What is the best way to establish credit for my company? I know companies have credit ratings (D&B #, Paydex score), but I don’t know exactly what they mean or how to establish them? What about purchasing a shelf corp? Are these legitimate? Should I open a credit card in my company name and starting routing bills through the card? SO MANY QUESTIONS!!
This is kind of a loaded question!
Business credit is generally considered a C-Corp, an S-Corp and an LLC (Limited Liability Company) operating independantly and paying Federal Taxes through an Employer Identification Number (EIN).
You really want credit that is independant and does not require a personal guarantee!
Your credit rating (Dunn & Bradstreet, Paydex) is not guaranteed to be reported by your lender, you will need to make sure your lender reports your good payment history.
Basically your D & B and Paydex is much the same as your personal credit on Trans Union, Equifax and Experion.
A shelf Corporation is a corporate entity that was filed and established some time ago, is seasoned and has potentually had some credit in the past therefore establishing a D&B or Paydex rating. They are legitimate but use caution and proper due diligence. (Caveat Emptor)
Establishing a credit card, business line of credit or an auto loan are all good ways to establish credit.
You need to create income through the corporation to support the credit, your bank and future lenders will only use the company tax returns and credit ratings to approve future credit.
Also remember to keep up your state filings and your corporations books and records.
Some personal expenses can easily be adapted to your business, but not everything. Use discernment to decide on business vs personal use.
Why not just buy a seasoned shelf corp that has an established credit line and use that line to buy RE with, instead of the going through all the BS that we investors are going through right now to get our financing?
JAKE
That is a good thought but most of the corp s that have this line of credit is at some place like LOWES OFFICE MAX ect
And is not like a cash line of credit at some bank
They have some trade lines in place and some history so it will make it less of hassel to get a say 25 K line of credit at a bank or loan company
But most do not have a cash line deal
And to get one like this can run you from 6 K to over 100 K
Thanks for the info, I figured there had to be a reason why more investors weren’t buying shelf corps…
Jake,
Check out www.creditboards.com for some good information
setting up a business credit account. There is lots of good information there.
You can get some good advice here also: http://www.bcscredit.com/
Once you get your entity and EIN setup you can open credit accounts with stores like Dell or Staples. Fuel cards (gas stations) will extend and report on credit also. Marathon and Shell are two I know of that do this. After about 6 months of activity and history you will typically start receiving offers for business credit. These are typically low limits or not the greatest of terms. After 12 to 18 months of history, you’re likely to receive better credit offers and terms with the more extensive history.
American Express has also been good to work with for my business. Their OPEN product targets small firms. I’ve heard of others having good success getting business credit by working with their local banks so you might want to speak to your local banker and see what they can advise or offer.
Good luck.
One more thing - definitely register with D&B. It’s free to do so and many creditors rely on them to decide who to extend credit to or use them to report on you. They’ll try to sell you a bunch of stuff you won’t ever need but it’s free to get listed with them and should help establish your businesses credit profile.
Herman- I called D&B and they basically said theirs no way to set up an acct without pay like $330 or something to get a file started, although the woman on the phone was very good at avoiding my questions about whether there’s a way to do it for free. did you do it for free?
Our former business banker wanted us to do this. I saw the same thing. They wanted a few hundred bucks to get us started. We passed on that and we’re still getting loans.
thx justin
Jake,
Do you have an LLC or some other entity set up to purchase rentals or other houses to rehab & flip? Or is this some other REI related business?
yes, I do have an LLC set up for rehabbing my properties right now. The reason I’ve been so interested in business credit lately is that I’m not sure what other types of industries (brokerage, prop management, etc) and business I’ll do in the future so I want to make sure my business is prepared for whereever I might take it. I’m also thoroughly convinced that going forward, access to capital/credit is going to be an absolute necessity to succeed in life, both in business and personally.
Ok. We had to start shopping different banks because the bank we were using to purchase property here quit doing NOO loans for now. We went to every bank in our town of about 40K people. Some others didn’t want to do NOO loans to a LLC. Of the ones that did, not one was concerned with tradelines, paydex scores, etc. It was all about how healthy our business was financially and also our personal financial situation. They cared more about Profit & Loss statements for the business and our personal debt. My suggestion to you is to not get wrapped around the axle trying to build tradelines for your business. If you keep your personal finances in check and develop a successful track record with your rehabbing business, you should be successful securing financing for future endeavors.
I found these guys online and through the XM radio www.fasttrackcredit.com They do a great job of establishing the DNB paydex score, and then achieving credit cards and lines of credit in just the business name and business profile. I was relieved to see that they also do a great job of building up both Experian and Equifax business as well which I have found out that those bureaus have become a major player in the business world now. DNB has kind of fell off the map so to speak a little bit since they only report business to business trade credit. Check these guys out I think you will be quite surprised at how well they will build the business profile, take care of you as a client and do what they say they can do. They offer a free E-book to download giving you great insight of what the business world does look for. Thanks. Bizcreditman
You found them online or you’re advertising for the company you own or work for???
:bs
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