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Establishing Corporate Credit in a Recession

Do you know about establishing corporate credit during a recession? And what about for a startup? As a brand-new company, by definition, you have no or little commercial credit history, so it can be hard. When you ask: What is the credit score of a new company? The answer is– it’s usually not so great. But don’t worry! Here are some ideas which will work – even as COVID-19 keeps changing our economy.

The good news is, business credit does not rely upon financial institutions. Or economies, or viruses.

Every Entrepreneur Needs to Know About Establishing Corporate Credit

Corporate credit is credit in a corporation’s name. It doesn’t attach to an owner’s individual credit, not even when the owner is a sole proprietor and the sole employee of the corporation. 

As a result, a business owner’s business and consumer credit scores can be very different.

The Advantages When Establishing Corporate Credit

Because corporate credit is distinct from personal, it helps to secure an entrepreneur’s personal assets, in case of litigation or corporate insolvency.

Also, with two separate credit scores, a business owner can get two different cards from the same merchant. This effectively doubles purchasing power.

Another benefit is that even startups can do this. Heading to a bank for a business loan can be a recipe for frustration. But establishing corporate credit, when done right, is a plan for success.

Personal credit scores depend on payments but also other elements like credit usage percentages. 

But for corporate credit, the scores truly only hinge on if a company pays its bills in a timely manner.

The Process

It’s a process  when you’re establishing corporate credit. It does not occur automatically. An entrepreneur must actively work on establishing corporate credit during a recession or any type of economic conditions.

Having said that, it can be done easily and quickly, and it is much more rapid than establishing consumer credit scores. 

Merchants are a big component of this process.

Doing the steps out of sequence results in repetitive denials. Nobody can start at the top with corporate credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Corporate Fundability

A corporation must be fundable to credit issuers and vendors. 

Hence, a corporation needs a professional-looking web site and email address. And it needs to have website hosting bought from a merchant such as GoDaddy. 

Also, company phone and fax numbers should have a listing on 411. You can do that here: http://www.listyourself.net

Likewise, the company telephone number should be toll-free (800 exchange or the like).

A corporation also needs a bank account devoted only to it, and it needs to have all of the licenses necessary for operating. 

Licenses

These licenses all have to be in the identical, accurate name of the corporation. And they need to have the same company address and telephone numbers. 

So note, that this means not just state licenses, but possibly also city licenses.

Recession Business Cash Today Credit Suite

Learn more here and get started with establishing corporate credit. Get money even in a recession! 

Working with the Internal Revenue Service

Visit the IRS website and get an EIN for the business. They’re free. Choose the type of corporation which works best, i.e. LLC, C-corp, or S-corp. 

A corporate business entity is best to limit risk. And it will make the best use of tax benefits.

A business entity matters when it involves tax obligations and liability in case of litigation.

Establishing Corporate Credit by Starting the Reporting Process

Start at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets any business in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process. 

This way, Experian and Equifax have something to report on.

Vendor Credit

First you should establish trade lines that report. This is also called vendor credit. Then you’ll have an established credit profile, and you’ll get a corporate credit score. 

And with an established corporate credit profile and score you can begin to acquire retail and cash credit.

These sorts of accounts often tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who give you starter credit when you have none now. Terms are often Net 30, versus revolving. 

Hence, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts need to be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. Compared to with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you used. 

To begin your corporate credit profile the right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then make use of the credit. 

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit – It Helps

Not every vendor can help in the same way true starter credit can. These are merchants that grant an approval with nominal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 3 of these to move onto the next step, which is retail credit. Here are some stellar choices from us: https://www.creditsuite.com/blog/5-vendor-accounts-that-build-your-business-credit/ 

 Accounts That Don’t Report

Non-reporting trade accounts can also be helpful. While you do want trade accounts to report to a minimum of one of the CRAs, a trade account which does not report can still be of some worth. 

You can always ask non-reporting accounts for trade references. Also credit accounts of any sort ought to help you to better even out business expenditures, consequently making budgeting simpler. These are providers like PayPal Credit, T-Mobile, and Best Buy.

In particular, during a recession, it can only help you more, the faster you build corporate credit. Adding trade references will help to speed along the process.

Retail Credit

Once there are 3 or more vendor trade accounts reporting to at least one of the CRAs, then move onto retail credit. These are companies like Office Depot and Staples. 

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the business’s EIN on these credit applications.

Fleet Credit

Are there more accounts reporting? Then progress to fleet credit. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and take care of vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the company’s EIN.Get Recession Money Now Credit Suite

Learn more here and get started with establishing corporate credit. Get money even in a recession!

Cash Credit

Have you been responsibly handling the credit you’ve up to this point? Then move to more universal cash credit. These are businesses such as Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

These are usually MasterCard credit cards. If you have more trade accounts reporting, then these are in reach.

Establishing Business Credit in Recession Credit Suite

Learn more here and get started with establishing corporate credit. Get money even in a recession!

Monitor Your Corporate Credit

Know what is happening with your credit. Make certain it is being reported and address any errors as soon as possible. Get in the habit of taking a look at credit reports. Dig into the particulars, not just the scores.

We can help you monitor corporate credit at Experian and D&B for 90% less than it would cost you at the CRAs.

At Equifax, you can monitor your account at: www.equifax.com/business/business-credit-monitor-small-business.

Update Your Record

Update the details if there are mistakes or the details is incomplete. At D&B, you can do this at: https://iupdate.dnb.com/iUpdate/viewiUpdateHome.htm. For Experian, go here: www.experian.com/small-business/business-credit-information.jsp. So for Equifax, go here: www.equifax.com/business/small-business.

Fix Your Corporate Credit

So, what’s all this monitoring for? It’s to challenge any problems in your records. Errors in your credit report(s) can be taken care of. But the CRAs normally want you to dispute in a particular way.

Get your business’s PAYDEX report at: www.dnb.com/about-us/our-data.html. Get your company’s Experian report at: www.businesscreditfacts.com/pdp.aspx?pg=SearchForm. And get your Equifax corporate credit report at: www.equifax.com/business/credit-information.

Disputes

Disputing credit report mistakes typically means you send a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always send copies and keep the originals.

Fixing credit report errors also means you specifically detail any charges you dispute. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail to have proof that you sent in your dispute.

Dispute your or your company’s Equifax report by following the instructions here: www.equifax.com/small-business-faqs/#Dispute-FAQs

You can dispute inaccuracies on your or your business’s Experian report by following the directions here: www.experian.com/small-business/business-credit-information.jsp

And D&B’s PAYDEX Customer Service telephone number is here: www.dandb.com/glossary/paydex.

A Word about Establishing Corporate Credit

Always use credit sensibly! Never borrow beyond what you can pay off. Keep an eye on balances and deadlines for payments. Paying on schedule and fully does more to boost corporate credit scores than just about anything else.

Growing corporate credit pays. Good corporate credit scores help you get loans. Your lender knows the company can pay its financial obligations. They understand the corporation is authentic. 

The corporate EIN attaches to high scores and lending institutions won’t feel the need to require a personal guarantee.

Takeaways for Establishing Corporate Credit in a Recession

Corporate credit is an asset which can help your corporation for many years to come.

The post Establishing Corporate Credit in a Recession appeared first on Credit Suite.

Alternatives to Traditional Start Up Business Loans

Start up business loans are the age-old solution for funding a new business.  Since the beginning of capitalism, entrepreneurs have used a combination of investors and business loans to fund a startup.  But what happens when the traditional routes don’t work?  What happens when you can’t get a start up business loan, for whatever reason? 

What are The Best Alternatives to Standard Start Up Business Loans?

Today, entrepreneurs have more options for start up funding than ever before.  In addition to traditional investors, you have SBA loan programs.  Dig deeper and you’ll find angel investors, crowdfunding, online lenders with alternative eligibility criteria, and hybrid options that most don’t even know about. Let’s dive into what’s out there so you can have a better idea of which options will work best for you. 

Start Up Business Loans: SBA Loans

SBA loans are the most like standard start up business loans. In fact, they are exactly the same, except that they come with a government guarantee.  That means lenders can relax their standards a little when making approvals. 

That’s not to say they are easy to get.  Due to the government guarantee, there is a ton of red tape involved.  However, once you cut through it, it is easier to qualify for SBA loans than regular start up loans.  Here are a couple of SBA loan programs that work well as start up business loans. 

7(a) Loans

This is the Small Business Administration’s most popular program. It offers federally funded term loans that go up to $5 million. The money can fund expansion, purchasing equipment, working capital and even start ups. Lenders partner with the SBA to process these loans and disburse the cash.

The minimum credit score to qualify is 680, and there is also a required down payment of at least 10% for the purchase of a business, commercial real estate, or equipment. You have to be in business for at least 2 years. However, business experience equivalent to two years will meet this requirement if you are a start up.

504 Loans

You can get up to $5 million from the 504 program as well.  You can use the money to buy machinery, facilities, or land. Generally, they are for expansion.  Private sector lenders or nonprofits process and disburse the funds. They work especially well for commercial real estate purchases.

Terms for 504 Loans range from 10 to 20 years, and funding can take from 30 to 90 days. They require a minimum credit score of 680.  The asset that is being financed has to be used as collateral. There is also a down payment requirement of 10%, which can increase to 15% for a new business.

Like 7(a) loans, to qualify you must be in business at least 2 years, or management must have equivalent experience if the business is a startup.

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Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Microloans 

The microloan program offers funds up to $50,000. You can use the money to start a business, purchase equipment, buy inventory, or for working capital. Unlike most other SBA loan programs, this financing comes directly through the SBA.

SBA Express Loans 

You can get up to $350,000 through the express loan program.  To qualify, your credit score must be above 680, and you must have a debt to service ratio of 1.1 or higher. If the loan is greater than $25,000, collateral may be necessary depending on the lender.

These loans have a much faster turnaround.  In fact, the SBA takes 36 hours or less to give a decision. Necessary paperwork for application is less also.  Consequently, express loans are a great option for working capital, among other things, if you qualify.

Start Up Business Loans: Private Lenders

What do you do if you do not qualify for an SBA loan?  You can try a private lender.  The lenders operate largely online.  They draw is that they rely on things other than credit score to determine whether a borrower qualifies for a loan.  Most still do a credit check, but they do not require as high of a score as traditional loans and SBA loans. 

Yet, you do have to be careful.  There are a lot of scammers when it comes to online lenders.  Do your research so you know exactly what you are getting into.  Here are a few to get you started. 

BlueVine 

You will find with most any online lender, they often offer options more similar to invoice factoring and lines of credit.  This is because these present fewer risks than straight term loans.  You can find out more in our Bluevine review.

Upstart

Upstart is an online lender that uses a completely innovative platform for loans.  The company itself questions the ability of financial information and FICO on their own to truly determine the risk of lending to a specific borrower.  They choose to use a combination of artificial intelligence (AI) and machine learning to gather alternative data instead.  They then use this data to help them make credit decisions.

This alternative data can include such things as mobile phone bills, rent, deposits, withdrawals, and even other information less directly tied to finances.  The software they use learns and improves on its own. You can use their online quote tool to play with different amounts and terms to see the various interest rate possibilities.  

To be eligible for a loan with Upstart, you must meet the following qualifications:

  • Credit score of 620+
  • No bankruptcies or negative public records
  • No delinquent accounts
  • Meet debt to income standards (they only note they will check this ratio, not what their standards are.)
  • Have fewer than 6 inquiries in the past 6 months on your credit report, not including those related to student loans, vehicle loans, or mortgages

These are the requirements they list on their website.  One independent review said that the requirement for the debt to income ratio is a maximum of 45%. It also says that the minimum annual income has to be at least $12,000.  For more information visit our Upstart review

Fora Financial 

Founded in 2008 by college roommates, online lender Fora Financial now funds more than $1.3 million in working capital around the United States. There is no minimum credit score, and there is an early repayment discount if you qualify.

The minimum loan amount is $5,000 and the maximum is $500,000. The business must be at least 6 months in operation and the monthly revenue has to be $12,000 or more. There can be no open bankruptcies.

OnDeck 

Obtaining financing from OnDeck is quick and easy. First, you apply online and receive your decision once application processing is complete. If you receive approval, your loan funds will go directly to your bank account. The minimum loan amount is $5,000 and the maximum is $500,000.

Just like any other online lender, they do have certain requirements to qualify for a loan.  For example, a personal credit score of 600 or more.  Also, you must be in business for at least 3 years. Annual revenue must be at or exceed $100,000. In addition, there can be no bankruptcy on file in the past 2 years and no unresolved liens or judgements.

It’s important to remember that, as with all lenders, the details of interest, minimum and maximums, and eligibility requirements can change without notice. Be sure to check all information with the specific lender for the most current information.

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Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Start Up Business Loans: Credit Line Hybrid

This is an option that most entrepreneurs do not know about.  It allows you to fund your business without putting up collateral, and you only pay back what you use.  

To qualify on your own, your personal credit score should be at least 685.  In addition, you can’t have any liens, judgments, bankruptcies or late payments.  Furthermore, in the past 6 months you should have less than 5 credit inquiries, and you should have less than a 45% balance on all business and personal credit cards.  It’s also preferred that you have established business credit as well as personal credit.

However, if you do not meet all of the requirements, you can take on a credit partner that does.  Many business owners work with a friend or relative to fund their business.  If a relative or a friend meets all of these requirements, they can partner with you to allow you to tap into their credit to access funding. 

What are the Benefits of a Credit Line Hybrid? 

There are many benefits to using a credit line hybrid.  First, it is unsecured, meaning you do not have to have any collateral to put up.  Next, the funding is “no-doc.”  This means you do not have to provide any bank statements or financials.  

Even better, typical approval is up to 5x that of the highest credit limit on the personal credit report. Additionally, you can often get interest rates as low as 0% for the first few months.  This will allow you to put that savings back into your business. 

The process is pretty quick, especially with a qualified expert to walk you through it.  Also, with the approval for multiple credit cards, competition is created.  This makes it easier, and likely even if you handle the credit responsibly, that you can get interest rates lowered and limits raised every few months. 

Start Up Business Loans: Debt Free Alternatives

It is rare to run a business completely debt free.  However, you can definitely raise some funds that you do not have to repay.  Any little bit helps.  

Crowdfunding

Crowdfunding is a way to get lots of micro investors at one time.  You advertise your business on a crowdfunding platform, and pretty much anyone who wants can give you money.  Rewards based crowdfunding allows donations as low as $5, and backers receive some non-equity gift for their generosity. 

There is also a such thing as equity crowdfunding which works virtually the same way, but investors actually receive equity in the company for their outlay.  Usually these amounts have to be at least $500. 

Grants

Grants are another debt free option to help supplement start up business loans.  There are not a ton of them out there, and the competition is fierce, but it’s worth the hassle for free money.  If you are a business owner that is a minority, a woman, a veteran, or if you run a business in a low -income area, there are more grant options available. 

Start Building Business Credit

The best time to start building business credit is in the startup phase. It takes time, but with expert help to guide you through the process, it can go much more smoothly.  This will allow you to access funding for your business, as it grows, on the merits of the business itself rather than your own credit.  

Why is the start up phase the best time to begin the business credit building process?  Because the entire process hinges on how your business is set up.  It’s much easier to set it up to build credit for itself in the beginning than to try and back track after the fact. 

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Credit Line Hybrid Financing: Get up to $150,000 in financing so your business can thrive.

Start Up Business Loans: What’s Best for Your Business?

Usually, some combination of a number of different funding options is necessary if you do not qualify for traditional start up business loans.  Sometimes, this is necessary even if you do qualify for traditional financing.  The options you choose will depend on what you have available to you.  

If you can get SBA loans, that’s great.  If you want to get short term lower interest rates with no security, a credit line hybrid can be an amazing solution.  Of course, private lenders are there to help you out if you need them, but keep in mind they use higher interest rates to help reduce risk since they do not put as much weight on credit scores. 

In the end, you have to weigh what you are eligible to get against what makes the most business sense.  It helps to have an expert walk you through it.  For more about expert help and alternatives to traditional start up business loans, check out these options.

The post Alternatives to Traditional Start Up Business Loans appeared first on Credit Suite.

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