Business Credit

                          What is Business Credit
Business Credit is also known as Corporate Credit or Trade Credit.  It is the single largest source of lending in the entire world.  It is when one business lends money to another business to purchase products or services from them.
Business Credit is largely overlooked as a core source of financing for a small company.  Most so-called experts will tell you all the ways to get money from your retirement and home equity to fund your business.  Instead a small business owner could obtain business credit from vendors that are going to offer them the products and services they were going to buy anyway with cash from their personal resources.
Another strategy many “experts” tell small business owners to use is to use their personal credit to obtain the financing they need.  In fact, some will say there isn’t such thing as business credit because you always have to use your personal credit.  This couldn’t be further from the truth.  First, you need to minimize the use of your personal credit as a small business owner in order to protect your personal credit score and ability to obtain credit in the future.   Second, if you have poor personal credit already, using your personal credit to obtain financing isn’t an option.  By building business credit separate from your personal credit you are limiting the use of the personal credit score and in many cases you don’t even need it to obtain credit in the business name.

Why Would You Need Business Credit?
Every small business owner needs to build business credit separate from their personal credit.  By building business credit you will:

• Protect your personal credit score
• Save time and money
• Meet current lending needs
• Prepare for any future lending needs
• Have cash in your business when it's needed
• Ability to extend your cash flow
• Lower your interest rates
• Build credibility for your business
• Use the ultimate leverage “OPM-Other People’s Money”

The biggest advantage of having a good business credit profile is saving money. By obtaining a more favorable credit score you will lower the interest you pay on loans and leases. For example:

Total Savings For Having Good Credit $19,480

Total Savings For Having Good Credit $8,685.60

Personal credit should be used sparingly when operating a business.  By limiting the use of the business owner’s personal credit in the business, they are able to maintain or even improve their personal score.  It is not necessary to always provide your social security number when obtaining credit in your business name.
In starting and running a small business you are often asked to provide your social security number to obtain credit, leases and even moving into your office.  We have seen small business owners who after just 2 years of starting and running their business saw their personal credit score drop from 730 to 640 with no changes in how they pay their bills and no new personal credit accounts were established.  Had these business owners worked with BCS prior to starting their business or before their scores started to drop, they would have been able to build a business credit score and keep their personal credit where it was to begin with.
Personal credit scores are calculated based on a typical consumers credit habits.  Business owners, however are not typical consumers.  They have more than the average number of inquiries in a year (which is one) and carry more debt than the average consumer.  This automatically works against the business owner and lowers their scores.
The illustration below shows how the use of your personal credit in your business over time will lower your personal credit score and diminish your access to capital when you need it most.

No Need for Personal Credit
Build business credit regardless of your personal credit score or guarantee.
The following illustration is an example of what the personal credit report will look like for the same individual who has no business credit and again when they have established business credit.  

Yes, it is possible to obtain credit under the business name without the use of your personal credit score or guarantee.  At the same time this does not mean that you never have to use your personal credit or guarantee ever again. 
In the four Tiers of financing a small business has its own requirements when it comes to providing a personal credit check or guarantee.  In the first two Tiers most companies will grant credit directly to the business, without the need for a personal credit check or guarantee.  The credit grantors are willing to take risks on the businesses because their target market is the start-up or small business owner. 
In the next two Tiers, Tier 3 and Tier 4, there is almost always a business credit check, personal credit check and guarantee.  This however, does not mean that it will show on your personal credit report.  The ability to have loans and credit for your business that don’t show on your personal credit report helps your credit score and ability to obtain future credit.  In fact, many of our clients have obtained over $350,000 in business credit that doesn’t show on their personal credit reports. 
One area looked at frequently for loan approvals is the DTI or Debt to Income ratio.  Two others are the available revolving credit and the amount of credit outstanding. 
By using business credit that only shows up on a business credit report and not your personal report you help the ratios and improve your chances of obtaining more credit and access to capital when you need it most.
                                                Business Credit Bureaus
NGF has been one of the leaders in the business credit services industry since 2009.  As the leader in the industry we stay abreast of the business credit bureaus that are making an impact on the small business owner.
When you read about business credit bureaus on other sites across the web, you will hear about the main three, D&B, Experian Business and Equifax Business.  You may hear about some small players in the market as well, Client Checker, Business Credit USA and Kroll. 
Although each of these business credit bureaus is important to have your company listed with, there are still over 30 other business credit bureaus you need to be aware of.  Depending on the type of industry your business is in, you may need to have a presence with an industry specific bureau such as for restaurants or trucking. 
Before you try to obtain a profile with any of the business credit bureaus you need to first build a solid foundation for your company.  The foundation is often neglected by companies, and is a major factor in business credit applications being declined.  For exact steps of when to register with the credit bureaus see our Business Builder Program.

Credit Grantors

Who Grants Business Credit

There are literally millions of companies across the globe that offers business credit.  Some may ask for nothing more than a credit application and check that you have a phone number and will then grant you a credit line.  Others will want to see that you have a good business credit score to grant a credit line.  Others will want to look at your personal credit, but then issue the credit line in the business name.  Others will require a personal guarantee. 
The key in finding companies that grant business credit is determining where they report your payment experiences.  If the credit grantor reports your information to the personal credit bureaus, regardless if you pay the bill through your business or the name on the account is in your business it’s still personal credit.  If the vendor doesn’t report anything to either a personal or business bureau it may help your personal credit but it doesn’t help the business, so you don’t want to work with these companies either.
You want to work with the companies that report your payment experiences to the various business credit bureaus.  You will typically find that trade credit or corporate credit is reported to bureaus such as D&B, Experian and several of the smaller boutique bureaus where as the bank lines of credit are reported to Equifax Business and Experian Business. 
Large companies such as Dell, Office Depot, and Chevron all offer business credit as well as even the small mom and pop businesses. You will typically find that some of the easiest credit you can get is from the companies with the lowest and highest sales volumes in their industry.  For example, Sears and a local hardware store may be very easy to obtain credit from, whereas a regional store may be very difficult.

Credit Bridge

The credit bridge is the process of establishing a solid foundation for your company that provides credibility in the financing market.  It’s the process of building credit and accessing capital for your company.
You can try to take the steps on your own or work with NGF to lead you through the hundreds of steps involved along the way. 
           Here is an example of what happens to our client before and after working with us:

National Growth Funding is the company to provide complete separation from your personal credit.  Beings that personal credit was not geared to handle business transactions, you need to call us now!  Contact us at (866) 791-1291 and speak to one of our Capitol Advisors.