Digging Into the Guts of Acquiring Business Credit
Business credit is something that a lot of new entrepreneurs struggle with. For starters, it’s not like you can’t get your hands on credit. So the better and much more specific note would be how to acquire business credit that doesn’t have a personal guarantee attached to it.
Personal guarantee? Isn’t that something that wouldn’t be separate from …well, you know…your person? We’ll get to that in just a minute. Indeed, the personal guarantee means that you’re personally guaranteeing that debt. That means that if your business flops, you’re not just going to be able to declare bankruptcy on that business and move on. You’ll have to pay that debt, or it’ll get attached to your credit report, along with a lot of nastiness and negativity. It’s a lot smarter to make sure that you can avoid this at all costs, especially when you’re trying to build your personal credit again. It’s quite possible to have awesome business credit and terrible personal credit. In fact, you should strive to make sure that your business gets better credit over time because that will help you have cash flow to buy bigger thins to push your business along. You have to spend money in order to make money, and sometimes it’s hard to sit back and wait until the invoices come in before you’re actually going to spend money. For a lot of business owners, they feel that business credit is far off — something that’s nice to have, but if they can’t get it easily then they don’t want it.
That’s absolutely silly. After all — why wouldn’t you want something that can completely change the way that you run your business? Wouldn’t you want to know that you can buy more inventory or even handle some expenses related to acquiring employees? The more money you have flowing in, the more power over your business that you control. If you want that for your business, then you’re definitely reading the right guide. Here’s how to make it all work.
First and foremost, you need to make sure that you’ve done as much preparation as possible. You will want to make sure that you’re actually thinking about how your business is perceived by other people. Remember that the world of finance and credit is very conservative, and you will need to make sure that you are looking like an actual business. This might be hard for the online based entrepreneurs to swallow down, because everything is about being as loose as possible. Yet you will need to really make sure that you step up and get your business…looking like a business.
What do we mean by that? Well, you need to make sure that you have a certain flow for your business. Are you just sending online requests for money instead of invoices? That’s not very professional and it can really hurt you when you have to go back and show where all of your payments are coming from. What about incorporation? You don’t want to find yourself without the look of a business just because you didn’t take the time to file the paperwork. Incorporation in many states is a matter of filing a few papers and paying a small fee — sometimes less than $75! Who knew that something so important would actually be so inexpensive to acquire? Even the business owners that are trying to bootstrap should definitely start thinking about incorporating their business. It makes getting bank accounts, credit cards, and other finance-oriented stuff handled much faster than if you just have a sole proprietorship. Also, there are numerous tax breaks that are only open to corporations. If that’s not enough to make you incorporate your company, we don’t really know what is!
You will also want to make sure that you get a phone line listed under the legal business name with 411 directory assistance. That’s something that most businesses need anyway, so this is something that isn’t really a big deal.
Once you have your business properly organized, you can jump right into getting credit. This will usually mean not only hitting up specific vendors, but also making sure that you’re looking at trying to get those vendors to report to the three major credit bureaus. Getting a Dun & Bradstreet number is also a good sign of moving in the right direction. That way you eventually establish a Paydex score. This score will help you open new liens of credit.
Vendors like Staples, UPS, FedEx, DHL, Wal-Mart and others all report to the major credit bureaus, which is a good thing. Once you know that something is going to report, the only other thing that you will need to make sure that you do is actually pay on time.
It really can’t be stressed enough — you must make sure that you pay on time. The last thing that you really want to do is find yourself not paying things on time. Then your business credit will be just as flawed as your personal credit, and who really wants to deal with that.
Keep in mind that you might see your business credit soar after a while — that’s something that you want to be careful about. You don’t want to jump in and max out your business lines — that would only lead to disaster! Instead you only want to utility 30-40% of the card. Pay off a bit more than the minimum each month to keep your payments from skyrocketing. Paying close attention to the interest rate also helps — remember that introductory rates are just that — introductory. They will go up, and you might not like where they end up.
Overall, you have a lot of power to go out there and get great business credit, so why would you ever want to delay another second? Take action today!
