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1. Have a corporate entity
You must separate the business as an entity apart from the personal owners and the only way to do this is setting up a legal corporate entity such as a corporation or LLC. We can setup your entity for you easily and affordably.
2. Physical Location
Your business must be real and not just an attempt to build personal credit by using a business entity. If that is what you are doing STOP HERE! This process will not work for you. Your business must have a physical office space, even if it is at your home. It is at this physical location that your business should receive regular mail, not at a mailbox store or post office box.
3. Phone Service and Directory Assistance
Your business needs a separate phone line and fax line. The business phone number must be listed with directory assistance. Call 411 and make sure anyone can find your business under the exact business name. If your business is not listed in 411-directory assistance than dial 0 for your service operator and make sure that they get your business listed correctly with 411.
4. Emails and Web Address
Your business should have its own email address and business web site with your business domain name. We can setup and host your website for as little as $7.50 per month for hosting or $39.95 per month for an all inclusive Do-it-Yourself website with all the bells and whistles included. We can even help you build it for a fee.
5. Licenses
You must obtain a business license and, if applicable, a tax resale license in the State and possibly County or City where you are conducting business. Following the proper regulatory guidelines for operating your business is critical to building a favorable business credit profile.
6. Financials
The business should have two years of financial statements. Don't panic or stop here if you haven't been in business for two years. Begin building your financial statements from the day you started the business and keep going with this process. How do you have two years of financials with a business entity that was just set up? If you have been in business as a sole proprietor or partnership prior to forming your business entity, you can use those financials. Ideally, the financials include a balance sheet and income statement for each of the last two years. Have a Certified Accountant assist you in these matters.
7. Tax Returns
Make sure you have properly established both your Federal and State business tax ID numbers under the exact business entity name. The tax returns for the previous two years should also be CPA prepared and filed with the IRS and the State.
8. Bank References
Your business entity must have a minimum of one bank reference.
Your business bank account should be at least two years old, but more importantly it should have an average daily balance of at least $1,000 for the last three months.
Not having the $1,000 balance will not stop the process of building a favorable business credit profile, but it will slow it down. If you don't have the $1,000, borrow it from family or friends and don't use it, just let it act as your base line in the business account so that your balance never drops below that amount. Make sure that your business bank account is reported exactly as your legal business entity name and at the same physical address as your business, not a Mail or P.O. Box.
9. Credit Reporting Agencies
Dun & Bradstreet (D&B) is the leading business credit reporting agency in the United States, Experian is the other. D&B provides businesses with a separate credit file number that is used to track and rate your business credit profile. This is called a D&B number or DUNS number.
Your D&B number is asked for when applying with some credit card and leasing companies. Most banks and lending companies will ask for your D&B number. Once your corporation is setup and has been issued a Federal ID tax number, you can apply for your D&B number online at Dun & Bradstreet
The process of obtaining a D&B number is free and takes about two weeks to receive your number. D&B also has the CreditBuilder Service for $499. They assigns a D-U-N-S Number to your company (if needed), builds a full credit profile, and adds up to 5 payment references, which are used to determine your ability to pay your bills. It is not necessary to use this service to get your business credit profile started and below is why. Potential creditors that ask for your D&B number will send a request to D&B asking for a credit profile on the corporation. But it is a valuable service nevertheless.
If a profile is not already available, D&B will compile one from information D&B will request from your corporation. Then D&B will ask you for financial statements, tax returns, and the trade and bank references listed above. Finally D&B will check the status of the corporation and business licenses along with any existing credit amounts and payment histories from your trade references. All of these items will be reflected in the profile. Experian reports are developed only from information that is provided by your trade references.
*CreditBuilder enables you to take the first step in establishing your company as a viable, trustworthy company in the community so you can promote the future growth and success of your business. Establish your credit by partnering with D&B to create a robust credit file that will be used by other companies to evaluate you as a potential borrower, supplier or business partner. And, generate industry awareness which can bring about new business opportunities and revenue.
10. Trade References
MAKE SURE YOU HAVE COMPLETED ALL NINE (9) STEPS ABOVE BEFORE THIS STEP. Your business entity is going to need five (5) trade references that have given you a credit account and report a favorable credit history to the credit reporting agencies. This can be one of the most difficult steps in the credit building process.
Don't worry and don't stop here! Trade references are vendors that will agree to issue credit to your business such as Net 30 or 60 day payment terms. Check with all of your suppliers and have them start you out slow.
A good place to start is by applying for an American Express Open Business Card. This card basically gives your business Net 30 day terms for its purchases. AmericanExpress. Also Capital One has outstanding business credit card programs with good rates and terms that are excellent for your business needs. They also have $25,000, $35,000 and $50,000 SBA loan programs you may want to look into. Two other good sources are OfficeMax or Staples business office supply credit cards. Officemax or Staples.
Establishing just five (5) favorable trade references is a major part of building your Business Credit Profile and creating a favorable PayDex score. This is not an overnight process and should be given a large amount of attention in order to succeed.
A Business Credit Profile is very important to the structure of your company and if done correctly can provide your company with well over $100,000.00 in business credit or more.
We hope this information has helped you.
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