More Resources
| ||||||||||
Business Opportunities
Home-based business
opportunities. Earn extra income
from your computer.
Bad Credit Business Loans
Find alternative funding sources if
you have bad credit.
Micro Business Loans
Do you need just a little cash to
grow your business try a microloan
from the SBA.
Business Loan Sources
A little creativity and al lot of
determination can get you the
money you need.
Home-based business
opportunities. Earn extra income
from your computer.
Bad Credit Business Loans
Find alternative funding sources if
you have bad credit.
Micro Business Loans
Do you need just a little cash to
grow your business try a microloan
from the SBA.
Business Loan Sources
A little creativity and al lot of
determination can get you the
money you need.
Related Topics:
 |
 |
 |
 |
|
 |
|
 |
|
 |
|
 |
|
 |
 |
How to Establish Business Credit Separate
from Personal Credit
Business credit can be established without using your personal credit history
and there are several good reasons why it should be done that way.
by Lisa Phillips
July 2010
from Personal Credit
Business credit can be established without using your personal credit history
and there are several good reasons why it should be done that way.
by Lisa Phillips
July 2010
Business credit cards, small business loans and business
lines of credit can be established separate from personal
credit. Small business owners who co-mingle personal
credit with business credit run the risk of ruining both
business and personal credit ratings should default occur.
Business credit that is not co-mingled with personal credit
provides several protections to you and your business.
First, should your business be sued, your personal assets
are protected. Second, the “corporate veil” does not exist
when personal finances are co-mingled with your business
finances. Third, lenders may limit funding if your personal
liabilities are lumped with business liabilities.
lines of credit can be established separate from personal
credit. Small business owners who co-mingle personal
credit with business credit run the risk of ruining both
business and personal credit ratings should default occur.
Business credit that is not co-mingled with personal credit
provides several protections to you and your business.
First, should your business be sued, your personal assets
are protected. Second, the “corporate veil” does not exist
when personal finances are co-mingled with your business
finances. Third, lenders may limit funding if your personal
liabilities are lumped with business liabilities.
Many small business owners believe they must provide a personal
guarantee to obtain business credit. A personal guarantee means the
business owner assures repayment of a business debt with personal
assets, if the business defaults on the debt. The personal assets to
repay the debt could be cash, investment securities, notes, real estate
investments, your personal residence, copyrights and even shares in a
closely held corporation. A personal guarantee will tie your personal
assets with your business debts.
The following steps will help the small business owner begin to
establish business credit without a personal guarantee.
1. Find a location and establish a business identity
The physical location of your business is imperative to establishing a
business identity. Home businesses are growing in popularity and very
legitimate; however the drawback is stability and privacy. If you are
planning a move it may not be helpful in establishing business credit.
Additionally, your home address will be used in public documents as it
is your business. Many businesses use a mailbox rental location, with a
street address, as the business location.
Separating your business credit from your personal credit may be
more difficult when using your home address. The ideal scenario is to
have an actual business location. Whatever address you decide to
use, keep it uniform. Use the exact same address on every business
document, application, bank account, form, magazine subscription,
catalog…you get picture. You are establishing a business identity.
2. Decide the Business Legal Structure
To begin establishing business credit separate from personal credit
you must structure your business as a corporation or limited liability
company (LLC). It is best to consult a professional such as an attorney
or accountant to make the best decision. The most common ways to
guarantee to obtain business credit. A personal guarantee means the
business owner assures repayment of a business debt with personal
assets, if the business defaults on the debt. The personal assets to
repay the debt could be cash, investment securities, notes, real estate
investments, your personal residence, copyrights and even shares in a
closely held corporation. A personal guarantee will tie your personal
assets with your business debts.
The following steps will help the small business owner begin to
establish business credit without a personal guarantee.
1. Find a location and establish a business identity
The physical location of your business is imperative to establishing a
business identity. Home businesses are growing in popularity and very
legitimate; however the drawback is stability and privacy. If you are
planning a move it may not be helpful in establishing business credit.
Additionally, your home address will be used in public documents as it
is your business. Many businesses use a mailbox rental location, with a
street address, as the business location.
Separating your business credit from your personal credit may be
more difficult when using your home address. The ideal scenario is to
have an actual business location. Whatever address you decide to
use, keep it uniform. Use the exact same address on every business
document, application, bank account, form, magazine subscription,
catalog…you get picture. You are establishing a business identity.
2. Decide the Business Legal Structure
To begin establishing business credit separate from personal credit
you must structure your business as a corporation or limited liability
company (LLC). It is best to consult a professional such as an attorney
or accountant to make the best decision. The most common ways to
structure a business is as follows: The C-Corporation; S-Corporation; Sole-Proprietorship; Limited
Liability Company and Partnerships are the most common. However, each has separate benefits
and drawbacks, especially when it comes to taxes. For business credit separate from your personal
credit you will need to structure your business as a Corporation or Limited Liability Company. See
Structure your Business for more research on the various business structures.
3. Get an Employer Identification Number
Obtain an Employer Identification Number (EIN). The (EIN) is a nine-digit number which the IRS
assigns in the following format: XX-XXXXXXX. It is similar to a social security number but is strictly
used for business purposes. To establish business credit without a personal guarantee you must
have an EIN. Business credit is tracked using your business name, business address and employer
identification number. You may obtain an EIN online from the IRS online. The application is simple
and takes about 5 minutes. You can even receive the EIN via email.
Liability Company and Partnerships are the most common. However, each has separate benefits
and drawbacks, especially when it comes to taxes. For business credit separate from your personal
credit you will need to structure your business as a Corporation or Limited Liability Company. See
Structure your Business for more research on the various business structures.
3. Get an Employer Identification Number
Obtain an Employer Identification Number (EIN). The (EIN) is a nine-digit number which the IRS
assigns in the following format: XX-XXXXXXX. It is similar to a social security number but is strictly
used for business purposes. To establish business credit without a personal guarantee you must
have an EIN. Business credit is tracked using your business name, business address and employer
identification number. You may obtain an EIN online from the IRS online. The application is simple
and takes about 5 minutes. You can even receive the EIN via email.
 | |  | |  | |  | |  | |  | |  |
4. Establish a Business Telephone Line
A business phone line with your company name listed in
the 411 directory assistance and the Yellow Pages must
be established. Set up a dedicated business phone line.
The business phone line account must be listed under
the exact business name and the phone must be
answered in your exact business name. The billing
address for your phone must be exactly the same as
your business location. Uniformity is important.
A business phone line with your company name listed in
the 411 directory assistance and the Yellow Pages must
be established. Set up a dedicated business phone line.
The business phone line account must be listed under
the exact business name and the phone must be
answered in your exact business name. The billing
address for your phone must be exactly the same as
your business location. Uniformity is important.
5. Open a Business Checking
Open a business checking account under the exact legal
name and address of the business. Business checking
accounts can be opened with as little as a $100.00
deposit. Your banker will be invaluable to you at some
point so take a little time to research the bank before you
open an account. The goal is to establish the business
account where a long term relationship can be built.
Open a business checking account under the exact legal
name and address of the business. Business checking
accounts can be opened with as little as a $100.00
deposit. Your banker will be invaluable to you at some
point so take a little time to research the bank before you
open an account. The goal is to establish the business
account where a long term relationship can be built.
Recent Topics
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
6. Obtain the necessary Licenses and Permits
Obtain required business license, permits and/or
registrations in the City or Jurisdiction where you do
business. When starting a new business always register
your business name, even if it is a home-based
business. Registering your business is a very important
initial step in starting a business. It not only allows you
to see if someone else has registered a business in that
name, but also enables you to open a business
Obtain required business license, permits and/or
registrations in the City or Jurisdiction where you do
business. When starting a new business always register
your business name, even if it is a home-based
business. Registering your business is a very important
initial step in starting a business. It not only allows you
to see if someone else has registered a business in that
name, but also enables you to open a business
7. Get a Website (yourname@yourbusiness.com)
Your business should have its own Website and Email
address. A website helps to establish your business
presence. It also acts as an informational tool. The website
does not have to be all bells and whistles. Something
professional and simple is sufficient.
Your business should have its own Website and Email
address. A website helps to establish your business
presence. It also acts as an informational tool. The website
does not have to be all bells and whistles. Something
professional and simple is sufficient.
8. Get a Dun & Bradstreet Number and Establish a Business Credit Profile
Dun & Bradstreet is the largest tracker of business credit. There are other business credit
companies, mainly Experian Business and Equifax; however, Dun & Bradstreet is probably the most
widely used company in the industry. The D-U-N-S Number is a nine-digit identification number that
provides unique identifiers of business entities. You can apply online for at Dun & Bradstreet for a
D-U-N-S number. There is no charge for the number and you will receive it within 30 to 45 business
days. A D-U-N-S Number can be assigned in as little as 1 business day for all businesses required
to register with the US Federal government for contracts or grants.
You can pay for their credit builder products and services in order to receive the D-U-N-S number
immediately, but it is definitely not required. Dun & Bradstreet employs very aggressive tactics
which lead you to believe you must purchase their credit builder services. Again, it is not necessary
to build a business credit file. Should you decide to purchase the credit builder products keep in
mind the prices are negotiable. D&B products can be as much as $899.00! Negotiate a lower price.
It is important to know that every bit of information you give D&B may end up in your credit profile.
All information reported to D&B will be public information and; unlike personal credit, it is much
harder to correct and change that information. There are no federal rules or laws which protect
business credit files. There are many good reasons to reveal as little specific financial information
as possible as your business competitors can easily gain access to that information. Do not feel
pressured to disclose every detail about your business, even though D&B sales representatives
may ask.
Dun & Bradstreet is the largest tracker of business credit. There are other business credit
companies, mainly Experian Business and Equifax; however, Dun & Bradstreet is probably the most
widely used company in the industry. The D-U-N-S Number is a nine-digit identification number that
provides unique identifiers of business entities. You can apply online for at Dun & Bradstreet for a
D-U-N-S number. There is no charge for the number and you will receive it within 30 to 45 business
days. A D-U-N-S Number can be assigned in as little as 1 business day for all businesses required
to register with the US Federal government for contracts or grants.
You can pay for their credit builder products and services in order to receive the D-U-N-S number
immediately, but it is definitely not required. Dun & Bradstreet employs very aggressive tactics
which lead you to believe you must purchase their credit builder services. Again, it is not necessary
to build a business credit file. Should you decide to purchase the credit builder products keep in
mind the prices are negotiable. D&B products can be as much as $899.00! Negotiate a lower price.
It is important to know that every bit of information you give D&B may end up in your credit profile.
All information reported to D&B will be public information and; unlike personal credit, it is much
harder to correct and change that information. There are no federal rules or laws which protect
business credit files. There are many good reasons to reveal as little specific financial information
as possible as your business competitors can easily gain access to that information. Do not feel
pressured to disclose every detail about your business, even though D&B sales representatives
may ask.
9. Begin to Apply for Business Credit
At this point you are ready to establish business credit.
Since the “credit crunch” of 2008, it has become a bit
more difficult to get business credit. Unfortunately many
small businesses defaulted on debt and now many of
the larger companies require personal guarantees. A
good place to start is your local vendors such as office
supply stores. If you have a business that uses suppliers
or manufacturers, such as the clothing industry, request
credit from those entities.
At this point you are ready to establish business credit.
Since the “credit crunch” of 2008, it has become a bit
more difficult to get business credit. Unfortunately many
small businesses defaulted on debt and now many of
the larger companies require personal guarantees. A
good place to start is your local vendors such as office
supply stores. If you have a business that uses suppliers
or manufacturers, such as the clothing industry, request
credit from those entities.
Apply for commercial credit (business credit) with your EIN and DUNs number only. Avoid from
providing your social security number as you do not want to provide a personal guarantee. Apply
for new credit sparingly. A few applications every 30 to 60 days is sufficient. Do not be tempted to
apply for several accounts at one time. You may get your business credit profile flagged!
The following national vendors have been known to provide business credit with no personal
guarantee. Some of these companies run a personal credit report to see how you pay your bills but
will not require you to personally guarantee the commercial account.
If you have existing business accounts, in good standing, add them to your Dun & Bradstreet
business credit profile. Contact your vendors and request they report your account information to
Dun & Bradstreet. Only request those account added if you have a good payment history with
them. There is no benefit in adding less than perfect accounts.
10. Pay the invoices before the due date
Business credit can be Net 20, 30, 45 or 60 ays which means you pay the balance in full within that
timeframe. If you do not have the cash to pay the bill in full do not use the account. On the other
hand, if you have a good amount of cash on hand, use the credit generously and pay the invoice
before the due date. This will help establish a good Paydex Score. Vendors will come looking for
you if they know you are a good customer who pays in full before the due date.
Dun & Bradstreet maintains a Paydex score (credit score) which ranges from 0 to 100. A Paydex
score of 80 and above is very good. This is where the Net accounts are beneficial. A business that
pays its accounts in full before the invoice is generated, receive the highest Paydex scores. It is
possible to receive a Paydex score of 90 or above based on your payment history.
You will need at least 5 accounts paid in full before the due date in order to establish a high Paydex
score. Check your D&B credit profile often using their eUpdate service. You want to make sure
every account is reporting correctly and all of your business information is up to date.
Building business credit is a process. It is not going to be accomplished overnight but, by the same
token, it is not going to take years. In a few months you can have a good Paydex score and be on
your way to applying for bank credit cards, lines of credit and business loans. Maintaining your
business credit calls for good money management. Budget and spend wisely and your business
credit profile will get better and better.
providing your social security number as you do not want to provide a personal guarantee. Apply
for new credit sparingly. A few applications every 30 to 60 days is sufficient. Do not be tempted to
apply for several accounts at one time. You may get your business credit profile flagged!
The following national vendors have been known to provide business credit with no personal
guarantee. Some of these companies run a personal credit report to see how you pay your bills but
will not require you to personally guarantee the commercial account.
- Fedex/Kinkos
- Home Depot
- Office Depot
- Quill
- Sherwin Williams
- Uline
- UPS
If you have existing business accounts, in good standing, add them to your Dun & Bradstreet
business credit profile. Contact your vendors and request they report your account information to
Dun & Bradstreet. Only request those account added if you have a good payment history with
them. There is no benefit in adding less than perfect accounts.
10. Pay the invoices before the due date
Business credit can be Net 20, 30, 45 or 60 ays which means you pay the balance in full within that
timeframe. If you do not have the cash to pay the bill in full do not use the account. On the other
hand, if you have a good amount of cash on hand, use the credit generously and pay the invoice
before the due date. This will help establish a good Paydex Score. Vendors will come looking for
you if they know you are a good customer who pays in full before the due date.
Dun & Bradstreet maintains a Paydex score (credit score) which ranges from 0 to 100. A Paydex
score of 80 and above is very good. This is where the Net accounts are beneficial. A business that
pays its accounts in full before the invoice is generated, receive the highest Paydex scores. It is
possible to receive a Paydex score of 90 or above based on your payment history.
You will need at least 5 accounts paid in full before the due date in order to establish a high Paydex
score. Check your D&B credit profile often using their eUpdate service. You want to make sure
every account is reporting correctly and all of your business information is up to date.
Building business credit is a process. It is not going to be accomplished overnight but, by the same
token, it is not going to take years. In a few months you can have a good Paydex score and be on
your way to applying for bank credit cards, lines of credit and business loans. Maintaining your
business credit calls for good money management. Budget and spend wisely and your business
credit profile will get better and better.
checking account. Most banks will not open an account under your business name unless you have
proof your business name has been properly registered.
proof your business name has been properly registered.