What is a business profile?

In simple terms, business credit is credit in your business’ name and linked to its EIN and not the business owner(s) social security number(s). Business credit is similar to personal credit; however, the credit is established in the business’s name, builds its own credit profile and score, and represents your business’s ability to borrow money from authorized lenders, based on its past actions. With an established credit profile, on-time payment history and score, the business will qualify for additional credit and funding from the business creditor and financial institutions. More importantly, since the business qualifies for the credit, in some cases there is no personal guarantee (PG) or credit check required from the business owner(s). A personal guarantee (PG) is an unsecured written promise from a business owner and/or business executive guaranteeing payment on an equipment lease or loan in the event the business does not pay. Since it is unsecured, a personal guarantee is not tied to a specific asset.

Why is a business profile important?

Business credit is ideal for entrepreneurs, small business owners, and nonprofit leaders just launching their business, as well as, established businesses and organizations. It can be vital for companies that do not have collateral required by the Small Business Administration loans. It’s also perfect for businesses with very little cash flow to verify, no tax returns, or don’t want to verify business information. There are many advantages to building business credit that is not connected to your social security number. First, your business can establish a credit profile that is completely separate from the business owner’s consumer credit profile. This gives business owners DOUBLE the borrowing power as they have both consumer and business credit profiles established.

Most creditors and vendors will check your business credit report before making critical decisions about your business. That evaluation criterion is based heavily on the applicant’s business credit score. Your ability to establish a sound credit profile and score will allow business credit grantors to evaluate the creditworthiness to determine whether or not to issue credit. The more established the business credit profile, the more options the business will have to obtain credit, loans, and leases without the use of personal guarantees. It is not easy to do this, but yet it is not impossible.

By not having an established business credit profile and score will get an owner DECLINED for credit and financing. Please be advised that there are no federal regulations that require the lenders notify the business owner for their reason for denial, so most never know.

When your business credit and profile is established correctly, it can be built without a personal credit check. Business credit can quickly be obtained regardless of personal credit quality. Additionally, most business credit can be obtained without the owner taking on personal liability or a personal guarantee. This means in case of default, the business owner’s personal assets cannot be pursued.

Your business can use its established credit profile and scores to qualify for revolving store credit cards like Amazon, Staples, Lowes, Sam’s Club, Costco, BP, Wal-Mart, even MasterCard, Visa, and American Express. In addition, your business could also qualify for credit lines and loans. Borrowing responsibility can help you build the business you have dreamed about.

SEPARATING PERSONAL FROM BUSINESS

Separating your personal and business credit profiles in order to build your business’s credit profile is one of the most important items you can take as a small business owner. Separating your personal credit from your business credit can provide you with access to financing opportunities that may make it more efficient and easier to fund and grow your business. The business is now at risk, not you… this way, you can diversify your assets as you like.

Having positive trade line credit is vital to building a good business credit profile and scores. By doing this, lenders and creditors will have a clear view of the financial standing of your business. Furthermore, establishing separate personal and business credit reports will provide your business with its own history to list your business’s credit, activity, and scores. The information and content in this streamlined guide make it simple for lenders and creditors to accurately assess creditworthiness.

WHO ARE THE BUSINESS REPORTING AGENCIES

Business Credit reports are offered by Experian, Dun & Bradstreet, Equifax, and FICO Small Business Scoring Service. These business credit bureaus allow your business to establish its own credit profile, scores, and payment history. As a business owner, you should know who the major business credit reporting agencies are and what type of data they collect on your business. Knowing this will give you greater insight into getting listed and established in the business credit industry. You will first want to get a copy of your business credit reports to see what is being reported before you start your business credit building.

WHAT IS A BUSINESS PAYDEX SCORE?

A business credit score is the credit scoring model for a business which indicates to lenders or creditors the likelihood and/or ability of your business repaying debts. For Dun and Bradstreet, they call it a Paydex score. These scores may help you secure better terms the next time you apply for a small-business loan, credit, or get an insurance policy for your business. Business credit scores are based only on whether the business pays its bills before-time or on-time. A business owner can obtain credit much faster using their business credit profile, unlike with consumer credit. Per the Small Business Administration, credit approvals and limits on business credit cards are usually 10 to100 times higher than the approvals and limits consumer credit cards. This is another great advantage of establishing business credit.

Most of the factors are similar to those used to calculate your personal credit scores, while others are unique and specific to the calculating business credit scores. Moreover, your business’s credit scores are calculated from various traits about your company and its financial history. Those variables could include industry risk, company size, payment history, outstanding debts, length of credit history, credit utilization ratio, and public records, such as bankruptcies, liens, and judgments.

Business credit scores vary between agencies and reports because they can have different information on file for the same person or business, and can produce a different score. The two most popular business credit scores come from the two credit bureaus most renowned for their business reporting. Despite offering business credit reports, Equifax does not market business credit scores.

How do I get started?