Here’s the biggest credit myth around:
“You can establish corporate credit with bad personal credit”
Anyone who tells you that is lying to you.
Ok, you can build corporate credit without using your personal credit, but it’s a slow, painfull processes. To do so, you must keep in mind that you need a few things in place.
First, you need a proper business structure. This means a seperate legal entity with a seperate EIN credit file, like I mentioned in the last post. It’s a good idea for asset protection anyway… get a corporation or LLC filed with the state, and an tax identification number from the IRS and you’re on your way.
The fastest was to grow business credit is with a personal guarantee. Even if you’ve had your business open for years, you may have personally guaranteed the debt. This isn’t so bad, as long as the lender is also reporting on your business credit as well. After a few years in business you may be able to get them to drop the personal guarantee.
So back to that myth… you can build business credit with poor personal credit. You can even get hundreds of thousands of dollars worth of it. But you won’t be able to buy a property, pay yourself, or hire an employee with that money. Most business credit that doesn’t involve personal credit is trade lines. A business trade line or trade credit is a line of credit that can only be used at the store that issued the credit. A classic example of this is an office supply store. You might get a $10,000 line of credit, but who needs $10,000 worth of staples?
Banks.. who give you real credit lines of real money you can use for anything, will want to see your presonal guarantee for the credit. It’s how real business owners operate.
Don’t have good personal credit? Become a credit millionaire today and get on the path to great business credit as well.
Building corporate credit is easier than you might think.
Millionaires have known for years that corporations are the best way to grow business, protect thieir assets, and make real money… and small business owner have been jumping on the same bandwagon for the last decade.
Your business should start to build a corporate credit history and business credit profile as soon you establish it. Your first step is to get a corpoarte tax identification number (tax ID number or EIN) from the Internal Revenue Service.
The fastest, and easiest way to get this started is to borrow your good personal credit to create business credit. Simply call up companies that you already do business with, tell them that you just created a new small business, and ask them about small busniess accounts for their current customers. Make sure they ask for your tax ID number, so you know the new account is building your corporate credit.
Other than that, building corporate credit is a slow and steady process, which involves establishing trade lines and credit lines with service providers that your business uses, like Staples or Home Depot.
