No BS Tips for Business Credit

Welcome to the No BS Tips to help you build business credit correctly. So in case you're sitting there wondering what on earth is business credit, I keep hearing about it. Business credit is the opposite of personal credit. So for example, with your personal credit, you spend on your credit card, you rack up debt, that's going to hurt your personal credit.

Business credit, on the other hand, is attached to your business and your EIN. So as you spend it, as you use it, it's not going to hurt or show up on your personal credit. I honestly believe that every business owner needs to have business credit, but most people don't understand how to get business credit or even how to build it. So when it comes to business credit, there's two main ways to get it.

The first and easiest way is called capital stacking. Now this type of business credit works even for brand new businesses. With this, you're able to get up to $200,000 at 0% interest up to two years without providing any financials. However, it does require a strong personal credit profile of at least $680,000 or higher. And let's face it, not every business owner has that type of credit.

So what's the solution? You can actually build the business credit despite having challenged personal credit. It does take a little bit longer. So the average business owner takes anywhere from four to six months to build upwards of $60,000 to $100,000 in business credit. However, it can be done and in this series, I'm going to walk you through step-by-step exactly how to do it and how to do it correctly.

Today, we're going to start at the very beginning, at the basics, how to set up your company correctly to ensure that you are able to build business credit correctly. The biggest and most important piece I can stress here is consistency. So, for example, when you are setting up your company, setting up your LLC, registering with the state, forming your LLC, you want to make sure that all of the information is congruent.

So everything that you're putting for the secretary of state, you want to make sure you use that exact same information on all applications with vendors, applications for your bank, all of that needs to match. And that's the biggest reason I see that people get denied and are not successful in building business credit.

So one of the best and funnest parts about starting a new business is coming up with the name. However, there are some specifics to this. You want to make sure that the name you are choosing does not include a high-risk industry in that name as that can be a red flag and prohibit you from getting funding as you move further down. So for example, high-risk industries, trucking, casinos, credit repair, financial services. I wouldn't want to name my company Sarah's Finance Company, right?

Instead, we're called TruFinCo. I wouldn't want to name a trucking company Sarah's Trucking Company. Instead, I could maybe call it Sarah's Enterprises. Once you have picked a name that doesn't have a high-risk industry, you'll want to make sure that name is available across all platforms. You can check that at namecheck.com. Next, you are going to be forming your business entity with your Secretary of State. However, there are a few key pieces of information you will need to provide that you'll need to establish first. You will need to provide your business address.

Most business owners that do not have a true brick and mortar choose to use a virtual address, an actual physical location for their business address. You'll need a business phone number. No, not your cell phone. You can certainly use a service that forwards to your cell phone but provides a different number. You'll need to have a business website. It can be as simple as a landing page, but you do need a business website. A business email address. No, not Sarah at gmail.com, but something using your domain name. So for example, one of ours is info at TruFinCo.com. Once you've done all of that, you've got your business entity set up with the Secretary of State. You are then going to want to get set up and get your EIN. You can do this for free at IRS.com.

And just as soon as you get your EIN, you'll want to run on down to the bank and set up a business bank account. They will require that documentation, but you'll want to do this early on because most lenders consider the date of which you opened your business bank account as your business start date. Once you've done all of that success, you'll want to run on down to the bank and set up a business bank account.

They will require that documentation, but you'll want to do this early on because most lenders consider the date of which you opened your business bank account as your business start date. Once you've done all of that successfully, you're going to be ready to move on to the next step, which is actually starting to build that business credit by establishing trade lines.

This is what you need to do before you establish trade accounts, before you start building that business credit to ensure that it is reported accurately and how you can monitor it. So it's important to understand there are three major reporting bureaus when it comes to business credit. They're not the same as personal credit, and the main and biggest is called Dun & Bradstreet.

So before opening any accounts, you're going to want to make sure you create and get a Dun & Bradstreet number. You can do this for free at dnb.com. You'll want to keep track of that number because on some vendor applications, they will ask what that number is. And it's important to understand that not all of the vendors report to Dun & Bradstreet.

Some do report to Experian, some report to Equifax, and some do report to all three. And the best way to monitor this and ensure that what you're doing is getting somewhere and you're making progress is to create an account at nav.com. I would compare nav.com to what we use for checking our personal credit. I hate credit and saying credit karma, but Experian has a great reporting one.

We use another one called smart credit. Nav.com is similar to that in that it helps you track building your business credit. It helps you monitor to make sure those vendors are reporting, but also make sure that there's no errors being reported.

starting to build that business credit and doing it by establishing trade lines. However, this is where most people mess up. You have to do it correctly and in the correct order. So let's break it down. So it's important to understand as you're establishing these trade lines, they're typically going to be called net 30 accounts. Sometimes they're net 60 or net 90. As you establish these accounts, you're going to place orders with these vendors and you're going to pay them off in full within that 30, 60 or 90 days, however that is set up correctly. When you make that payment, that's called a payment expense.

experience. And that payment experience is reported to your business credit using your EIN. So to start with, you're going to want to establish three accounts from tier one before you do anything else. So some good examples of tier one accounts, Granger, Advanced Auto Parts, Hardware Express, HD Supply, and Marathon. However, there's a couple key components to keep in mind when you do apply for these accounts. First and most important piece is to make sure your information is the same across every application and it needs to match what you have registered with the Secretary of State. Secondly, you need to understand how to apply. So in my soon-to-be-released amazing book, we walk you through it. Where to apply, what the company is, and if there's special instructions as well as their requirements. So some are going to be different. Some are more advanced on their requirements, but typically for these tier one accounts, they're not. It's also important to understand which of the three business credit bureaus they're going to report to.

Today, we're going to talk about the next step, which is establishing trade accounts with tier two vendors. So one of the important things to understand where most people fail when building business credit is they don't do it correctly, and they don't ensure that all of their information is correct across all platforms, across all applications. So you'll want to ensure that on all of these applications, it matches the exact same information that you provided to the Secretary of State when you first created your entity.

Before moving on to tier two, you want to make sure that your three that you established in tier one have reported those payment experiences. You want to keep in mind that it typically takes anywhere from 30 to 60 days after you've made that payment before it starts reporting on your business credit report. You'll want to establish three more accounts in tier two.

Here's some good examples of tier two. This is also showing you how in my upcoming book that's coming out on the 18th, we walk you through step-by-step how to apply, where to apply, where they report to, what the company is, what the special instructions are, as well as what's required to qualify. And I'll be honest, that's where a lot of people fail is they don't know what's required to qualify and they might just be missing one piece and they're denied and they don't understand why they're not effectively building business credit.

You've got Fleet Pride, GetGo, Global Fleet, Grey Bar, Gulf Fleet, and Hisco. There's many more, but those are just a few to get you started.