Everything You Could Ever Want To Know About Business Credit:
Everything You Could Ever Want To Know About Business Credit (1 of 6)
Planning and putting up an owned business is hard. It is a dream of millions of people around the globe. There are a lot of people who set up their own businesses but never quite get around to it. This can be due to one of the factors that can discourage these people from launching their own venture off the ground, which is the lack of capital. There are also others that fear the risk of losing their own money.
However, with careful planning, thought and effort, it is possible to raise some capital that can help to get the business started and it can be done through building a business credit. For short, you need to borrow against the business rather than from personal assets.
Put Together A Business Plan
Maybe the hardest step in building business credit is to convince the potential lenders that you are trying to achieve and set up a viable venture. The quality of your business plan and preparation is important. In order to set up a proper business structure, you must make sure that the prerequisites, i.e. licenses, documentations, are in place. You can use the business plan to show your lenders that you have placed a deep thought about the several elements in a business: the competition, pricing, products and the markets. If you are not sure about the business plan, you can always hire an advisor, but it is critical to prepare yourself for the defense of your sales projections and the estimated costs of the start up and running.
Assessment Your Credit
Preparing and doing a credit assessment is necessary before entering the business credit market. The credit assessment would determine if you are able to comply with the lender and the credit bureau’s requirements. After achieving that, keep your eyes peeled for businesses that can issue credit without the need for an established business or personal credit checks or guarantees. Once you are able to transact the business with credit vendors, you will be able to use those references in order to build your credit profile with the agencies for credit report.
You can also take advantage of those retired or semi-retired businessmen. These people sometimes volunteer to help start up a business. You can build your knowledge as you start the journey to a successful business with a good standing in credit.
Build Up Your Business Credit
It is very important to build up your business credit scores to be able to avail of financial loans to fund your small business. In truth, small enterprises are now clamoring about for loans to improve their business by using the money for improvements or purchasing inventory to meet consumer demands.
Building up your business credit takes a lot time and effort, and requires a paper works by the dozen. Here are some tips on how to get started in giving your business credit rating a healthy boost:
Business Structure
The first step in improving your business credit is to get one in the first place. This can be done by registering your business as an LLC or a corporation. Next you need to provide all the necessary paper works required by lenders such as legal document like business permits and licenses, financial statements, references, contracts, and so on.
You need to keep in mind that when you register your business as an independent entity, you need to have a fixed address of your business, as well as open lines of communication.
You might also need to register your business in a credit agency so they can keep tabs on your credit ratings and scores. These organizations will act as reference when you apply for a financial loan that requires a valid credit report.
Building up your credit status will depend on the financial stability of your business as based on the financial documents during its operation. Also, prompt payments are a major issue when it comes to raising your credit status. Fail to pay on the date agreed; you get a negative score on your credit score if that happens.
You might also need to keep monitor credit card reports when they are delivered to you. Try to check for transactions that you did, or did not, make. If you spot an error, report it immediately to the corresponding agency. This will result to a higher credit rating.
Get A Loan
Before you can actually improve your credit scores, you need to have a credit to work with. Many small businesses are now opting for business credit cards to improve their ratings. One reason for this is that these plastics have reduced interest rates and APR, which is quite useful for making prompt and affordable payments.
Also, since business credit cards have no principal amounts attached to them, you can easily control the interest expense you make every month. You can do some budget planning to minimize expenses and maximizing profit, without worrying about interests piling up.
Another way to improve your credit status is through credit lines. Many financial institutions offer short-term lines of credits for small businesses, with convenient payment terms.
Since the interest expense on lines of credit are dependent on the principal amount, you can easily reduce it by paying the original debt until you reach zero. With this term in mind, you can easily make prompt payments according to the agreement between you and the lender.
The best way to build up your business credit is to make your payments on time. Whether you have multiple loans and/or several credit cards at your disposal make sure that you pay each one on time.
“Down is not out. Broke is not broken. With the right outlook on life, impossible stands for I’m possible, and comeback stories of epic proportions, are the stories we remember forever!” Michael “MJ The Terrible” Johnson – Founder & Owner – Masters of Money, LLC.
Everything You Could Ever Want To Know About Business Credit (2 of 6)
Business Credit Cards
Having available credit available to a new business venture may not be absolutely necessary, but it can certainly help to have it.
The Drawbacks of Business Credit Cards
Many small business owners don’t realize that they are only initially starting out on a business and have not yet established a business credit score, their professional and personal finances can be blended. That is because most credit cards require a personal liability agreement from the business owner until the company/business is well established.
That said, business owners can be held liable for any problems with the company’s credit account. For example, if your company doesn’t make the payments on time it could affect your personal credit score.
Other possible disadvantages that business credits may have include the large possibility for employees to abuse the use of company credits by charging personal purchases. Aside from this, fewer protections may come with it as compared to a personal credit card because the intended use of these credits are for company purposes and not personal. Higher interest rates are also usually charged by business credit cards as compared to personal credit cards.
Business Credit Card Management
Despite the possible disadvantages that credit cards may bring, remember that these things can only happen if there is a mismanagement of your credit account. What you can do is set certain precautions so as to avoid such drawbacks from happening. Remember to register your company with a business credit bureau as they can help you establish a business credit score, which will later on help you forgo with the personal-liability agreement.
Comparing Business Credit Options
The market for distributing credit lines for businesses has really grown over the last 10 years. After all, most entrepreneurs know that owning a sufficient credit line can give a business a lot of advantages. The bigger the company gets, the more useful a credit line becomes.
Credit Cards
A small business credit card is basically a credit line catered especially for companies who are just starting out. This type of resource/instrument offers a lot of flexible options, with cash back rewards, special discounts and other business friendly perks/benefits.
Unsecured Line of Credit
As your company grows, having a larger credit line would certainly prove to be more practical. For companies that have large expenses or need to purchase goods in bulk/large quantities, having an unsecured line of credit can offer your business much more flexibility. This particular financing resource can give your business the same services that a business credit card can, but with usually a much lower rate of interest and a higher credit limit. Unlike secure credit cards, no collateral is needed to secure your debts.
As long as you use the credit wisely and pay your bills on time, take advantage of a business credit line, to use to grow/fund your business, and to have in case of an emergency.
“When you need to accomplish something, remember the name “Will Resourceful”. Have the “Will” to see it through and be “Resourceful” enough to get the job done.” Michael “MJ The Terrible” Johnson – Founder & Owner – Masters of Money, LLC.
Everything You Could Ever Want To Know About Business Credit (3 of 6)
Help Your Business with the Unsecured Line of Credit
Having access to credit for a business can be the difference between a business staying in business/thriving, and a business going under. There are basically 2 main financing sources that most small businesses use, and that is credit cards and lines of credit.
Small Business Credit Cards
Small business credit cards can be ideal for new entrepreneurs/business owners, since they are easier to obtain and offer some flexible options. Additionally, there are suppliers that accept payments through the use of small business credit cards. This would enable small business to be at par with other business and maintain the stocks with the materials needed for its production
Small business credit cards also have disadvantages. Such cons may exist in the requirement of guaranteeing the card by newly formed businesses. This is a common requirement for some credit card companies. And so, the credit card will appear on the company owners’ personal reports on credit.
As you review your business credit card, you should ask the credit card company if this will be reported under the business name or your name personally. However, there are several issuers that are open to putting it in the business name only if the owner has a good personal credit.
The Unsecured Line of Credit
For larger expenses, the unsecured line of credit is a more appropriate financial resource. The unsecured line of credit can also offer the same flexibility of a small business credit card but with a lower interest rate and a relatively bigger credit limit.
There are several creditors who offer secured line of credit but with lower interest rates. You would also need to use some kind of collateral as a protection against your debts. Through the use of an unsecured line of credit, the possibilities in relation with tolerating your assets to be utilized for security are shunned.
As compared to the application for a business loan, acquiring an unsecured line of credit is easier. On the other hand, in order for the unsecured line of credit to be approved, the company is still required to be able to present an excellent status in their business credit.
Maintaining and Building a Business Credit
If you are looking for a method to fund your business, it is important to consider if you will qualify for an unsecured line of credit. However, the business credit score should be reviewed and must be enough to acquire such credit. Fortunately, it is never too late to improve your score and doing the correct actions early, such as opening a business credit card account in the business name only would help you to see improvements on your score.
Building a good business credit is always emphasized whenever applying for a business funding. From the time you launch your business, it is important to make it your goal to establish your business credit and keep it in good standing.
When the time comes that you will need financing, you will easily qualify for an unsecured line of credit.
“The one place you will never find success, is inside of your comfort zone.” Marcus Jennings
Everything You Could Ever Want To Know About Business Credit (4 of 6)
Bad Credit & Business Loans
Before setting up a business, there are two questions that you must ponder: Are you willing to finance your own business from your personal assets? or Is applying for a business credit a more practical approach? If you choose the latter, it is important to review your credit history.
Having a bad credit must not hinder you from setting up your own business though it cannot be avoided for the credit history to be reviewed whenever applying for a loan. This review would play a role in determining whether your application for a business loan would be accepted or rejected.
A good credit history can help you qualify to a loan with great rates, terms and conditions. On the other hand, if you have a bad credit history, you do not have any choice but to settle for a bad credit loan. A bad credit loan is designed to help people who have bad credit history. Unfortunately, not every lender offers these kinds of loans. Do not take that as an obstacle that you cannot overcome but it must motivate you to look for lenders who are willing to offer bad credit loans.
Bad Credit Loan Terms
It is natural for the lender to charge a higher rate of interest for people with bad credit history, since these people are considered to be a risk factor in lending a loan. You must be prepared for the higher cost of closing costs, processing fees and others as compared to a normal loan. However, you will be assured that your application will be accepted even if you have a bad credit score; this is a definite advantage despite the high rate of interest.
If you review and compare the loans, almost all of them are similar to substandard ones but you must understand the reality that because of your bad credit score, these loans are the only chance you have. There is no other lender who would accept your application.
Improving The Odds
You have the option of applying for a secured loan to help improve the chances of the application to be accepted. In a secured loan, the borrower is required to pledge a type of security when he or she applies for a loan. By doing so, the lenders would not be at risk. In the event that the borrower defaults on the payments, the lender can easily retrieve the amount. There are several lenders who are more open to the subject of a secured loan and it might not pose a difficulty for you to convince a lender in spite of your bad credit rating.
You can also hugely improve the chances of your application to be accepted by building credit worthiness before applying for a loan. You can do this by never defaulting on payments, keeping your banking transactions and others free of errors. If have done all of this, then you can apply for a loan. This only shows that despite your bad credit history, the recent pattern in your transactions is developing healthy payment habits. Credit worthiness is the most important determining factor regarding the issue of the chances of your loan getting approved.
Payments
Once your loan has been accepted, the last thing you are required to do is to always make sure that you make your payments on time. Doing so would somehow clear your bad credit history and allow you to apply for proper loans and not on bad credit loans.
Secured vs. Unsecured Business Credit Cards
Having a bad credit record can surely become a hindrance in establishing your business. Most likely, you will have difficulty in trying to persuade lenders to give you a credit account, which can be very significant for your company. Without a credit account for back up, you are placing your company at a very huge threat of running out of financial resources and even a possible pause in its operations.
But because your credit score may not be very constructive to your reputation, you may have very limited options –either you get an unsecured bad debt credit card or a secured credit card. In this article, let us know the difference between these two credit cards and how they can help your business, especially if you have bad credit.
The Difference Between a Secured and an Unsecured Credit Card
A secured credit card would basically require you to have a security deposit in the bank before you can use it. This amount of deposited money will be your guarantee of payment to your lender. Most secured credit cards though, hold credit limits amounting to a percentage of the balance that you have in your account so if your business may need to make large purchases that your balance cannot afford, then this may slow things down.
On the other hand, an unsecured credit card allows you to make purchases even without the collateral. But such a lose set-up may also charge high rates of interest and may have stricter penalty agreements for late payments as compared to that of a secured account. Despite this, a lot of people still prefer this type of account, as it seems to offer more flexibility and freedom to its users.
However, in cases mentioned above wherein you have a huge debt or a bad credit record, the chances are that signing up for an unsecured account might be too risky. After all, if you are not well disciplined in using your credit card, you might just end up adding more and more to your already escalating debt.
Because of the fact that both types of credit cards have good and bad characteristics, the key to choosing which would be best in your situation is to consider the potential of your company to make the right payments as well as its needs. Bear in mind that you have already started off with an unfavorable credit score. So be sure that if you sign up for an unsecured credit card account, your business is making enough profit to put up timely payments to the lenders. Otherwise, the high interest rates will just further sink your business into bad debt.
In such cases, unsecured credits are reasonable for use. But still, if you are just running a small business and fearful of possibly worsening your already damaged credit score, then opting for a secured credit account will be a much safer bet. With this, you can forego with possibly drowning yourself in escalating rates of interest that your company might not be able to cope up.
If you have bad credit, the choice of which credit card would be best for you will basically depend on your business. If your business has high demands for large purchases and if you as the business owner can make sure that you can most probably make your payments on time, then there is nothing wrong with getting an unsecured account.
No matter which you choose, always remember that you can only improve your bad credit and pave way to the growth of your business if you handle your finances and credits well.
Everything You Could Ever Want To Know About Business Credit (5 of 6)
Unsecured Business Credit & How It Can Help Your Cash Flow
It is very important for any enterprise to never run out of funds, especially if the life of the business is dependent on being able to make large purchases of goods for production. In such dilemmas that many business owners are either facing or are at risk to face in the future, having an unsecured business line of credit could make all the difference.
What Is An Unsecured Business Line of Credit and How Does It Help
An unsecured credit line for your business is a type of financing resource that can provide your company with the money that it needs without requiring collateral. Having such a credit line for your company can be of great benefit, especially when faced with problems on cash flow. This can provide you with the temporary funds that your company may need for operations to continue.
This is extremely vital especially when funds are simply either lacking or not available, but your business is greatly dependent on making purchases for production and profit to come in. Aside from that, this type of credit line can also be beneficial for commercial use in such a way that it involves fewer risks for your part as the business owner as no collateral is involved. This means that you do not necessarily have to gamble your company’s other available resources.
Most lenders offering this credit line can also charge less interest and even a bigger credit limit as compared to other sources of finance. Assuring that your company has an unsecured line of credit will be a big step of precautionary on your part to keep your company afloat, even when faced with financial crises.
What You Should Consider Before Applying For An Unsecured Credit Line
What you should know about trying to secure such a credit line is that it may not be as easy as you want it to be or that it may not come right at an instant. In applying for unsecured credit lines, lenders would usually take the extra step of checking on your company’s credit history. This is necessary for them to do, as they are risking more by providing you with finances without the collateral.
Before you can be approved for an unsecured line, make sure that your company has maintained a favorable credit score. These lenders are interested to find out if whether your company is capable of making the right payments and purchases for both your parties to gain good income.
In running your own company, sometimes being prepared for possible problems can surely play a big role in helping you ride the tides of business. For sharp entrepreneurs, even when there is no immediate need for the extra funds, having an unsecured credit account at hand will be a good cautionary tool for anything that could possibly go wrong with the business.
After all, you can never know exactly when your company might experience cash flow problems. But knowing that you have back up when funds become unexpectedly tight through unsecured business lines of credit, will surely set a whole lot of difference for your business to step up the ladder.
What You Need To Know About Credit Repair Business
A credit repair business can definitely help you out in fixing your bad credit record, especially when you are in the need of a quick financial loan – either to be used to fund your business venture or for personal use like home improvements.
When it comes to putting your credit score back into shape, these experts utilize their knowledge in the legal department of credit business, accounting, and finance to get the job done. But in truth, the services offered by credit repair businesses aren’t cheap and may dig deep into your budget. But despite the possible expense, many are still going for these professional to fix their credit scores rather than doing it for themselves.
But before you actually consider hiring one, you need to know that there are plenty of frauds and scammers around pretending to be the real deal, especially on the Internet.
Here are some signs that you need to watch out for:
Fraud Sign #1
Some credit repair business offers to fix your credit rating as fast as 30 to 60 days, and many are gullible enough to fall for it. In truth, there is no way to fix your credit score within that time frame; it may take months, or even years to get the job done.
It’s true that they can check your credit reports for possible transaction errors, and report this to the responsible agency for correction – this can give your credit rating a much needed boost. But if there are no errors found on your report, then it will take quite some time to get it fixed.
Fraud Sign #2
Real experts in credit repair will give you advice during consultation for free, and will proceed with helping you fix your credit rating without any up-front charges. Fraud credit repair businesses, however, are more interested in getting your money than actually fixing the problem. These individuals will ask for up-front or advance payments for their service before they even process your request.
Fraud Sign #3
Many individuals are offering to give your credit history a clean sweep by using their contacts in credit agencies – this is practically the most common sign of fraudulent credit repair business. It is impossible, even illegal, to erase whole records of credit transactions for a certain individual by having contacts in the corresponding bureau.
Some of these frauds will even file false claims on erroneous transactions on your credit report. But in truth, the transaction will only be temporary erased while it is being carefully researched by certain departments on the agency. If there is no error found, the credit agency will systematically place it all back on your credit history.
Fraud Sign #4
Another illegal credit repair business practice is when they ask you to change your Tax Identification Number to get a clean credit history. Even if you do change your TIN, the new one will still be under your name and contact information, which would still be linked to your old debt. Many of these individuals would even offer to process your new TIN for a certain fee, if you do give in to such advice, your money will be long gone while you wait for something to happen.
If you do choose to fix your credit rating by letting experts handle the situation for you, it’s best to take time and check on the credibility of the service. The common fraud signs will help you distinguish the real ones and the fakes.
“Every minute you spend thinking about what you should have done, takes away from what you should be doing. Do what you have to do, to make things happen. Focus forward!” Gene Rockefeller
Everything You Could Ever Want To Know About Business Credit (6 of 6)
How To Build Your Business Credit Score
For a business to be in the favor of different lenders and to obtain the necessary funding for its future capital needs, having a favorable credit score is very vital. But a good credit rating does not come in an instant, and for any business owner, there are certain steps to follow.
These steps will help improve a business’s credit rating, as well as maintain a favorable reputation to lenders and investors.
1. Make Sure Your Business Has A Legal Structure(Entity)
Your business will not be able to build business credit if it does not have an entity/legal structure unto itself. It is necessary for you to be incorporated or to form a Limited Liability Company (LLC). It is highly unlikely to give business loans to sole proprietors.
2. Have A Physical Address, Telephone #, Email and Internet Service
Having a physical location for your company adds credibility for lenders to believe that your company is legitimate when your office address is not your own home address. Also, having a telephone number, email address and a website, are essential.
3. Check Your Business Listings
Have your company enlisted under all the necessary agencies and make sure that all your listings are under the same exact legal name as well as with the same exact phone number and address. It is very important for all your personal creditors to have you listed under a uniform identity.
4. Obtain Necessary Business Licenses, Permits, Etc.
Obtain a business license for your company and, if applicable, a license for tax resale in the state, city or county location of your business. Follow all the necessary regulatory guidelines for running your business.
5. Organize Financial Statements & Tax Returns
Be ready to present at least two years of financial statements, with which the help of a CPA is highly recommended. And it is also very important, that your business at this time should already have its own tax ID number. Both federal and state business tax ID numbers should be enlisted under the same exact legal business name.
6. Secure Bank References
A minimum of one bank reference is necessary for your business to establish its score. And it would be advisable if your bank account were at least active for a couple of years.
7. Obtain Trade References
Your business will need trade references that have given you a credit account. This may include your suppliers or any firm in which your company has purchased goods, preferably at a regular basis. Make sure to choose references that will give a favorable credit history to agencies investigating on your financial history.
8. Credit Report Agency Reports
Get three business credit cards that do not have personal links to you, and that will give business credit reporting agencies their feedback on your company.
After doing all these, just remember to play your business in a clean and fair game and of course, pay all your bills on time, and your company will likely have an excellent credit score.
How To Use Business Grants To Fund Your Business Idea by Michael “MJ The Terrible” Johnson – https://www.therealmjtheterrible.com/how-to-use-business-grants-to-fund-your-business-or-product-idea-newly-updated/
