the bank account should be in your business name. I know a few people in my town who laugh at both business credit and a business bank account. They just don't like having the government looking over their shoulder. No, they don't sell drugs, one operates a lawn care business and the other is a tree trimmer. All cash.
Personally that's OK but think about it. By playing w/in the rules you get all kinds of benefits. Taxes aren't one of them but retirement programs, business paid health coverage, etc make up for what is perceived as no guv oversight. This of course is a topic for another thread so I will stop right here and only say make your business one of those mentioned and get a bank account in your business name.
Third, let's talk run ins w/the law. These are called public records cuz your case was adjudicated by some court. They will most likely show up on your biz record as well as your private credit record. If at all possible, try to stay out of trouble w/John Law. Traffic tickets and that sort of minor stuff is OK but domestic violence, drug convictions, child support, tax liens, judgments and acts of moral turpitude ain't.
I am not a preacher so I really don't care what you've done. But I also ain't a credit reporting agency that does care. Enuf said about that too.
Fourth, some people say your telephone number has to be listed in the 411 directory. The free one I used was List Yourself! -- Your Free 411 Directory Assistance Listing (Not an AFF ID). Even though we've been listed for years in our phone book and on the net on all of the major search engines and related sites, I went and did this anyway. Can't hurt cuz I want my biz number everywhere. The more people who call the more policies written.
Fifth and last one for today- business plan. This one alone probably frightens off more people than any other step. Make sure it is up to snuff. A one page paper saying I want to build as many web sites as possible won't cut it. You can find all kinds of free biz plan templates by doing a search with those keywords. Heck, maybe somebody on this forum will volunteer their's as an example.
There you have it for this round. That's a lot of stuff to read and digest. If you are missing one or more of the above, the choice is yours. You can do it or not do it.
As Arnold said, "I'll be baaack..."
Tom
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