Companies like Apple, Facebook and Google didn’t rely on their own money to grow their ambitions. Even if you have a lot of cash in your bank and are experiencing tons of sales right now, there will come a time when you will be needing additional cash support to address any sudden, drastic turn of events in your business.
The businesses that beat the odds are those which built good business credit. However, some business owners only think about building credit when they actually need it, and not before. Some have even more difficulties building theirs even on time.
There are several reasons why people fail in building business credit, but here are the top three reasons.
Credibility Score
Your business should look good not only to your customers but to your lenders as well. How your business is viewed by creditors, vendors, and lenders is vital. You must meet or exceed lender credibility standards before you apply for business credit. You need over 20 credibility points to be seen as a strong business.
One important thing you can do is use your exact business legal name and have a physical address. This is the name you use in all your bank statements, licenses, and corporation papers. It should also be the name that will be recorded in all DBA filing.
Social Security Number Use
You can get approved without using your social security number. Some vendors may ask for it but you can apply first without it. Real business credit does not need an SSN to qualify in several cases. When you’re applying with your SSN, for most of the time you’re providing a personal guarantee.
Your EIN (federal tax identification number) can qualify you for credit. If your EIN has enough credit, you don’t have to use your SSN to get approved. If you do use your SSN, your personal credit will be reviewed, and if you have a bad record, things can go south. Remember, credit can be acquired with only your EIN.
Order of Application
Start small. You can begin your business credit report the way you do your consumer report, through small credit cards. Build your initial credit profile through small credit cards, and your business can be approved. A vendor credit is what these cards are – they serve as your initial means in the business world.
A vendor credit is when a vendor or a company provides a line of credit to your business on day terms. This can be on Net 15, 30, 60, or 90 days. This lets you make use of their services or products to the maximum amount agreed on. You’ll then have 15, 30, 60, or 90 days to pay your bill. From there, you can apply for bigger funds, given that you’ve fulfilled your agreements without problems.
Avoid making the same mistakes a lot of small businesses still do. Develop an excellent business credit profile and score so that your business has a backup in case of hiccups.
I’m a 7-figure business startup consultant, best-selling author of “The Wealthy State of Mind,” and international motivational speaker, with a passion for helping entrepreneurs achieve success in business. Using the methods I’ve developed from helping businesses achieve success over the past 10 years, the Entrepreneur Academy was born. Inside, entrepreneurs are taught the fundamentals of building a successful and profitable business based on real-world tactics that are responsible for generating millions of dollars in business profits.
