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Why You Need A Business Credit Card

A lot of small to medium-sized business owners use credit cards in the course of business. The problem is, many make the mistake of using their personal cards. There are a couple of major problems with this:

First, if you use your personal credit cards for your business you are blurring the line between business and personal finances. The better separation you can achieve between your business finances and personal finances, the better off you will be. For this reason, a credit card in your business name is the best route.

Second, using your personal cards for your business puts your personal credit at risk. If the debt belongs to the business, shouldn’t it be on the business’ credit?

Most people don’t think this is a big deal until they run into problems and no longer have their personal credit to fall back on.

In one example, a couple in business together racked up over $100,000 of unsecured debt on their personal credit for their business. When the business’s income dropped, even though the business was at first able to stay afloat, the couple was forced to file for bankruptcy.

With their personal credit destroyed, they could no longer get credit to support the business–and the business went through some serious struggles as a result. The stress took a toll, and the couple is now divorced. Perhaps things might have gone differently if they had depended on business credit rather than their personal credit.

Maybe you’re thinking that your company won’t struggle, or that you don’t use credit cards much anyway. What’s the point, then?

Using a business credit card in your business does offer some real advantages aside from the two that were already mentioned. For example:

1. Streamline operations and automate expense tracking. Paying expenses can be much easier to manage with a business card, and reports can be generated monthly or annually in many cases to help categorize and analyze expenses.

2. Business cards have “rewards” programs too! If you have a lot of regular monthly expenses for your company that can be paid with a rewards card, you could easily get $500 to $1000 per year (or more) in cash rewards, or even free airline tickets if you use a travel rewards card.

3. Manage employee spending. Business credit cards can be set up to have spending limits for employees, which can aid in managing expenses for in-the-field employees.

4. Using a business card helps you build credit for your BUSINESS, which is of utmost importance in today’s economy.

As you can see, there are several big advantages to using an actual business credit card for your business.

A helpful hint for those wishing to establish business credit: Try to get approved based on your business’s creditworthiness rather than your personal creditworthiness.

This means avoid providing your social security number on credit applications for your business credit card. If you don’t get approved based on your business credit alone, then you can try applying and include your personal credit information as necessary.

3 Big Reasons People Fail Building Business Credit

There are three main reasons many people fail building business credit. The 1st BIG reason people fail, is that their business isn’t setup credibly in the lender’s eyes. The perception lenders, vendors, and creditors have of your business is critical. Before applying for business credit a business must insure it meets or exceeds all lender credibility standards. There are over 20 credibility points that are necessary for a business to have a strong, credible foundation.

To insure you are seen credibly, it is very important that you use your exact business legal name. Your full business name should include any recorded DBA filing you will be using. Insure your business name is exactly the same on your corporation papers, licenses, and bank statements.

Whether you have employees or not your business entity must have a Federal Tax ID Number (EIN) to start getting business credit. Just like you have a Social Security Number, your business has an EIN. Your Tax ID number is used to open your bank account and to build your business credit profile. Take the time to verify that all agencies, banks, and trade credit vendors have your business listed with the same Tax ID number.

Your business address must be a real brick-and-mortar building, deliverable physical address. It cannot be a home address, cannot be a PO Box and cannot be a UPS address. Some lenders will not approve and fund unless this criteria is met. There are Business Address Solutions available at companies like Regus including address only where you receive mail and packages at your dedicated business address.

You must have a dedicated business phone number that is listed with 411 directory assistance, under the business name, to successfully obtain business credit. Lenders, vendors, creditors, and even insurance providers will verify that your business is listed with 411. A toll-free number will give your business credibility, but you must have a LOCAL business number for the listing with 411.

Lenders perceive 800 number or toll-free phone numbers as a sign of business credibility. Even if you’re a single owner with a home-based business, a toll-free number provides the perception that you are an even bigger company. It’s incredibly easy and inexpensive to setup a virtual local phone number or a toll-free 800 number.

A cell or home phone number as your main business line could get you “flagged” as an un-established business that is too high of a risk. DON’T give a personal cell phone or residential phone as the business phone number. You can forward a virtual number to any cell or landline phone number.

Credit providers will research your company on the internet. It is best if they learned everything directly from your company website. Not having a company website will severely hurt their chances of obtaining business credit. There are many places online that offer affordable business websites so you can have an internet presence that displays an overview of your company’s services and contact information.

It is important to get a company email address for your business. It’s not only professional, but greatly helps your chances of getting the thumbs up from a credit provider. Setting up a business email address is just too easy and inexpensive to neglect.

The 2nd BIG reason people fail building business credit is that they apply using their social security number. Always apply first without using your social security number. Some vendors will request it and some will even tell you on the phone they need to have it, but submit first without it. Many don’t even know you can get approved without it.

When you apply using your SSN you almost always are giving a personal guarantee. One easy way to know if you have business credit already is if you obtained credit without signing for it and providing your SSN. TRUE business credit doesn’t require an SSN in most cases to qualify.

Business credit is using your EIN to qualify for credit. When you have enough credit built for your EIN, you can then get approved without providing your SSN. If you provide an SSN, your personal credit WILL be pulled in most cases. That personal credit will then be used for the approval decision.

Most credit issuers will approve you without your SSN if your EIN credit is strong enough. If your EIN credit is not good enough, you might be declined and they then might ask for your SSN. No matter what ANY credit representatives tell you, credit CAN be obtained based on your EIN only.

The 3rd BIG reason people fail building business credit is that they apply for credit in the WRONG ORDER. A business credit report can be started much the same way as a consumer report commonly is, with small credit cards. The business can be approved for small credit cards to help them build an initial credit profile. These types of initial cards in the business world are commonly referred to as “vendor credit”.

A vendor line of credit is when a company (vendor) extends a line of credit to your business on “Net 15, 30, 60 or 90″ day terms. This means that you can purchase their products or services up to a maximum dollar amount and you have 15, 30, 60 or 90 days to pay the bill in full. So if you’re set-up on Net 30 terms and were to purchase $300 worth of goods today, then that $300 is due within the next 30 days.

You can get products and services for your business needs and defer the payment on those for 30 days, thereby easing cash flow. And some vendors will approve your company for Net 30 payment terms upon verification of as little as an EIN number and 411 listing. When your first Net 30 account reports your “tradeline” to Dun & Bradstreet, the DUNS system will automatically activate your file if it isn’t already. This is also true for Experian and Equifax.

You need to have a total of at least five (5) Net 30 day pay accounts reporting. Some vendors require an initial prepaid order before they can approve your business for terms. Vendor accounts are hard to find, so keep in mind that your vendors do not necessarily have to serve 100% of your business needs.

Avoid these three BIG mistakes to quickly build an exceptional business credit profile and score that you can use to obtain credit for your business.

Business Consultants and Business Plan Writer Benefits

Business ventures, in their startup have a considerable amount of fear. The fear is of failing the venture and hence a considerable amount of capital, and in extreme cases, of going bankrupt. Business consultants have a very important duty of saving businesses from going bust right at the beginning. Since there is a lot attached with doing business than just money, there are employments and credibility too; hence business consultants help new startups passing through the rough.

Business consultants have the education and background to help entrepreneurs with creating professional strategic business plans.. Before anything moves forward, there is a substantial amount of paper work that helps entrepreneurs. First one being that they are able to clearly see their path and the second one is that when applying for business loan or equity they are asked to present a clear picture as to what they plan to do. Business consultants make such plans for a living; their expertise of having done this so many times at commercial level is very useful for startups.

Another reason why business consultants are useful is that they do not own the business and have no personal involvement. Hence they do not hold a bias towards it or against it as they are not its competitors either. That way, whilst making suggestions they can also present the business owners with useful critical information as to where they are lacking; or better yet, if the venture should even be worked on. Business plan writers bring both upsides and downsides in account.

Choosing a tier 1 visa business plan director, businesses ensure that they get in depth guidance about how to perform their business activities in a long run and on day-to-day basis. Simpler business plans might just contain detailed information about processes. But only a tier 1 visa business plan writer explains the roles and duties. This gives useful information about what kind of a person is suitable for what job. Here again, internal bias towards a person in a certain role gets eliminated as there is a chance a new businessman would incorporate a dead weight into the business due to relation.

Companies can make use of customer and public data available with business consultants. While there are some who would conduct a full market research for their customer businesses for a premium, there are some consultancies that simply use their experience for that matter and provide realistic insights to how ground realities work. A persuasive business plan requires plenty of home work to be done and business consultancies if chosen wisely can make a business huge success. A persuasive business plan helps startups getting funds either from banks or from share holders. Some companies employ business consultants on a long term and ongoing basis. The god thing in that is that they can amend their plans and documents on “as needed” basis. Business consultancies also help getting through legal hindrances.