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Secrets to How You Can Build Amazing Business Credit!

Mar 15, 2008
Business credit is similar to your own personal credit. The key difference is that this is for your business. Smart business people separate their credit histories so problems don't overlap and negatively affect two lines of credit instead of just one if tragedy strikes.

Good business credit gives you the ability to get favorable loans free of high interest rates or personal guarantee requirements. With high enough credit, you can pay back vendors days after receiving their product or service or extend payment if needed. Good credit gives your business a certain level of respectability and entices customers to do business with you.

Now that you know the benefits of good business credit, I'm sure you're going to want to know how to get some of this great credit for yourself. Here's the secret of how you do it.

First, you make sure that you aren't using your personal credit for your business. This means taking out loans and opening up lines of credit in your name for the business. Don't do that. If you're doing this in your own name, the business will never get credit of its own. This is to say nothing of ruining your own personal credit if something happens to the business.

Second, we make sure that you're not longer a sole-proprietorship or a partnership. You want to incorporate your business and make it a separate business entity. This means that you and your business are considered to be two different people under the law even though you (or your partners and you) will continue to control your business.

Third, you enroll in a business credit builder program. These programs exist to give businesses lines of credit with participating vendors. Here's how it works without a business credit builder program. Usually a business tries to open up a line of credit with a vendor. Assuming they don't fail, they get a line of credit. These lines of credit usually have unfavorable terms like payment ahead of delivery or high rates. Once the relationship starts, the vendor usually does nothing to help you build credit. If you pay your bills on time, that's fine. They just won't tell anyone that you're being a good customer. If you miss a payment, then they'll do something. They'll report your missed payment to the reporting agencies. So if you do well, then nothing happens. If you do badly, then you get a negative mark on your record.

So how does it work with a business credit builder? You get into the program and they help you select from vendors in the area that are open to extending favorable terms and opening up business relationships. All of these vendors are obligated to report your good payment history to the credit agencies. By paying your bills on time, you get positive marks on your credit report and before you know it, you'll have a great credit report. In addition, most good business credit building companies will work with you help you monitor your credit report, apply for favorable loans, and to make sure you're properly filing out all the paperwork.

It's the surest ethical way to build up your business credit!
About the Author
Scott Letourneau is the CEO of NCP, Inc. and is offering free business credit training to interested business owners across the country. For a webinar 90 minute class where Scott corners a national bank offical and askes the "Hard Questions" isit, http://www.nvinc.com/business-credit.htm
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