How to establish business credit

[jus1975]

How can I establish credit for my business without paying thousands of dollars to a company to do it for me. It has to be a way to DIY.

[bigvegan]

Get a business credit card, buy your normal stuff with it, pay it off every month, and ask for credit line increases on a regular basis.

Put on a clean shirt and go talk to every bank in town about establishing a line of credit for your business. Start small, and gradually increase this line as per your business credit cards. If you have the credit lines in your personal name as well as in the business, this will be easier.

This all assumes that you've got decent credit and are trying to start/build a small business.

If you have crappy credit and/or you want the business to have credit fast, pay the company now and get it done.

The banks are catching on to the credit gaming that these businesses are doing, so I imagine they'll be cutting back on that shortly.

What are you trying to do? If you're trying to get easy money with no risk, that's going to be tough for a while. If you're just looking to build a business, get a few lines of credit, max out the available credit while keeping your actual use of said credit to an amount you can pay off every month, and check your credit report/score every month.

If you need more details, explain what your goal is and we can give you more specific advice.

[jus1975]

My business is small. Just word of mouth right now. I would like to build a website and put on some shows along with some sponsored drag races this summer. I would like to start off small and allow the business to build on its own. My advantage over similiar business's is that I have very low overhead. I work out of my home and I have a full time job so all profits can go back into the business. I feel I would only need to borrow when I decide to lease or build a shop. Or maybe a small loan after the website is done for inventory and marketing. In the meantime I would like to start building credit for my business. I started first by putting everything in my name and using my credit. I have pretty good credit but I would like to do other things, such as renting property, but I am afraid that the debt the business has me in from starting up will lessen my chances on getting approve for loans to procede with that venture.

[customcarpainter]

You need to have a well thought out business plan put on paper to show the banks how you plan to pay them the money back.If you have an accountant who is worth his salt,they will be glad to help you.

[hotrdblder]

make sure you set the business up with dun and bradstreet, get a federal tax id number, get a phne number to establish it, if these things are not in place its very hard to verify the business especially if you have not done a sched c on you tax returns ever.

[RaceMan]

make sure you set the business up with dun and bradstreet, get a federal tax id number, get a phne number to establish it, if these things are not in place its very hard to verify the business especially if you have not done a sched c on you tax returns ever.

Just what I was gonna say Dunn & Bradstreet is very easy to do and can help , you don't have to do all the credit builder stuff they have it can help but cost $$ .

[vintageracer]

Do not establish business credit! Run your business with CASH and pay your invoices on time. That will establish all the credit you will need.

Credit, as in good references from your current suppliers to new suppliers you wish to add will be the only credit you should need. Pay all your invoices on time or early with CASH on hand, not credit. If you do not have enough CASH to start your business then work EXTRA hard at your current job or second job and SAVE the CASH needed to start your business. A credit card is ABSOLUTELY the WORST place to get money to start a business.

Most small business FAIL within 3 years. Biggest reason is DEBT or unpaid taxes to the State or Federal governments! Most failed entreuprenuers are underfunded when they start the business and therefore turn to credit since they are far too impatient to wait and start their business with cash!

If you are GOOD at what you do you will ALWAYS have work to do and customers to serve. Start your business small with CASH and build it from there!

[speedster]

When starting a new business, your personal credit IS your business credit. Whether you are a corp (C, S, LLC) a partnership (LLP) or sole proprietor, a start up business IS YOU in the eyes of any financial mechanism. Risk versus reward - but if you truly have no overhead and are starting small, cash is king. If you want to build your business, setup the business structure of your choice and then buy all relevant things through the business, funded by you. Like you stated, you wish to build the business from profits, then do so. Do not build it by debt. It becomes self regulating. After the business is established this way, you will know if you need to take on debt for future expansion plans. If you don't reach that point then it probably wasn't meant to be. Good Luck.

[jus1975]

I have registered with D&B, but they where the main ones that wanted money to help establish credit. I have a LLC corp and 800 number. Unfortunately I already started with credit cards and with miss organization it has dug me in a hole. However its not so bad. I am maintaining and paying them off. It will take awhile but I can handle it. Like I said, I was going to try to do as much as possible without banks and credit cards but if I could build a little credit along the way that would be great. The only thing I would maybe need credit for is starting a shop and inventory. And also some of these large buy-ins that companies required such as Air Ride Tech. So far this debt has been a nice tax write off. I guess I can google how do write up a nice business plan. I thank you guys for all the advice.

[Bill Howell]

Do not establish business credit! Run your business with CASH and pay your invoices on time. That will establish all the credit you will need.

Credit, as in good references from your current suppliers to new suppliers you wish to add will be the only credit you should need. Pay all your invoices on time or early with CASH on hand, not credit. If you do not have enough CASH to start your business then work EXTRA hard at your current job or second job and SAVE the CASH needed to start your business. A credit card is ABSOLUTELY the WORST place to get money to start a business.

Most small business FAIL within 3 years. Biggest reason is DEBT or unpaid taxes to the State or Federal governments! Most failed entreuprenuers are underfunded when they start the business and therefore turn to credit since they are far too impatient to wait and start their business with cash!

If you are GOOD at what you do you will ALWAYS have work to do and customers to serve. Start your business small with CASH and build it from there!


I agree 100%

[shmoov69]

I agree TOTALLY with Mike (Vintage Racer) on his advice. Pay up front with as much as humanly possible. Take advantage of every cash/quick pay discount avaliable. This way allows you to build "real" equity and also if things ever go south, you are not up to your eyeballs in debt that you can't get out of without screwing yourself (and others!).
Good luck!

[BMF Machine]

I agree as well; Got mine started, ran out of money, kinda, Now I am busting my ass at my dayjob and in my shop. So, 4 and 1/2 years to go before I am at zero debt for the shop?

That sucks, but I am sure it will be worth it!

I am also sure there will still be customers, that I can make happy, after my dayjob is gone? Now, time is very limited? Mostly production runs at my shop. Just hangining in there; ya might say?

[vintageracer]

Just a note to add to this disucssion. I just bought another Mustang and was looking for parts on the web. There is one guy who has a site with over 3000 Mustang related sites listed, http://links.vintage-mustang.com/index.html?links-perfparts. I began to click and choose sites that had parts or performance parts in there title. Of the first 10 sites I chose, 4 were no longer in business or had sites that were no longer active.

Realize that the sites I chose to visit were not the big guys like Summit but small guys I had never heard of but I thought they might have something neat and different suspension wise that I had not seen. All were small car parts, supply or service business's, just what we are talking about here! Maybe I just hit the right sites and maybe not, however the end result was 4 vendors who were gone with websites no longer active! Maybe these 4 former vendors may have some insight on the use of credit in their unsuccessful business's?

Concerning the BIG buy in that many suppliers want, there for several reasons for the big buy in the greatest of which is to keep hobbyists from setting up a business to buy discounted parts for their own projects with no expectations of ever selling anything. The big buy in also protects the current re-sellers who also must maintain a certain level of sales to continue to be a re-seller for that vendor.

If you cannot save the cash for the BIG buy in, find another vendor who will sell to you at cost or very little above cost. You will be helping that vendor increase or maintain his sales level with the supplier you are interested in. There are LOT'S of vendors that "pool" their buying power through one guy to help all of them purchase at the lowest cost from a particular supplier. I do this with PUI intererior parts. I buy PUI from another supplier since he has the DEEP deal with PUI. He buys Corvette interior stuff through me.

There are a lot of suppliers that it may not be worth the expense to become a "buy in" type of distributor since there is either not enough sales or profit margin in their products. The problem of low profit margin for re-seller's on supplier products is increasingly becoming a problem. The suppliers are increasingly selling direct to increase or maintain their profit structure as these suppliers get squeezed. There is not a lot of profit in the a lot of suppliers parts today to even bother selling them. Choose your suppliers wisely!

[jus1975]

Well I'm sort of in the same boat as BMF. I'm in to far. I could get out and just slowly pay the debt off or maybe add alittle more to the pot with hopes of future success. I decided to stay at it and possible get the publicity needed to be successful.

[SN65]

Hummm....

When asking for and considering the advice of others in regard to business, give consideration to the following....

Is the person giving the advice in business for themselves full time (not part time out of their garage) how long have they been in business and how are they doing?

As far as establishing business credit. If you are a small manufacturer looking to sublet machining, etc... Work with a favored supplier. Explain your situation. Show them your work/purchase orders and negotiate a payment schedule. They want the business just as much as you do. It is much better to work with other peoples money than you own, especially if you can negotiate just in time shipments and payment of invoices after you recieve funds from your customers. Also, work hard on your business relationships. A good personal relationship with your vendors and suppliers is going to take you much farther than any report from D&B ever will.

OAN, I would recommend a subchapter "S" corp. A "C" corp is fine if you don't mind paying taxes twice.

When you pay the legal eagle for the corp docs (about $1,000 plus or minus), they should supply you with all the associated info you need to operate your business (tax ID #s, etc...).

Good luck. And remember, it is going to be much harder than working for others. After all, If going into business for yourself were so easy everybody would do it.