by Sam | Business Credit, Funding
Everything You Should Know About Business Credit… But Probably Don’t…
Business credit is credit under your business name that’s associated 
with the business’s EIN number. What you probably didn’t know is that this is credit your business can attain that is not affiliated with your SSN. Once your business credit is built properly, the SSN isn’t even used during any application process, meaning that there is no personal credit check to acquire this kind of EIN credit. You can learn more about the differences between Business Credit Scores and Personal credit scores here.
Whenever you fill out an application for something like an auto loan, the lending company pulls your personal credit with your name, address, and SSN. This kind of information is sent to the consumer credit bureaus and they provide the creditor a credit score report featuring all information they will have about anyone with a very similar name, address and SSN. With this kind of credit, an inquiry is then put on your credit profile/report and your profile/report is utilized to create the lending choice. Plus, the credit you obtain will be reported to consumer reporting agencies.
When you fill out and submit an application to apply for something like a business loan, the lendors pull your business credit together with your name, address, and EIN number. These details from your profile are sent to the business credit reporting agencies, and they supply the lending company a credit report record including all the information they have relating to a business with a similar name, address and EIN.
An inquiry is then put on your business credit report. Using your business report, it is then used to help make the lending decision. Additionally, the credit you obtain will then be reported to business reporting agencies reporting. What you probably didn’t know is that it is absolutely vital that when applying for loans, funding, auto financing and credit using your business business credit, you should NEVER use your social security number on the application, despite the fact that it will be asked.
When this is done, NO personal credit can be pulled since the lenders will be unable to pull your personal credit without your SSN. This forces the lending company to only pull your EIN credit which is what you supplied. (Your EIN number, not your SSN). What this means is you will be approved SIMPLY on the merits of your business’s credit report. Your personal credit reported won’t even be reviewed.
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by Sam | Business Credit, Duns and Bradstreet, Funding
Building Business Credit
When applying to most
Business Credit cards you need to have good consumer credit in order to get approved. But let’s say your personal credit isn’t that good and you don’t have a guarantor?
What can you do?
This is when building Business Credit rating makes a ton of sense. Actually, if you have good personal credit, building your Business Credit can help you get even more money… minus a personal guarantee. Business credit is credit in business name, that’s associated to the business’s EIN number not the business owner’s SSN. Once it’s done properly, business credit can be acquired with no personal credit history checking and no personal guarantee… something all other cards stated cannot deliver.
How to Start Building Business Credit Rating.
Most of the time, consumer credit rely upon secured credit cards or an account that has a well-established co-signer. But co-signed accounts and properly secured accounts are not necessarily widely used or popular in the business world. Virtually all Business Credit will depend on vendor accounts instead.
What are Vendor Accounts?
Vendor accounts are accounts that ordinarily offer conditions such as Net 30, rather than revolving. So if you get approved for $1,000 in vendor credit and use all $1,000 you would have to pay that money back within whatever term was arranged at the time of approval. A Net 30 account would need to be paid entirely within 30 days.
On the other hand, a Net 60 account must be paid in full within sixty days. You have a set amount of time you must pay off what you obtained or the credit you used unlike with revolving accounts. In order to get started on your Business Credit profile the CORRECT way, you need to get approved for vendor accounts that are accountable to the Business Credit agencies. Once you have done this, you can then use the credit, pay back what you used, and the account leads to being reported to Duns & Bradstreet, Experian, or Equifax. Once reported, you will have tradelines, an established credit account, and an established credit score. Working with your newly established Business Credit profile and credit score, you will be able to get approved for credit, and eventually store credit while not having to supply your SSN or personal guarantee.
This is certainly possible because now your EIN credit profile is made, and can stand on its very own. So if you leave your SSN off of the application, the credit issuer then pulls your EIN credit, recognizes an excellent profile and credit score, and can then approve you for real revolving credit.
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by Sam | Business Credit
Bank credit is the total amount of borrowing capacity a business can obtain from the banking system. Banks have their own internal way of scoring and rating businesses credit worthiness They do this through a system called bank ratings, which rates the credit worthiness of a business from the bank’s perspective. A business can secure more business credit quickly as long as it has a minimum of one bank reference and an average daily account balance of at least $10,000 for the past three months. What lenders REALLY want to see is that a business has this $10,000 average balance. When a business has this, it yields a “Bank Rating” of Low-5, meaning the business has an average-daily-balance of $5,000 to $30,000.A business that has a balance of $7,000 to $9,999 will net the business a lower rating such as a High-4, which will make it harder for a business to get approved for bank financing.Here is the actual bank rating scale, so you can see where you business might rank:
● High 5, account balance of $70,000-99,999
● Mid 5, account balance of $40,000-69,999
● Low 5, balance of $10,000-39,000
● High 4, 7,000-9,999
● Mid 4, 4,000-6,999
● Low 4, 1,000-3,999
There are other factors outside of average bank account balances that affect this rating. A business will be scored higher if it has the average balance of $10,000 for 3 months, so it’s crucial that the money be in the account, and stay in the account for 3 months to maximize the bank rating. Overdrawing the account and obtaining non-sufficient-funds charges is one big way any business can severely hurt it’s bank rating. For the best rating, a business should insure their bank statements reflect a positive cash flow. Positive free cash flow is the amount of revenue left over after the company has paid all its expenses When the account shows a positive cash flow it indicates that the business is generating more revenue than is used to run the company, increasing the bank rating. The bank rating is also improved when the business has a consistent amount of regular deposits. Other factors can also affect the rating including age of the bank account, other bank products that the business uses, and how many investment and savings accounts the business has. Having a good bank rating is essential with securing bank financing.
To maximize your bank rating insure you keep your bank balance average over 3 months as high as you can, preferably over $10,000 and that your account doesn’t go negative.Take advantage of and use other services your bank offers such as CDs, savings accounts, and other investment accounts and open your bank account when your corporation starts, and leave it open as this longevity will help your bank rating. Make consistent deposits on a regular basis into your business bank account and insure each month you have good cash flow through your account by regularly putting into the account more money than you take out. Taking these steps will insure you have an exceptional bank rating and can get approved for the greatest amount of bank financing.
