I have a long time friend and client who has struggled with his personal credit for years. Like many of my readers, this person was drawn to business credit because he was able to build it, despite what the situation is with his personal credit. This blog is and will always be about BUSINESS CREDIT. However, over the next several months we are going to try and do some crazy things with his personal credit. He has absolutely nothing to lose so we’re going to go all out!

We’ll document his journey in hopes of helping others who are having the same struggle as he.

I’ve said it a million times.. No matter how much business credit you have – your personal credit plays a vital role in your life. Don’t ignore it. Don’t forsake it. It will not go away so you need to do whatever it is that you can to make it better.

Here is the break down. This client/ friend of mine will be referred to as Joe. The problem with Joes credit is the credit that he was granted (Several years ago) he ended up closing via “Charge Offs”. Joe is 30 years old and lives on the west coast. He has a good paying and steady job. Last year Joe made $83,000.

As of today his Equifax score is 581. He has $486 in revolving credit and $0 in installment accounts. He has 5 inquiries in the past 3 months and 5 of his accounts are red flagged. His accounts that were charged off all have red flags. He was 120 days late SEVERAL TIMES on all three accounts. His two current accounts have been 30 days late a few times in the past 12 months.

As mentioned above, the issue here is the small amount of credit that he was granted he ended up charging off. Because he messed things up when he was first granted credit, he kind of screwed his credit up long term.

He has asked me to help him a) Get more credit and b) Fix his current credit situation. Today, if he were to apply for a credit card (which we have) he will get denied every single time. We can’t even get him a $500 credit card.. He is continually denied for cell phone accounts, rental agreements and pretty much anything else that requires decent credit.

Over the next several months we’re going to try some aggressive techniques to build, boost and enhance his credit.

Watch me turn Joe from a ZERO to HERO… in the world of personal credit.

-Professor Steward

We are continually asked questions about business credit and real estate. It seems as though everyone is interested in “flipping homes” with the help of business credit. The vast majority of people do not think it is possible to use business credit when trying to buy homes or other properties.

Several years ago, when the economy was thriving, you could easily go to your neighborhood bank and apply for a real estate loan. Now days, banks are nervous to lend on a primary residence, let alone an “investment property”. What other options are available for the avid real estate investor? Well…

Scenario 1: Borrow from your Inner Circle
Scenario 2: Borrow from a bank.
Scenario 3: Use your business credit.

Scenario 1: Borrow from your inner circle.
I don’t know about you but I never like involving friends or family members in business transactions. Even if “Uncle Joe” has deep pockets, do you really want to involve him in your business life? I never encourage my clients to borrow from friends or family.

Scenario 2: Borrow from a bank.
This is a fantastic option, IF they’ll lend to you. Banks are getting tighter and tighter with the money that they lend – especially when it comes to 2nd homes or investment properties.

Scenario 3: Use Business Credit
If you had a cash line of credit and other types of business credit, why couldn’t you use this credit to purchase real estate?

Borrowing from a bank or from your inner circle is NOT a GUARANTEED situation. However, building business credit is 100% guaranteed if you’re willing to put in the time and effort.

Most of the people that contact us are looking for “non PG” credit.  (Non-PG credit = Non Personally Guaranteed Credit)  While it is totally possible to obtain credit without a personal guarantee, it is important to note that your company needs to be properly structured before a creditor will approve an account on a No PG basis.

When you sign a personal guarantee (PG) you are accepting personal liability and responsibility for the debt IF your company where not able to pay the debt off.  Don’t worry though – you may be able to take off your personal guarantee once your business has established a good relationship with the creditor.

When it comes to credit accounts w/ a PG, there are two main differences.  The first type of “PG’d” credit account is the type that reports to your personal credit profile no matter if you default or not.  The second type of “PG’d” credit account is the type that ONLY REPORTS to your personal credit profile if you default.

I continually speak with far too many people who endlessly search for “NON PG” credit.  If you’re going to use a PG on a credit account for your business make sure it is the type of account that does not report on your personal credit unless you default.  Once your business is strong enough most of your accounts should be without a PG, but this takes time – so don’t get discouraged.

-Professor Steward

In your quest for business credit you will find that there are many opportunities for non-bank credit accounts.  These “non-bank” credit accounts will be from various creditors on a Net 15, Net 30 or even Net 90 basis.  As you build the foundation for your company you can utilize these Non Bank accounts as “mini business loans”.

As you search for creditors who offer credit accounts make sure that they report your payment history to the business credit bureaus.  It is imperative that the creditors you work with report to the credit bureaus.  As they report to the credit bureaus you’ll further establish the positive reputation for your business.

Once an account is established the creditor will give your account a limit.  If your limit is $3,500 – you may not spend more than $3,500 with them via your credit account unless they grant more credit to your business.  If you were to spend $1,200 with them you would go ahead and place the order and cite your account number at the time of ordering.  You’ll receive the product or service that you ordered and then receive an invoice.  If the account is on Net 30 terms, then you’ll have 30 days to pay the bill, in full.  If it is a Net 60 account then you’ll have 60 days to pay the account in full.  As long as you’re keeping up with your payments and paying your bill on time, you should be able to ask for an account increase in 2 – 4 months.

Conserve your cash flow while building a strong reputation for your company and use easy-to-obtain Net accounts for your business.

-Professor Steward

90% of the people that I’ve helped build business credit have had bad personal credit.  In most cases the only reason that they have bad personal credit is because of previous business failures.  In every situation, the client did not know how to build business credit and did not know that they could separate their personal credit from their business credit.  For this reason, when their business crumbled -so did their personal credit.

While you’re building your business credit, pay close attention to your personal credit.  It is extremely important that you fix any issues that your personal credit profile may have.  Don’t wait – do it now!

There are many unscrupulous companies in the “credit repair” industry.  We’ve found a company who we’ve been sending our clients to for several years.  You can find this company by clicking this link.  We are not affiliated with them, but we have sent many people to them in the past.  Their price is right and their money back guarantee is like none other.

Even when your businesses have millions of dollars in credit, your personal credit will still have endless value to your personal life.

Business credit and personal credit both have their own unique value and importance.. don’t forget it!

-Professor Steward

According to a new study over 558,000 new businesses were started each month in 2009.  This is the largest number of new businesses created in the past 14 years.  This study brings up several important points.

Due to the current recession we know that banks and other creditors are more conservative with the dollars that they lend.  We know that creditors ARE still lending, they’re just being more careful than ever.  Combine this with the fact that there are more businesses being created now than anytime in recent history and we’re left with a sticky situation.

So banks are lending less + More businesses are being created now than anytime in the past 14 years and it is reasonable to think that each of these businesses are seeking some type of credit reinforcement.  This tells me that it has never been more important to be credit compliant, to have a real business, to structure things appropriately, to be a good steward and to do things the right way – the first time.

Source:

http://www.kauffman.org/newsroom/despite-recession-us-entrepreneurial-activity-rate-rises-in-2009.aspx

-Professor Steward

As a small business owner myself there were many MANY years that I completely relied upon my personal credit to fund my business.  After several years of only using my personal credit to fund my business I started to research business credit.  My discovery of business credit led me to where we’re at today.  The most important aspect of building business credit (the right way) is the ability you’ll have of separating your personal credit from your business credit.  This way, if you business takes a hit – your personal credit and personal finances will not.

Your social security number is a number issued to you personally.  No two SSN’s are the same.  Your SSN is one of the ways that the IRS tracks your taxes and the credit bureaus track your credibility.

Your Tax ID Number is similar to your SSN, but for your business.  With your Tax ID number the IRS will track your taxes.  Additionally,  your DUNS# will be one of the numbers that is used to track your businesses credibility and stewardship with creditors.

You’ll only ever have 1 SSN.. however, you can have literally thousands of Tax ID Numbers AND DUNS#’s.  Each and every business that you own should have its own Tax ID Number.  WHAT DOES THIS MEAN FOR YOU?  Although you’ll only ever have 1 personal credit profile (with each bureau) you can have a limitless number of business credit profiles.. THIS IS REALLY EXCITING!  You can literally build credit onto hundreds or thousands of companies if you chose to.

When it comes to business credit – the sky really is the limit!

-Professor Steward

Apparently there have been some fairly significant changes over at Dun and Bradstreet.  In this post I would like to review these changes and share with you the ins and outs of each program.

FREE:  You can get a Free DUNS# from Dun and Bradstreet, however going the “free” route will take 30 days.  If you have time to spare and don’t have the funds to pay for any of the items described below, then the free route is the way you should go.  Keep in mind that when you request the free DUNS#, the DUNS# is all you’re getting.  If you are a government contractor or governmetn vendor you can get your DUNS# in 24 hours or less.

Because D&B tends to change the details of their programs fairly often, please check with us for the accuracy of the descriptions below.  (As of the date of this entry being published all of the information below is correct)

Depending on your budget and your situation, I would recommend getting one of the following packages.  Also, I would recommend that you try to develop a relationship with your D&B contact.  Be kind, honest and respectful to your D&B representative.  They have the ability to make or break your business credit profile, so be kind to them.

DUNs File Creator:  Price $229

If you want a DUNS# right away, this is the product for you.  In almost every situation they’ll assign a DUNS# to you within 24 hours of purchasing this package.  With this package you can also count on getting your DNB file created for your business within 5 business days.  The DNB file will allow you to add a plethora of information about your business like; financial statements, owner information and background information.

This is the package that 90% of our readers purchase from D&B.  The downside (which isn’t a downside for most of our readers) is with this package you will not be able to automatically add your creditors to your profile.  What will happen is you’ll have to wait for your creditors to automatically report on their regular reporting cycle.  Once you purchase this package call your creditors and make sure that they have your DUNS# on file and let them know that you want them to report your payment history to D&B.

DNBi Self Monitor Basic:  Price $449

Only 10% of our readers end up purchasing this package.  Why?  Well, while this is a great package, only a certain group of people have the type of business that can actually utilize the full benefits of this package.  Most people reading this blog are people who have just started their business.  They do not have any creditors and if they do have any creditors they’ve only had them for a very short time.

This package allows you to add up to 8 of your existing creditors to your file, automatically.  You do not have to wait for them to report on their regular reporting cycle with this package – D&B will contact them, verify that you have an account with them and essentially force them to report your account information immediately.  You can submit these 8 trade references over the course of 3 months with a total of 4 payment experiences to be added.

I sure hope that helps!

-Professor Steward