==== ====Here are some great ways to get you business off the ground todayhttp://tinyurl.com/7vtb74b==== ====Business versus Personal Credit:Personal - Personal credit building starts when an individual provides their social security numberand applies for their first credit card. At that point a credit profile is started with the personal creditreporting agencies in the region of the country in which they reside. This profile, also commonlyknown as a "credit report", is built with every credit inquiry, credit application submitted, change ofaddress and job change. The information contained in the report is usually reported to the creditbureaus by those businesses issuing credit. Eventually, the credit report is viewed as a statementor report of an individuals ability to pay back a debt, and is the key tool to access and grant credit.Business - When a business issues another business credit, it is referred to as trade credit (creditfrom vendors or suppliers). Trade, or business, credit is the single largest source of lending in theworld, but it typically not reported to the business credit agencies by most small businesses. Thedata regarding trade credit transactions must be submitted and then is accumulated by thebusiness credit bureaus to create a business credit report using the business name, address andfederal tax identification number (FIN). The credit bureaus use this data to generate a historicalreport about a companys business credit transactions and payment history. Typically, thebusinesses issuing credit rely on the business credit report to determine the credit they are willingto grant and the amount of the credit limit. Additionally, many businesses (suppliers/vendors) willsubmit credit reference applications to the key suppliers of the business as a method to obtainpayment patterns as part of the credit granting process.The major credit bureaus are:Dun & BradstreetBusiness Credit USACorporate ExperianSmall Business EquifaxTransUnion (Personal)The information provided to the business credit bureaus (primarily D&B) is sent in voluntarily, asbusinesses are not required to report. Therefore, credit bureaus may never receive anyinformation about the business transactions on credit and a business could go for yearsaccumulating business history without being reported to the credit bureaus and establishing apositive business history of sound credit practices.Establishing Business Credit History:Business credit scores range on a scale from 0 to 100 with 75 or more considered an excellent
rating. Personal credit scores, on the other hand, range from 300 to 850 with a score of 680 orhigher considered excellent. With todays tighter credit scrutiny the higher the credit score, themore likely an individual or business is to obtain credit and at more favorable terms (interest rateand contract length).While it is important to know that there are many factors http://www.myfico.com that affect a creditscore; its based on more than just whether you pay your bills on time (still very important). Thecredit score will be affected by the amount of available credit you have on bank lines of credit andcredit cards, the length of time youve had a credit profile, the number of inquiries made on yourcredit profile, paying the bills on time, bankruptcy, as well as other considerations.The typical American consumer credit report receives two to three credit inquiries per year andusually has 11 credit obligations - typically broken down as 7 credit cards and 4 installment loans.Business owners are not your typical consumer, because they carry both personal and businesscredit. This typically doubles the number of inquiries made to their personal credit profile and thenumber of credit obligations they carry at any given time, all of which negatively impact thepersonal credit score. Additionally, because business inquiries and personal inquiries are notseparated on the personal credit report, the personal credit scores are negatively impacted. Asmentioned earlier, using the personal credit history to get credit for their business, businesses arenot able to build their business history/score, all of which could help attain critical business creditin the future.A critical mistake many business owners make is using their personal information to apply forbusiness credit, leases and loans. This practice has the resultant impact of potentially loweringtheir personal credit score, while not building a business credit history and business credit score.A key to establishing credit for the business and a profile and score is to find companies (UPS,FEDEX, etc.) or your key supplier and vendors that will grant credit for your business without usingyour personal credit information and then report the payment experiences to the business creditbureaus. By reporting the information to the proper credit bureaus, those companies will help thebusiness establish a business credit profile and score.The Seven Steps to Success:1. Company Legal Structure - The business must be a legal entity unto itself in order to establishbusiness credit. Therefore, it is recommended to form a corporation (C Corp) or LLC (discuss withyour CPA the advantage/disadvantages of a C Corp versus LLC) as opposed to structuring yourbusiness as a sole proprietorship or partnership. Formation of a sole proprietorship or partnership,dictates that personal credit information could be included on the business credit report.Additionally, as a sole proprietor or partner in a partnership, you are personally liable for the debtsof the business and all your personal assets are at risk in the event of litigation.Corporations and LLCs, on the other hand, provide the business owners liability protection, andcan build a business credit profile thats separate from the personal credit profile. Therefore, applyfor credit under your businesss name and find businesses will to grant credit without a personalcredit check or guarantee.2. Register with Business Credit Agencies - The best known business credit bureau is Dun &
Bradstreet. Dun & Bradstreet has a process on their web site to establish a D-U-N-S number (aspecific 9 digit number related to your business) and instructions how to establish a businesscredit rating. It is strongly recommended that you contact D&B and follow their process to establishbusiness credit. The following is from the D&B web site:How do I get started with D&B? With our unsurpassed global data collection system, D&Bcontinually gathers the data that initiates the creation of business credit profiles on newcompanies. Many kinds of activities can trigger a profile on a new company, such as incorporatingyour business, applying for a loan, getting a business telephone number, taking out a lease onoffice space - even just when another company seeks information from D&B about your business.Still, a new business may not have a complete business credit profile. Getting a D-U-N-S Numberfrom D&B - the worldwide standard for business classification systems - is an essential part ofhelping you establish your business credit profile and will ensure that when a company looks youup in the D&B database they will find you. In some cases, a D&B D-U-N-S Number is so arequirement for doing business some entities, such as the US government.You should make sure you have a D&B business credit profile if:You are planning to obtain a business loanYou need to purchase or lease equipmentYour cash flow is tightYou want to ensure you are getting a fair deal from lenders compared to your competitionYou want to pay net 30 days instead of COD (Cash On Delivery)You are paying interest at prime plus 1, or even higherYou plan to do business with entities that require a D-U-N-S Number, e.g. the US GovernmentThese issues and dozens other like them can be addressed by having a strong business creditprofile. A good rating provides you with the financial freedom to take the steps you need to grow,and is a straightforward, unbiased method for other companies to assess your level of risk whenconsidering taking you on as a creditor. A poor credit rating is a certain barrier to growth andsuccess, preventing you from getting adequate funding on fair terms.Communicating directly with D&B will help establish your business credit in less time. If you are anew company, D&B can help you build a complete business credit profile from the ground up; ifyou have been in operation for a while, you will want to improve and/or protect your businesscredit profile. Find out more about how to establish, monitor, improve, or protect your businesscredit.3. Credit Market Requirements - Businesses must meet all the requirements of the credit market inorder to have a higher probability of credit approval, as not being in compliance with the creditmarket can "send up signal flares" with both credit bureaus and potential grantors of credit.Some of the "signal flares" include:not having a business license,not being registered with the Secretary of State for a certificate of good standing,operating under your social security number rather than a FIN or EIN,not having a phone line (land line) that is listed in the phone directory in the exact business legal
name,no web site, ornot having a business email address (not AOL or gmail, but a specific URL for your company).4. Small Business Credit Lines - Investigate and locate a minimum of five businesses(vendors/suppliers) willing to grant a small business credit without personal guarantees and willreport the payment experiences to the business credit bureaus. This will assist your business toestablish a credit report and build a financial credit foundation for the company. Find companieswilling to grant credit that report to the credit bureaus such as marketingoncredit.com, UPS,FEDEX5. Business Credit Cards - Obtain three business credit cards (Sams Club Discover Businesscard), that are not linked to you personally and that report the business credit to the reportingagencies. Then be sure to always pay your bills on time!6. Financial Statements, Business Plans and Loan Packages - These documents are oftenrequired by many credit grantors as part of their loan application process. CxO To GO is a nationalprofessional services firm that has assisted many business with their financial statementpreparation and business plans. Additionally, CxO To Go has packages such as PowerPlan andPowerPlan2 for business plans, PowerPuncher for executive summaries, CFOCast for financialprojections and BankSell for bank proposals so lenders and bankers will take action. It is importantto note that 61% of all businesses are turned down for a loan due to a poor loan package,however with BankSell the lender loan package gets results and moves the applicant to the top ofthe list for review and credit committee approval.7. Debt management - Be a smart money manager and manage the debt levels to ensure they arenot too burdensome and can be paid back with current cash flow. Do not incur debt that will overleverage the company and cause missed or late payments.Keith McAslan is a Partner with CxO To Go a national professional services companyheadquartered in Denver, Colorado that provides on-demand C-Level expertise and best practicesto client companies on a part time, flexible, and affordable basis. Keith is sought after to provideadvisory services as the Trusted Advisor to Owners and CEOs. By utilizing his extensiveexperience as a successful financial and operational C-level executive, Keith brings a resultsdriven leadership style to complex situations.McAslans expertise includes: financial advisory; management consulting; part time, interim &virtual CFO, COO and CEO; debt and equity financing; turnaround management; acquisition anddivestiture advisory. Most recently Keith, was instrumental in the successful sale of Western Forgeto Ideal Industries. As the interim CFO with finance and private investment transaction experience,he guided the management team through the complex sale and due diligence process completingthe sale from prospective buyer presentation to close within 60 days. Please contact Keith at 303-520-2493, [http://www.cxotogo.com], or kmcaslan@CxOToGo.com for your free 2 hour strategycall to discuss your business needs.
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