What’s All This About Business Credit?

Business credit is credit in a business name that’s linked to the business’s EIN number. This is credit a business owner can obtain that is not linked to their SSN. That’s just the first thing about business credit that you should learn.

When built correctly, the SSN isn’t even supplied on the application meaning there is no personal credit check to obtain this kind of EIN credit.

When you apply for something such as an auto loan, the lending institution pulls your personal credit using your name, address, and social security number.

This information is sent to the consumer credit reporting agencies. Then they supply the lender a credit report with all information they have relating to someone with a similar name, address, and SSN.

With this type of credit an inquiry is then put on your consumer credit report. Then they use your report to make the lending decision. Plus the credit you obtain will then be reported to the consumer reporting agencies.

When you apply for something such as a business loan, the lending institution pulls your company credit using your name, address, and EIN number.

This information is sent to the business credit reporting agencies. Then they supply the lender a credit report with all information they have relating to a business with a similar name, address, and EIN.

With this type of credit an inquiry is then put on your company credit report. Then they use your business report to make the lending decision. Plus the credit you get will then be reported to the business reporting agencies.

Use Your EIN

It’s important to note that when applying for financing and credit using your corporate credit, you should NOT supply your social security number on the application, even though it will be requested.

When you do this, NO personal credit can be pulled because the lender can’t pull your personal credit without your SSN.

This forces them to only pull your EIN credit as you supplied your EIN not your SSN.

This means you will get approval ONLY on the merits of your company credit report… your personal report isn’t even reviewed.

This means there is no credit check from the business owner to get approval. This also means that anyone who has bad, even horrible personal credit can still get approval for corporate credit.

Here’s a video that walks you through the steps to build your business credit

No Effect on Personal Credit

This sort of credit reports to the business credit reporting agencies, not the consumer reporting agencies.

So as this credit is used it has no adverse impact on the owner’s consumer credit because it’s not on report to consumer agencies.

This means using the account, even over 30%, won’t have any adverse impact on the personal credit scores.

And there are no inquires on the personal credit when you apply for company credit as long as you don’t supply your SSN.

Utilization

30% of your total consumer credit score is based on utilization so if you use your personal credit to get credit cards for your business, if you use those cards you will lower your scores. Using more than 30% of your limit WILL result in a score decrease

So if your limit is $1,000, having a balance above $300 lowers your scores. This means 40% of your total score is damaged. And this is just by applying and using the credit you get using your consumer scores. With true corporation credit, it affects 0% of your score.

Check out this article from FICO to see how your score is calculated including the portion dedicated to utilization.

Inquiries

10% of your total consumer credit score is based on inquiries so if you are using your personal credit to apply for business loans and credit, your scores will go down as a result of those inquiries.

Plus those inquiries can remain on your credit for an extended period of time affecting your ability to borrow more money.

And some unsecured business lending sources won’t even lend you money if you have 2 inquiries or more on your personal credit reports within 6 months.

But with company credit, the credit doesn’t report to the consumer agencies, so neither inquiries nor utilization have any effect on your consumer credit scores.

This is one more reason every highly successful business has corporate credit.

You Can Build Business Credit Scores Quickly

Business credit scores are based only on whether the business pays its bills on time. As a result, a business owner can obtain credit much faster using their biz credit profile versus their personal credit profile.

Personal Credit Scores are based on 5 factors: Payment History – 35%, Utilization – 30%, Length of Credit History – 15%, Accumulation of New Credit – 10%, and Credit Mix – 10%.

PAYDEX Score are based on Payment History

• Expect payment may come early – 100
• Payment is prompt – 80
• Payment comes 14 days beyond terms – 70
• Here, payment comes 21 days beyond terms – 60
• Payment comes 30 days beyond terms – 50
• Payment comes 60 days beyond terms – 40
• Here, payment comes 90 days beyond terms – 30
• Payment comes 120 days beyond terms  – 20

Consumer credit scores are made up of 5 factors and take years of well disciplined borrowing to get really good scores. Company credit scores are mostly based on payment history only, so as long as you pay bills as agreed… you will have an excellent score

And it only takes 2-3 reported accounts for you to establish a score. And most vendors report your account to the business reporting agencies in 30-90 days.

This means you can build a corporate credit profile and have an excellent credit score in a VERY short time period.

Check out this link to videos on how your scores are calculated with all three major business credit reporting agencies .

ANYONE Who Wants Your Company Credit Report Can Pull It

With consumer credit, someone HAS to have Permissible Purpose to pull your personal credit… basically they must have your consent to review your reports.  Only certain institutions have approval for credit pulling capabilities and can pull your consumer credit report. These are places like banks, auto dealers, mortgage brokers, and others with licenses to lend money.

But with corporate credit, this information is public, which means ANYONE who wants your business information can easily and cheaply get it.

Think about some of the people who can see your reports as they wish whenever they want: customers, clients, suppliers, others who you might do business with and competitors.

Your Business’s Information is Out There

Here is some of the information anyone can easily see about your business:

• Amount of tradelines (payment experiences)
• Credit scores
• High credit limits
• Past payment performance
• Employees
• Revenues
• And much more

It’s available to ANYONE who wants it.

Pull your own credit reports to see what others are seeing about your company right now .

Would you want to do business with a company with a similar profile?

What does your profile say about you… are you established?

How will your customers, clients, even competitors think about you with this information?

Keep monitoring your reports regularly to see what others can see about you. And keep building your corporation credit so you can have a credible image portrayed for anyone who wants to see your credit in the future… especially those who lend money or issue credit.

Getting Approval with No Personal Liability

When you put your SSN on a credit application, you are almost always providing a personal guarantee. This means you are personally liable for your business debts so if you were to default on one of these obligations, the creditor will pursue your business assets first, then they’ll come after your personal assets including… your home, your cars, your stocks and bonds, your bank accounts and any and all other assets.

Business owners don’t expect to fail but unfortunately, 90% do fail. It makes no sense to put you and your family’s financial future in jeopardy when you know going in that you have a 90% possibility of ruining it.

Remember, many times the reasons a business might fail have nothing to do with you, or things you can control… such as shifts in the economy so don’t risk it all if you don’t have to.

There is no question, starting and running a business IS risky. This is why most conventional banks make it so hard to get a loan. So DON’T use a personal guarantee unless you have to.

With many business loans you will need to. But with credit you DON’T need to as long as you build business credit.

Check out this great article by Entrepreneur that talks more about separating your personal and business liability .

How to Devalue Your Business

Anyone who has sold or bought a business will tell you of the importance of biz credit.

All potential buyers can easily obtain extensive information about your business, just by getting your corporate credit report… that anyone who wants it can get.

This means they’ll quickly know details about your business including:

• Credit scores
• High credit limits
• Past payment performance
• Employees
• Revenues
• And much more…

Now that you know how easy extensive credit and financial information is to get for a company, if you were a buyer wouldn’t you get it?

Based on what’s on your business credit report, would you want to buy your company?

Does your report reflect that your company is “established”? Does it show that you pay your bills, do you look like a successful company from your report?

If you could choose from two companies to buy that were the same in every way except business credit, which one would you buy?

Is it the one with a very limited or no credit profile? Or the one with a credit profile that reflects good payment performance, with available credit.

Business credit is essential in getting a good evaluation of a business. So make sure you have checked yours recently and it represents your business as you want and it should.

About Business Credit: You Can DOUBLE Your Borrowing Ability

A major benefit of business credit is that it more than DOUBLES borrowing ability.

You already have consumer credit, now you can have a whole other credit profile with business credit.

This means it’s the only way to get multiple Staples cards, Office Depot, Lowes, Walmart, Target, and so on. That is, in most cases.

When you have access to more store and cash credit cards, you also have access to a lot more usable money.

Plus per SBA business credit limits are 10-100 times that of consumer limits.  Getting business credit radically increases your available credit as a result.

An average Staples card limit on the consumer side might be $3,000. But in the business world it might be closer to $30,000.

Businesses have a need for higher limits… and higher limits they get with business credit.

Scaling a Business

This is another reason it’s very hard to scale a business using personal credit only.

Plus you can get business credit VERY fast. You can get approval for initial vendor credit to help your business grow within 1 week. That credit will typically report within 30-90 days.

Once reported you will then have reported tradelines which in turn give you an established business credit profile and score.

Once you get an established profile in 90 days or less, you can then start getting real usable retail credit cards.

Within 120-180 days you can then get real cash credit such as Visa, MasterCard, Discover, and AMEX. This is credit you can use anywhere.

In this interview we dived in deep with some clients to find out exactly what is possible with business credit. And we found out how high their limits really were, check it out

No Financials… No Problem!

Business credit is perfect for startups. Most conventional and private lenders won’t lend to companies without financials and who have been open 2 years or more.

The most popular cash flow type of financing requires one year in business and steady revenue . Most consumer credit card approvals are based on personal income. But with this sort of credit, even a startup can get loads of new credit without any of these items.

This kind of credit is perfect for businesses who don’t have or want to show financials. Let’s face it, we write off all expenses in a business we can. This leaves a smaller net profit, which is what most lenders and investors look at most.

About Business Credit: More Benefits

This type of credit doesn’t look at financials, or bank statements. A business even with no cash flow can get approval for high limit cards, helping them grow their cash flow. And they don’t look at tax returns either. So even if the business shows a loss they can still get approval.

Most business lending requires collateral. This is because most businesses fail. Plus, the risk of repayment of lent money is VERY high. And it is why most conventional lenders make it so hard to get money, they aren’t setup for this type of risk.

This is also why SBA requires you use ALL business assets, and even personal assets, as collateral. Business credit is one of the only ways to get money without providing collateral to offset the risk.

About Business Credit: Upshot

For more information on building your business credit download this FREE four step guide.