How do I build credit for my small business?
james asked:
I just opened a car audio business in tx and i have poor personal credit. How do i build my business credit/get a credit report on business ect… also my business is a dba type. Also I can’t seem to get credit approval from anyone because of my personal credit any advice will be helpful.
I just opened a car audio business in tx and i have poor personal credit. How do i build my business credit/get a credit report on business ect… also my business is a dba type. Also I can’t seem to get credit approval from anyone because of my personal credit any advice will be helpful.
Try taking a break from your bussiness and join a larger bussiness to get credit and get exsperience
As a small business, your business’ credit is pretty much tied directly to your personal credit.
You could try to incorporate, i.e. form a corporation. This has certain costs and benefits, but DOES essentially create a new “person” in the eyes of the law with a mostly clean slate as far as credit goes. This is an expensive and complicated option, and probably a bad idea for you, but it IS an option.
Your best bet:
Go to the bank you normally do business with, i.e. the one where you have your checking account, and ask for a SMALL personal line of credit for the business.
This would be in the order of a couple of thousand dollars, but you would have to take care of this as if your business’ life depends on it.
The best thing you can do otherwise is to grow the business and become profitable for another year or two. Keep your expenses as low as possible, remember to pay your taxes honestly and on time, and you will over the course of a year or two be able to borrow more.
Learn how to write a solid “business plan” before you go asking for a line of credit with your bank. This lets the bank know that you have a solid grasp on the business, and will maximize your chances.
—————–
WHAT FOLLOWS IS SOME GOOD GENERAL ADVICE THAT EVERY SMALL BUSINESSPERSON NEEDS:
I have done some bookkeeping for a number of small businesses, and will tell you that there are TWO sets of skills you have to master.
The first set is knowing how to do your job well, whatever that is.
The second skill set is that of knowing how to run a business, and that includes what to use credit for, how much to get, and even when to throw in the towel.
A LOT of small businesses go under because the owners are experts in the first area, but horrible in the second.
I strongly recommend that anybody who wants to run their own business take at least two, and possiblly three accounting/business courses. This allows you to look at your business in a way that lets you plan for things like getting credit and how you spend/earn your money.
Another thing that helps is to get a book on writing a business plan. Any good bookstore with a business section will have one of these, as well as a LOT of free sources on the web, if you search. Be careful of websites that offer to sell you “courses” in business management. The information you need is widely available and free.
Lastly,
Get in touch with the Small Business Administration. They can help you with a whole range of things, and provide you with some very solid FREE advice, including training courses that will help you manage your business.
Regards,
RG
A true business credit card is a line of credit that is taken in the name of the business, under the business’ credit. Activity, whether good or bad, is reflected on your business’ credit report through D&B and other financial institutions, and the liability for any debts incurred and bills owed is with the business.
However, some companies out there offer “business” credit cards which they require a person guarantee for. These institutions will often ask for a personal guarantee, and will almost always ask for a social security number from the person applying for the card. If this is the case, the credit card is not a business credit card, but is simply a personal credit card which is used for the business. The business is not liable for bills and debts – you are.
When applying for a credit card for your business, watch out for areas asking for your SSN (and not your TaxID or EIN) and be wary of any credit card that asks for a personal guarantee. By ensuring that your credit card is in the name of your business, you can help to build your business’ credit, while avoiding creating problems with your own.
Many companies offer a list of credit cards that are issued under the business name only. Those lists typically run $300-$900, depending on the quality of the information inquiring. I would suggest starting your search online via google or yahoo. Search for “strong business credit” (just like that in quotes) to find services that sell the information.
Good luck,
Ilya Bodner
Small Business Owner
Initial Underwriting Group
To build business credit you should start by making sure you have a business phone listed in 411. Staples and Office Depot are easy to get approved for new business. Experian and DNB are the main business credit reporting agencies. Net 30 accounts are the best way to build business credit early. You can get cell phones from ATT, Sprint, and more using biz credit. Net 30 means you pay 30 days after you get the bill.