Establish And Build New Business Credit
You set up new credit every time you set up a new business. However, there is no credit rating because credit has not been used or reported to the business credit bureau, Dun & Bradstreet (D & B).
To find out how to get credit under a Business Name just do a Google search for “business credit” or click this link:
Dun and Bradstreet is the credit bureau for businesses, just like Equifax, Experian, and Transunion are credit bureaus for people. You can register your new business and start building credit under your new Business Name at their website. Just click the link below:
In the first edition of this book, I was surprised by a reader who criticized me for not including details on exactly how to build new credit under a new Business Name. While this book is not intended to be a book on Credit Building, I have nevertheless taken the reader’s comments to heart and have added this chapter. I will outline a process that can be used by a new businessperson to build credit with positive new credit ratings under the Business Name.
The first thing I want to do is to raise the caution … “Credit can be dangerous and expensive”!
Just ask anyone who has faced foreclosure, bankruptcy, or repossession because of the potential pitfalls of credit. Many of the people reading this book are doing so because credit destroyed their lives. The recent economic downturn has ruined many lives. Many people had perfect credit only to suffer the damages caused by an identity theft that destroyed their good name, reputation, and credit. Some have even gone to jail because of identity theft when arrested for crimes committed by the identity thief’s fraudulent activities in the stolen identities of their victims. Economic crisis is still looming for the USA and will continue to loom for many years to come. Nature driven disaster can occur. Disease, injury, or illness can happen to a spouse, children, relatives, or ourselves, and you can be left holding the financial liabilities.
Credit can also be costly with interest rates on credit cards upwards of 30%.
STRONG RECOMMENDATION: If you are reading this book because credit directly or indirectly destroyed your past life, I suggest you never again allow credit to place you into potential jeopardy. Don’t seek new credit personally or in a new Business Name. This will mean you have to live within your means. I recommend improving your means so you never again need or want credit. Take your new life as a respected businessperson seriously and work to produce the income that places you above the need for credit.
If you do seek to build new credit, do so under one Business Name only. Do so in a business that does not own your home, automobile, yacht, recreational vehicle or any other item important to you. Do everything else important in a separate Business Name. This way, those important things can never be jeopardized by a credit problem, personal injury, identity theft, economic crash, natural disaster, etc. Keep things compartmentalized so one sinking ship or business cannot affect your other important business holdings.
The above stated … Here is a simple detailed process to build new business credit:
I’ve used $500 for this example but a higher amount is better (consider $500 the minimum amount).
1) Contact local banks by telephone and ask to speak with a business loan specialist. You want to ask, “does the bank report business loan payments to the business credit bureau, Dun & Bradstreet”. Keep contacting banks until you have a list of at least three that report business loans to D & B. You might start with any bank(s) where you have already opened a new business account.
2) Go to the first bank on your list and open a business Savings account with a $500 balance. If you have extra funds to devote to getting your new business credit established, that’s fine, use the higher dollar amount. For simplicity sake, I will continue to use $500 for the rest of this example.
3) A few days after opening the savings account, visit the bank in person or make an appointment to open a business loan.
4) When you meet with the business loan officer, explain that your business is new and you wish to help build the business credit rating by taking out a small business loan. Also, explain that you are already a business client with a savings account at the bank and you are willing to pledge the balance of your savings account as collateral. In this way, you will be able to 100% secure your new business loan. There will be no risk at all to the bank for making the business loan and with no risk, the bank will make the loan. The bank likes zero risk and to guarantee the bank’s protection, they will freeze your $500 savings account as collateral for your $500 loan. You will sign the loan documents and walk out of the bank with a cashier’s check or cash in the amount of $500. If for some reason you do not get the loan, don’t be discouraged. Withdraw your funds and move on to the next bank on your list.
You’ve deposited $500 and received $500 in return after the loan is made!
5) Go to bank #2 on your list and open a business savings account with the $500 you received from the loan at the #1 bank.
6) Repeat the loan process to walk away with $500 again.
7) Do the entire process again with bank #3 on your list.
Three times is enough.
You’ve used $500 to get three bank loans and you even got the $500 back after the third loan … Cool!
OK … Now make your payments on time or early for the next 3 months. Each month, your timely payment will be reported to D&B.
After 3 months of payments on each new business loan, you will have established your D & B credit rating with timely payments on three business loans:
1) Take the $500 you got back from the bank #3 loan three months before and go to bank #1. Pay off the business loan in full. You will have paid a small amount of interest for the three months your business loan has been open and reduced the balance below $500.
2) Having paid off your business loan in full, the $500 business savings account will now be unfrozen. Leave the $500 in the savings account and apply for a business credit card with as high a credit line, as the bank will give you … it will probably be $500 but could be more.
3) When Bank #1 approves your new credit card, withdraw most of the money from the savings account but leave a small balance to keep the account open.
4) Take the funds to bank #2, repeat the process, and then repeat with bank #3.
You have used $500 to get three business loans reported to D & B. Bank loans hold the highest credit scoring at D & B. Your three loans with timely payment and “paid in full”, are all perfect credit references.
You now have three shiny new Credit Cards!
Now you can get credit with stores. You might even buy a business auto with your perfect new business credit and further improve your business credit rating.
It will take a bit over three months to carry out this business credit process.
An individual can do the same process to establish new personal credit. However, adding new credit accounts to an already damaged credit rating will NOT remove the bad credit accounts and so the bad credit accounts will still probably keep the overall credit rating damaged beyond use. These days with computerized records and data sharing, methods that could delete bad credit ratings in the past, no longer work.
Use your new business credit responsibly and pay your balance off each month … So you aren’t hit with those high interest rates.
Congratulations on your new BUSINESS CREDIT!