Building a strong credit foundation
As an entrepreneur be it a fresh start up business or a seasoned entrepreneur with an existing and thriving business your ability to borrow money with no personal guarantee is limited if you don’t start off with a solid foundation. The importance of a strong foundation is to show the potential lenders your business is viable and has the means to repay whatever credit they are prepared to extend to you.
Building a strong credit foundation is quite simple actually and can be done in a relatively short amount of time 60-90 days if you stay focused and stay the course. We recommend starting off with no less than 4 but no more than 11 Tier 1 credit accounts. These Tier 1 accounts are typically those with easy approval and is extended to those with limited or bad credit, and usually allot a small credit limit on a Net 30 basis. These types of accounts can offer you the opportunity to purchase supplies related to your business operation while also reporting your purchases to the bureaus. Please always check with respective customer service department to find out which credit bureau they are ACTIVELY reporting to. Example of Tier 1 accounts:(Grainger, Uline, Crown Office Supplies, Burst Biz, JJ Gold, Shirtsy, BusinessT-ShitClub, CEO Creative, Office Garner, Linear Supplies and Business Credit Advocate).
Lock these Tier 1 accounts in and use them regularly it does no good to open an account and not use it! No usage on a Net30 can cause the account to show dormant on your credit report. A Dormant report on your credit report is not a bad thing but it also doesn’t benefit you.
With 4-11 accounts reporting your tradelines to various credit bureaus you should be generating some positive movement in your business credit score. You can move to Tier 2 Accounts. These are accounts generally come with a higher credit limit and some may require a personal guarantee in some instances we recommend you have an additional 4 -8 Tier 2 accounts open and actively reporting
Examples of Tier 2 Accounts:(AirGas, Amazon PBI, ATT for Business, Autozone Commercial Credit, Best Buy Business Advantage, Dell Business Credit, Discount Tire commercial account, Floor & Decor, HP Business Credit, Menards, National Tire and Battery Commercial Account, Samsung Business Credit, Webstaurant.
As you move up to Tier 2 it’s best to try and stick to those accounts that most fit your business type, This will lead to meaningful use of the account and can lend a big hand in getting your scores up. The overall goal of building business credit is to be able to access funding and other opportunities that are available to you and your business via your EIN #.
Moving on to the last and Final Tier 3 this is where you begin to get access to large amounts of cash out there for your business. This Tier comes with PG almost always. So, while working Tier 1 & Tier 2 it is IMPARITIVE you begin working on your personal credit if you are below a 620. Get any of those negative remarks off that personal credit report! Having bad personal credit will make obtaining business credit VERY expensive! Build that personal credit report with the correct type of accounts - There are folks out there with 700’s that get denied with some of the most sought-after banks (American Express, NavyFed and those alike.) Because their credit profile has the wrong type of accounts these potential lenders are looking for.
If you’re looking for some help on how to get your business credit game strong and get access to the funding out there, please don’t waste any more time get subscribed to Business Credit Advocate today!