Updated: Jan 31, 2022
Business Credit is credit obtained in a Business Name. With business credit the Business builds its own credit profile and credit score. With an established credit profile and score, the business will then qualify for credit. This credit is in the business name and based on the business’s ability to pay, not the business owners. Since the business qualifies for the credit, in some cases there is no personal guarantee required from the business owner.
As amazing as business credit is, Entrepreneur estimates that 90% of business owners know nothing about it. We created this guide to ensure that as a Credit Repair specialist you know six of the most important aspects of business credit, and what it can do for you and your company.
This knowledge is essential. You’ll encounter many customers who will want you to teach them more about business credit. And, you can create a very lucrative income stream knowing how to properly advise your clients the through business credit building process. Now, let’s jump in so you can learn business credit secrets that every credit repair company should know.
6. Business Credit Has No Affiliation with Personal Credit
Business credit is credit in a business name, linked to the business’s EIN number. This is credit which a business owner can get which is not linked to their SSN.
When built right, you don’t supply your SSN on the application, meaning there is no personal guarantee to get this kind of EIN credit.
When you apply for something like an auto loan, the lending institution pulls your personal credit using your name, address, and social security number.
The lender sends this information 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 then goes on your consumer credit report, and your report is used to make the lending decision. Plus, the credit you get will then be reported to the consumer reporting agencies.
When you apply for something like a business loan, the lending institution pulls your business credit using your name, address, and EIN number.
This information goes 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 business credit report, and your business report is used to make the lending decision. Plus, the credit you get will then be reported to the business reporting agencies.
It’s important to note that when applying for financing and credit using your business credit, you should NOT supply your social security number on the application, even though the form will request it.
When you do this, they cannot pull your personal credit because the lender can’t do so without your SSN.
This forces them to only pull your EIN credit as you supplied your EIN not your SSN.
It means you will get approval ONLY on the merits of your BUSINESS credit report.
Your personal report isn’t even reviewed.
This means there is no personal guarantee from the business owner to get approval. This also means that anyone who has bad, even horrible personal credit can still get approval for business credit.
Business credit reports to the business credit reporting agencies, not the consumer reporting agencies.
So, as business credit is used, it has no adverse impact on the owner’s consumer credit because it’s not reported to consumer agencies.
This means using the account, even over 30%, won’t have any adverse impact on personal credit scores.
And there are no inquiries on the personal credit when you apply for business credit if you don’t supply your SSN.
30% of your total consumer credit score comes from 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 damage to 40% of your total score just by applying and using the credit you get with your consumer scores. True business credit affects 0% of your score.
10% of your total consumer credit score comes from 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 two inquiries or more on your personal credit reports within six months.
But with business 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 business credit.
5. Business Credit Scores Are VERY Different than Consumer Credit Scores
Business credit scores are based only on if the business pays its bills on time. As a result, a business owner can get credit much faster using their business credit profile versus their personal credit profile.
Personal Credit Scores come from five factors:
Payment History 35% z Utilization 30%
Length of Credit History 15%
Accumulation of New Credit 10%
Credit Mix 10%
Business credit scores mainly come from payment history alone. Consider that the most popular score in the business world is the PAYDEX score from Dun & Bradstreet. An 80 means that payment is prompt.
Consumer credit scores are made up of 5 factors. It can take years of well-disciplined borrowing to get excellent scores. Business credit scores are mostly based on payment history. So, as long as you pay bills as agreed, you will have an excellent score.
With Experian and Equifax, you can have just one account reporting and you will have a business credit score. Most vendors have your account reported to the business reporting agencies in 30 – 90 days.
This means you can build a business credit profile and get an excellent credit score in little time.
The credit scores in the business world report on your business and assesses different forms of risk like the risk of filing for bankruptcy. For example, Experian’s Intelliscore considers more than payment history. So does the Business FICO score. But the main scores used today including the Equifax Small Business Risk Score and D&B PAYDEX score use payment history as the only factor. And other scores like Intelliscore use it as their primary factor.
4. ANYONE Who Wants Your Business Credit Report Can Pull It
With consumer credit, someone HAS to have Permissible Purpose to pull your personal credit. They must have your consent to review your reports.
Only certain institutions like banks, auto dealers, mortgage brokers, and others licensed to lend money and with approval for credit pulling capabilities can pull your consumer credit report.
But with business credit, this information is public. This 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. They are customers, clients, suppliers, others who you might do business with, and competitors.
Here is some of the information anyone can easily see about your business:
Amount of tradelines (payment experiences)
High credit limits
Past payment performance
Revenues And much more.
It is available to ANYONE who wants it.
Pull your own credit reports to see what others are seeing about your company right now https://amerishopbusinesscreditbuilders.com/
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 business credit so you can portray a credible image for anyone who wants to
see your credit in the future, especially those who lend money or issue credit.
How this Affects Your Ability to Sell Your Business Anyone who has sold or bought a business will tell you of the importance of business credit.
All potential buyers can easily get extensive information about your business, just by getting your business credit report.
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?
The one with a very limited or no credit profile? Or one with a credit profile reflecting 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 that it represents your business as you want and it should.
3. Business Credit Delivers Higher Approval Limits, Without Personal Risk
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 also.
This means it’s the only way to get multiple Staples cards, Office Depot, Lowes, and so on, 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 they get higher limits with business credit.
This is another reason it’s very hard to scale a business using personal credit only.
Plus, you can get business credit in less time than you may think. You can get approval for initial vendor credit to help your business grow within one week. That credit will often report within 30 – 90 days.
Once reported you will then have reported tradelines. In turn, they give you an established business credit profile and score.
Once your profile is built 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 like Visa and MasterCard credit that you can use anywhere.
Grow Your Business, Without the Risk 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% 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, like 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 business credit you DON’T need to as long as you build business credit.
Remember, when done right, you can get business credit without providing your SSN. This means there is no personal guarantee supplied.
So, if the unthinkable happens and your business fails or you default on your business cards, there is no way the creditors can then come after you personally, or your personal assets.
There is a big misconception that because you have a business credit card you aren’t liable for it personally. Only your business is. But this often isn’t true.
To get real business credit without a personal guarantee you must apply without providing your SSN. If you got a business card but supplied your SSN on the application, chances are good that you did also supply a personal guarantee.
This is why it’s essential to know to get business credit the right way, to eliminate your personal liability and to help your clients do the same.
After all, it doesn’t make sense to put your family’s financial future at risk when you don’t need to.
2. No Financials? No Collateral? Startup? 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 two years or more.
The most popular cash flow type of financing requires one year in business and steady revenue, and many even require collateral.
Most consumer credit card approvals are based on personal income. But with business credit, even a startup can get loads of new credit without any of these items.
Business 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.
Business 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 tax returns aren’t looked at 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, and the risk of repayment of lent money is VERY high. This is why most conventional lenders make it so hard to get money, they aren’t setup for such 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, without providing financials. And you can get approval even as a startup business.
1. You Can Build Business Credit in 3 Steps
EVERY highly successful business in this country has business credit. Most of these companies used their business credit to get as big as they are today.
For example, Walmart has over 500 business credit tradelines reporting on their Experian report alone. This is how they manage to sell 80% of their products without paying for them first.
You read that right; they are brilliant!!!
Walmart uses their business credit to buy the products to stock their shelves. You then buy their products, and they use your money to pay off the credit they used to get what you bought.
This is an amazing use of business credit, and one of the main reasons they are the number one retailer in the world.
But contrary to what many believe, business credit is NOT only for big companies. ANY company can build business credit!
Big companies are often the ones that enjoy the benefits of business credit the most. This is because they have CFOs who know how to get and use business credit, where most small businesses don’t.
But YOU CAN get your hands on the exact same credit these larger companies have, if you know the formula to get it.
Step 1: You can start a business credit report much the same as a consumer report often is, with small credit cards.
The business can get approval for small credit cards to help them build an initial credit profile. These types of initial cards in the business world are often called vendor credit.
Net 30 terms are common with most vendor credit sources. This means they will give you 30 days to pay the bill you owe in its entirety.
Some companies will have you pay for your first couple of orders, others won’t.
Some companies report your credit very fast and it reports fast, some don’t.
Look out for all these things when applying with vendors.
Some of the most popular vendor sources include Uline and Quill.
Step 2: You will need a total of three payment experiences reported to start getting retail credit. A payment experience is the reporting of an account to a business reporting agency. Some accounts report to multiple agencies.
Don’t apply for store credit with no payment experience, no score, and no profile, or you WILL get a denial. The key to revolving business credit is to build your initial score and profile with vendor accounts.
Most major retailers offer revolving business credit. This includes Lowes, Home Depot, Staples and Office Depot. Most major stores offer business credit even though they don’t promote that they do.
To get approval they will want to see that you have payment experiences. They want to see an established credit profile with at least one reporting agency. Two is even better. And they want to see positive credit scores where your credit is reported.
When you have met these criteria, then it’s time to start getting business credit.
Step 3: Once you have a total of 10 payment experiences you can then start getting approval for cash credit.
You should have at least one account with a $10,000 high credit limit so your cash limits are as high as possible.
When you do, you can start getting Visa and MasterCard credit cards not requiring a personal guarantee.
You can start from no credit and get to this point in less than a year! This is amazing considering in the consumer world you must have credit reported for six months to even get a consumer credit score.
So, using this three step formula you can help your customers get business credit fast, while helping them with your main services.
Visit us at https://amerishopbusinesscreditbuilders.com/ for more information on building business credit, getting business loans, and making money offering business credit and financing for your customers through a turnkey solution.
AMERISHOP BUSINESS CREDIT BUILDERS