COLORADOSHELF
COMPANIES TO BUILD
BUSINESS CREDIT

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Build business credit in 2023

How to Successfully Build Business Credit Fast in 2022

1. Credit obtained in the name of a company entity is referred to as business credit. 

  • The company uses business credit to establish its own credit profile and credit score.
  • With an established credit profile and score, the business will be able to obtain more credit. 

2. Many entrepreneurs assume you can’t acquire money if you have 

  • Low credit
  • No collateral
  • No income verification
  • No personal guarantee
  • Have already been rejected
  • Or are a startup business

3. However, many business owners make critical errors when asking for business loans that have nothing to do with the above-mentioned qualities.

Benefits of Business Credit

Greater Borrowing Ability

  • When you have both consumer and commercial credit, you have more borrowing power, which is a significant advantage to growing business credit.
    • According to the SBA, limits are 10-100 times larger than for consumer credit.
  •  As a startup business, you can also be authorized for business credit even if you are unable to obtain a bank loan or alternative financing. 
    • You can fund your firm using your revenues if you have access to loans and credit lines. 
  • Business credit can provide your firm with a competitive advantage by allowing it to fund itself.

Business Entity Flexibility

  • You can get business credit if you own a company in the United States.
  • You may develop business credit for any type of company.
    • As long as your non-profit is incorporated, you can obtain business credit.
  •   There is no need to purchase fictitious tradelines or shelf corporations.

Business Credit Quality Matters

  • The quality of your business credit influences 
    •  Whether you will be authorized for a business loan
    • How much you will be approved for
    • And the conditions you will pay. 
  •  Even if you do not have established business credit, you may be denied financing based on the quality of your business credit. 
  • Even if you have no credit reporting, your firm may be assigned a failing score if it appears unestablished or bankrupt. 
    • Just one reported business credit account can boost your score from poor to excellent, making your firm more appealing to lenders.

Business Credit Growth

  • As your credit score improves, business reporting agencies will recommend you for more and more money, assisting your firm in obtaining higher approvals for 
    • Business credit cards
    • Loans
    • And credit lines
  •  This is how large corporations use business credit to expand their capital, and you, as a small business owner, can do the same. 
  •  Business credit is the sole financial solution available, regardless of 
    • Cash flow
    • Collateral
    •  Or credit
  •  Thus, it is available to every business.

Step 1: Improve Fundability

Fundability

  • A company’s fundability is its ability to obtain capital. 
    • A large portion of this power is in your hands. 
  • You have the ability to make life easier or more difficult for your company and yourself. 
    • The devil is in the details, and paying attention to specifics is essential for fundability.
  • A business begins with no credit history. 
    • As a result, only what is on an application is considered for approval, so your application must be very solid. 
    • What is on the application is also important for businesses where the proprietors have bad personal credit. 
  • Because these enterprises do not appear to be fundable to lenders, you want to change that by designing for fundability from the beginning.

NAICS Codes

  • NAICS codes can be found on the IRS website. 
  • Federal statistical agencies utilize the North American Industry Classification System (NAICS) to classify business entities.
    • This will be used to collect, analyze, and disseminate statistical data about the American corporate economy.

Risk Matters

  • The biggest reason risk matters has to do with funding. 
    • Lending institutions may be hesitant to do business with high-risk businesses, so these businesses need to find other financing solutions.
  • These can include
    •   Crowdfunding
    •  Angel investors
    •  Venture capital
      ⦁ And business credit building

Industry and Risk

  • Determining your business’s industry is an important first step toward funding. 
    • Some industries are thought to be riskier than others. 
  • When it comes to traditional finance sources, more risk may result in higher underwriting guidelines or possibly no funding at all. 
  • Risky industries are those in which there is
    • Substantial risk of personal injury or property damage
    •  A large amount of cash is used
    •  The revenue stream is unreliable
    • There is a low barrier to entry, therefore proprietors aren’t necessary skilled or experienced. 
  • Manufacturing of weapons, gas stations, and consulting all meet the bill.

NAICS Codes and Risk

  • NAICS codes are also intended to identify high-risk firms.
  • NAIC codes are used by 
    • The IRS
    • Lenders
    • Banks
    • Insurance firms
    • And Company CRAs
  •  They are attempting to identify whether your company is in a high-risk industry categorization.
  • There is a list of high-risk and high-cash sectors in NAICs 2-014. 
    • Casinos, pawn shops, and liquor stores are higher risk industries, but the NAICS list is outdated and there are no plans to replace it.

Using a Different NAICS Code

  • Of course, you want to be completely honest when selecting your NAICS code, but if multiple codes are applicable, you don’t have to choose the one with the highest risk.
    • As a result, it pays to double-check and be cautious before making your decision.
  • If only high-risk codes apply, there’s nothing wrong with modifying your business to correspond with a related but lower-risk category.
    • There is nothing shady or dishonest about this.

Business Entity

  • A business entity is required to obtain financing or credit for your company. 
  • In many circumstances, incorporating or forming an LLC provides you greater legitimacy.
    • By definition, corporate entities reduce your personal liability.
  • Check that your entity is registered in the same state as your business address.

EIN

  • Just like you have a Social Security Number, your business has an Entity Identification Number (EIN). 
  • It is a unique identifier used to open a bank account and to build a business credit profile. 
    • You can get a free EIN for your business at IRS.gov. 
  •  Take the time to verify all agencies, banks, and trade credit vendors have your business listed with the same Tax ID number.

Business Name

  • We begin with your business name because so much flows straight from it.
    • Check with your Secretary of State; they may require that a business name be unique.
    • Ensure that your Secretary of State has all of the relevant information for your firm that is up to date and proper.
  • It is also critical to give the URL for your company’s name so that they may check up information if necessary.
  • Because you want people to be able to find your business, the name on your application should be the same as what is posted online and with your Secretary of State.
  • Check that the company name appears on all
    • Corporate documents
    • Licenses
    • Utility bills
      ⦁ Bank statements
      ⦁ And online listings.

Business Address

  • Your business address must be a real brick and mortar building. 
    • That is, it must have a physically deliverable address. 
  • Your company’s address should never be a UPS or PO box. 
    • Some lenders will not approve or fund transactions unless this criterion is met. 
  • If you want your company to appear larger than it is, virtual offices can help. 
  • If you need to host a meeting or conduct an interview, a virtual office is a far better option than using your home. 
  • Excellent virtual office service providers include 
    • Regus
    • Davinci
    • And Alliance
  • Keep in mind, however, that some credit issuers do not allow virtual workplaces

Business Phone and 411 Listing

  • Toll-free phone lines are always the greatest option for a business because lenders consider them to be a sign of corporate credibility.
    • Even for a single owner running a home-based business, a toll-free number gives the impression that the organization is larger.
  • Setting up a virtual local phone number or a toll free 800 number is simple and inexpensive.
    • Using a mobile or home phone number as your primary business line may cause you to be identified as inexperienced, however VoIP (voice over internet protocol) is also acceptable

Business Licenses

  • Check with state, county, and city governments to discover if any licenses or permits are required to operate your type of business. 
    • The standards for licensing will vary depending on the state, town, and industry. 
  •  Always ensure that your corporation is properly licensed. 
    • Being licensed increases your company’s legitimacy, which can lead to additional clients.

Web Domain and Professional Website

  • Lenders and credit providers will research your corporation on the internet.
    • It is preferable if customers learn everything from your company’s website. 
  • Lack of a company website can jeopardize your prospects of obtaining corporate finance. 
    • It should be a professional website with useful information for anyone who comes across your business online. 
  •  To verify validity, get web hosting from a hosting website.
  • To make it easier to find, your domain and email address should be your company name, such as yourname@yoursite.com.
    • This is not only professional, but it also increases your chances of being approved by a credit provider.
  •  Do not use:
    • Yahoo
    • AOL
    • Gmail
    • Hotmail
    • Or other comparable email services.

Business Merchant Account

  • Opening a business merchant account is an excellent approach to help your company. 
    • Your business can now accept credit and debit cards. 
  • According to studies, clients will spend more if they can pay with a credit card.
  • This also broadens your financial alternatives.
    • It is also more secure in general.

Business Bank Account in the Business’s Name

  • You must have a bank account devoted strictly to your business.
    • The IRS does not want you commingling funds. 
  • It can simplify bookkeeping and lessen the danger of an audit during tax season.
  • Separate your personal and business funds.
    • Having a business-only bank account makes this simple. 
  • Your business banking history is critical to your future success in obtaining larger business loans.
  • Lenders frequently view the day you open your business bank account to be the day your business began.
  • The greater your company banking history, the greater your borrowing capacity

Business Credit Reporting Agencies

  • Go to the Dun & Bradstreet website and look up your company.
    • If you can’t find it, you can obtain a free DUNS number from the D&B website. 
  • A PAYDEX score can be obtained by providing a DUNS number and three payment experiences.
  • To begin building business credit, you must first obtain a DUNS number.
    • Once on D&B’s system, search Experian and Equifax for your company.

Step 2: Obtain Initial Credit

Business Credit Building from the Ground Up

Credit Line Hybrid

⦁ Once your company is officially constituted, the first step is to get basic business credit through Credit Line Hybrid. 
⦁ Some advantages include

  • 0% interest rates
  • Cash out
  • No DOC
  • Up to $150k in credit lines
  • Aids in the development of corporate credit
  • And requires good personal credit.

Vendors

  • Vendor accounts are the second option for obtaining initial credit.
    • This is a tried and true method for establishing business credit.
  • Every step and credit provider is intended to benefit your company.
    • Its purpose is to assist you in qualifying for business credit cards with EIN only that you will wish to use.
    • This isn’t about raising your credit score; these credit providers will have everything your firm need to prosper. 
  • One of the best aspects about vendor credit is that it is not tied to a bank.
    • As a result, 31 CFR & 1010.230, a 2018 government law mandating anybody with at least 25% ownership in a firm to give their Social Security number when asking for a loan, does not apply.
  • When asking for credit and failing to provide an SSN, merchants are required to use an EIN. 
    • You should never enter a different number in any SSN field. 
  • You can qualify for higher credit if you have at least three payment experiences that have been reported to company CRAs. 
    • Keep in mind, however, that any cards issued by banks will be subject to federal restrictions

Starter Vendor Credit

  • Start-up vendors are more willing to collaborate with a more diverse clientele of businesses, including startups.
    • As many vendors do not, ensure that they report to the CRAs. 
  •  Within 60 days, vendors must report to business CRAs.
  • They assist you in developing your business’s credit profile and score.
  • Terms vary depending on the vendor, but they are typically Net 30.
    • This implies you have 30 days to complete your payment. 
  • Some businesses will not allow virtual offices.
  • A DUNS number and an EIN are frequently required.
    • You will not, however, require collateral, good personal credit, or cash flow

76

  • Phillips 66 Company owns 76 and reports to D&B and Experian.
  • Before applying for several accounts with WEX Fleet Cards, make sure to provide adequate time between applications so that your account is not flagged as fraudulent.
  • To qualify, you need
    • Corporate entity in good standing with the Secretary of State
    • EIN
    • Company address that matches everywhere
    • DUNS number
    • Business license
    • Business bank account
    • Business phone number listed with 411. 
  • Your SSN is required for informative purposes only.
    • If you are concerned about them pulling your personal credit, speak with their credit department before applying.
  • If you have been in business for less than a year, you can substitute a $500 deposit for a personal guarantee.
  • You can apply online or by phone, and the payment terms are Net 15.

The CEO Creative

  • Get low-cost electronics, wireless earbuds, truck and auto cams, and much more. 
  • CEO Creative provides high-quality bespoke design and branding services.
    • You can design your own company logo, business cards, and other marketing materials. 
  •  Equifax and Credit Safe report to Creative’s CEO.
    • They were reporting to D&B until December 2020 and are working to get that restored.
  • The membership cost covers access to all of their products as well as member discounts.
    • Discounted online printing and graphic design services are available. 
  • Pay an annual fee to run your company’s credit report and keep monthly reports. 
    • The membership fee will not be reported to credit reporting agencies.
    • To report company credit, a minimum of $40 in goods purchased is required. 
  • Client’s payment history, as well as all records created between the previous month and today, will continue to be reported to D&B as soon as concerns are resolved.
  • To qualify, you need
    • Corporate entity in good standing with the Secretary of State
    • EIN
    • Company address that matches everywhere
    • DUNS number
    • Business license
    • Business bank account
    • Business phone number listed with 411
    • Be in operation for at least 60 days
    • Monthly membership fee.

Grainger Industrial Supply

  • Hardware, power tools, fasteners, fleet maintenance, and other products are available from Grainger. 
    • They are accountable to Dun & Bradstreet.
  • If a company does not have established credit, they will require additional documentation such as accounts payable, income statements, and balance sheets in addition to their standard standards. 
    • Net 30, 45, 60, or 90 days.
  •  To qualify, you need 
    • Corporate entity in good standing with the Secretary of State
    • EIN
    • Company address that matches everywhere
    • DUNS number
    • Business license
    • Business bank account
    • Business phone number listed with 411
    • Be in operation for at least 60 days
  •  You can apply online or by phone.

More Starter Vendors

  • Always go directly to the vendor’s website for the most up-to-date information.

Step 3: Get Retail, Fleet, and Cash Credit

Advanced Vendors

  • There are a number of vendors who do not report to business credit reporting bureaus unless you default. 
    • You should definitely consider getting credit with them as a business owner because credit can aid you in ways other than business credit building. 
  • Budgeting can be aided by not having to put up 100% of the price of equipment, a facility, or anything else. 
    • If you don’t have the money right now, credit may be the only way to take advantage of a limited-time opportunity. 
  •  If a company credit card offers rewards, cash back, or points, you should use it.

Business Credit Cards with No Personal Guarantee

  • Credit providers will begin to trust you more and more as you continue to build excellent business credit and pay your obligations on time.
  • You can obtain bigger credit limits and better terms, as well as begin to obtain company credit cards with no personal guarantee

Retail Credit

  • Retail credit is available from big businesses such as Staples, where you can purchase anything from office supplies to power equipment.
    • Retailers will look to see if your company’s information is consistent throughout. 
    • They will also check to see if your company is properly licensed. 
  • Qualifications will differ. There may be a requirement for a certain
    • Amount of time in business
    • Number of employees
    • Or a amount of annual revenue.
  • Terms may be revolving, and at least 3-5 accounts reporting to business CRAs are required.

Fleet Credit

  • Fleet credit can be used to
    • Purchase gasoline
    • Maintain vehicles
    • Or repair vehicles.
  •  Even small firms with small fleets can benefit.
    • These are frequently gas credit cards. 
  • Before applying, you must have five or more accounts reporting.

Business Credit Cards

  • MasterCard is a popular business credit card. 
    • They may be used almost everywhere. 
  •  Most of these cards may also have rewards schemes or provide important benefits

Auto Financing 

  • You may also be eligible for vehicle financing if you have 14 or more accounts reporting.
  • You can get accepted without providing a personal guarantee or undergoing a credit check. 
    • Ford, GM, Toyota, and Ally Bank are among the companies that will approve you. 
  • Terms can be fluid. 
    • The time in business requirement may be longer than for other types of funding. 
    • A minimum number of staff may also be required. 
  • Being able to qualify for bank credit cards usually means you can meet the majority, if not all, of the standards for other types of finance.

Business Credit Building Details

  • Taking on debt and then repaying it on time will help you improve business credit. 
  • Startup businesses may not be eligible for bank or SBA loans, but they may be eligible for loans from alternative lenders. 
  • Credit Line Hybrid is a great solution for startup owners with good personal credit to create business credit while financing a business.

Step 3: Get Retail, Fleet, and Cash Credit

  • Monitoring your business credit reports is another component of establishing business credit. 
    • Know what’s going on so you can notice trends and, if necessary, apply the brakes. 
    • If there are any errors, you must effectively contest them. 
  • Because company credit building never truly ends, you will remain mentally committed in the process. 
  • Monitoring, on the other hand, might soon become costly. 
  • Whatever improves one report will inevitably improve your records at the other two major credit agencies. 
    • Avoiding bankruptcies and litigation, as well as paying off debts on time, always concurs benefits

Business Credit History

  • A credit limit increase will not be granted to every cardholder who requests one. 
    • Credit issuers, above all, want to know that you will repay them. 
  • A excellent payment history assures a creditor that you will pay your debts. 
    • Because you are less of a danger to them, they believe they can issue you more credit. 
  • This will result in a 
    • PAYDEX score of 80
    • Equifax Credit Risk Score of 90 or above
    • And an excellent FICO score for your company.

Building and Growing Business Credit over Time

  • As you continue to demonstrate how responsible you are in paying your business bills, your company will qualify for credit limit increases over time. 
    • You will also receive fresh offers for greater credit.
    • Approvals will be easier to obtain as providers gain confidence in a rising credit score

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