Group Talk

Building business credit is one of the greatest opportunities for small business owners. It provides our business with the ability to obtain financing for unforeseen expenses, operations, expansion costs and investments.

There’s so much going on with corporate credit that there are several different fields devoted to servicing it, including business credit cards, small business loans, accounts receivable factoring, merchant account cash advance, lines of credit, equipment financing, secured/unsecured loans and many others.

These types of financing have been around for a long time, so you’d think that by now we would know all there is to know about corporate credit. After years of studying and applying every aspect of it, there are still many facets that remain secretive. And because it is so complex, we tend to simplify information about how it works in order to make it more understandable.

This has resulted in many myths about building business credit. Let’s look at the top 10 myths that have been circulating about business credit, beginning with, of all things, its starting line.

10: Sole proprietorships can establish corporate credit

A sole proprietorship is not considered a separate legal structure. Instead, it is considered a personal extension of you so you don’t have any protection from them. So every time you apply for credit for your business you will need to supply your social security number as the number that identifies your business.

As a result you are responsible for all debts and agreements you enter into in the name of your business; you’re also on the hook for all of your partners actions in the name of your business as well.

9: Using personal credit for business has no effect on the corporate veil

When you use your personal credit for the benefit or operation of your company it can lead to an “alter-ego” decision by regulatory or a financial organization, and a piercing of the corporate veil. This would directly endanger the owners personal assets and make the owner or owners directly liable for the penalties or repayment of any debts incurred by the business or corporation.

8: Obtain unlimited business credit for real estate investing

There are certain industries like real estate investing that are flagged as a high risk with the business credit bureaus. If you plan on investing in real estate then you will want to make sure that the company you are building corporate credit for is not “real estate investing”. Most banks will automatically turn you down because your company is operating in a high risk industry. You still will be able to invest in real estate but you may have to set up a business that does business development, business management, business consulting, marketing & advertising, training and development, etc. and then operate your real estate investing from a separate division of the company.

7: Credit repair is illegal and cannot be done.

False. Consumers have every right to repair their own credit in accordance with the Fair Credit Reporting Act. If you choose to use a credit repair company be sure to verify its track record with the BBB. Also, if you are paying for the service before it’s rendered make sure the company is in compliance with the Credit Repair Organizations Act (CROA). *Non Profits and Credit Union Service Organizations (CUSO) are exempt from CROA.

6: All vendors, suppliers and lenders report to the business credit bureaus

Not true! There are over a half a million vendors and suppliers that are willing to extend vendor lines of credit to your business but less than six thousand of these companies report to the business bureaus. What’s even more alarming is not all of these companies report on a monthly basis either. Some only report to the business bureaus once every six months!

5: All business credit cards report to the business credit bureaus

Currently there are over five hundred business credit cards in the marketplace but less than forty will issue a card without requiring a personal credit check or personal guarantee. These select cards report solely to the business bureaus and not your personal credit reports.

4: Every business has a business profile with the business credit bureaus

A Dun & Bradstreet profile requires that a business owner first apply for a DUNs number and submit their business information. Corporate Experian and Small Business Equifax create a business profile report for your company once a lender or supplier that you have payment experience with submits a data record. There are many other business bureaus that require business owners to complete a registration process prior to creating a profile.

3: Buy a shelf corporation and get all the business credit you’ll ever need

Shelf corporations provide certain advantages when it comes to obtaining credit simply from the fact that a business that is five years old has a much greater influence to a lender than a business that’s been in business for a few months.

With that said a shelf corporation alone will not enable you to obtain all the credit you need because there are many other factors that are taken into consideration. For example, if you have a ten year old shelf corporation that needs a $100k business line of credit a bank will need to view your company’s bank rating, balance history, financials, tax returns, profit & loss statements and so on.

2: All you need is a strong paydex score to qualify for a business line of credit

While a strong business credit file does play a part in qualifying banks look at many other factors. This includes your bank rating, balance rating, NSF track record and personal credit scores.

1: All you need is an 80 paydex score to get unlimited business financing

This by far is one of the biggest myths in business credit because an 80 paydex score with Dun & Bradstreet is said to be like having a 720 personal credit score. While that may be true to some degree there are some important details that many fail to mention. For example, you can have four positive trade references reporting with $200 being the highest credit limit on all four accounts and still score an 80 paydex.

This is because DNB’s rating system requires a minimum of four positive trade references but if the four you have are small limits then this hardly qualifies your business to get approved for thousands of dollars of cash credit, lease credit and business lines of credit.

In addition, having only a DNB file is like having only one personal credit file with the credit reporting agencies. Let’s say all you have is a personal credit file with Equifax but have no file with Transunion or Experian. You would never be able to get approved for a mortgage because you don’t have a completed financial picture for lenders to review your creditworthiness.

This holds true for your business as well. In order to show a complete credit picture for your company then you will need to have a profile with the three main business bureaus.

Now that you know the myths surrounding the corporate credit industry I encourage you to share this information with other small business owners and put your company on the path to corporate credit success!

I work with all kinds of entrepreneurs. Some are glad to sign on the dotted line to guaranty a loan. Many don’t mind using their home or assets as collateral for their business because they believe in themselves and believe in their business.

But there are times – and circumstances – when someone doesn’t want to – or can’t – use their personal guaranty, their personal credit. Sometimes an entrepreneur can’t or won’t use their personal assets. So what can they do?

They can build business credit – often unsecured and without your personal guaranty. As long as business owners find the right ‘business credit coach’, it is very possible to set up business credit cards, lines of credit, loans, and business terms with vendors of all kinds. As I always say, when looking for these coaches, make sure you pick the right one. There are good ones and bad ones.

These business credit coaches offer a step-by-step process that results in a solid foundation for business credit success. The steps are proven to help you obtain credit and financing for your business… sometimes it is guaranteed!

Many have a systematic approach with highly predictable outcomes to ensure your long-term success. Many companies offer a web-based back office that carefully tracks your progress and measures your results helps you to know exactly what you have accomplished, what you are currently working on, and what is to come.

There are various levels: some offer a guidebook, others give you unlimited access to trained coaches throughout the program. The assist in preparing credit and loan applications and target the application to the best lenders nationwide.

A general list of offerings include:

1. Registering your business with Dun and Bradstreet.
2. Obtaining a DUNS number for your business.
3. Establishing a proper DUNS rating for your company.
4. Entering your business into the banking system.
5. Providing you with a list of vendors who report to
the business credit bureaus.
6. Providing you with a list of vendors who will grant business
credit without a personal guarantee.
7. Providing you with a list of business credit cards
to apply for.
8. Assisting you in obtaining a standard industrial classification
code.
9. Assisting you in obtaining a favorable Paydex score.
10. Assisting you in obtaining a favorable Intelliscore.
11. Assisting you in setting up the foundation for building
business credit.
12. Provide you with banking contacts that will grant unsecured
business lines of credit.
13. Set up of your Corporate Experian business Credit report
14. The business credit coaches will also be your first trade
account reporting to Corporate Experian.

Acorn People is a training facility that will be launching a new service for drivers. The new service will allow the new legislation to be reached with regard to certain training aspects for HGV drivers. By September 2014 everyone will need the 35 hours of CPC certification in order to continue driving. Acorn is looking to make certain there is an option for these drivers to get the training.

It should be mentioned that buses and coaches have until 2013 September. This means anything over 3.5 Tonnes like the HGV vehicles still have an extra year compared to the bus drivers for the CPC training. These details are creating quite a stir considering that most of the drivers have yet to go through training no matter what type of product they drive.

The new legislation has changed how things will occur for training. One can now take the CPC and HGV training together; however, for those with an HGV licence they have to go back to the training facility to get the 35 hours. Additionally the training will need to happen every 5 years. This means that even with training by 2014, the drivers will have to attend classes again in 2019 to re-certify for the CPC.

Acorn stated they are trying to get all of the UK drivers into training so that those who have not started at all will be able to complete the training by deadline. Most training facilities are trying to get fleet companies to begin a cycle where they send a few drivers every other month or so. This will help with any backlog to ensure that all drivers are properly certified.

For some companies they do not want to have their drivers sent on training when there is a high turnaround of employees. They feel it would be wasted funds because they may have to send more individuals later on as they lose those who are already trained. For fleet companies it has been somewhat of a headache. For the added training, the government believes it will help with the number of driver accidents. They wish the roads to be safer for all, thus they are ensuring at least the fleet drivers are properly trained every five years. Anyone who is going to be a driver can take the course in conjunction with their HGV training to make it a little easier.