My Business Credit Journey to 1,000,000

I was driving back home today from a client’s office and some of his questions bothered me. It seems that all the “authorities” on the subject of business or corporate credit have been selling this idea that business credit is a secret, it is hard to obtain and you should pay up to 10 points for lines of credit(my own little pet peeve). The truth is, IT IS A SECRET but only because the “gurus” in the industry kept it that way. So one of my goals is to dispel all the myths and uncover the secret.lol…

Myth 1.

Business Credit should replace your personal credit.

While business credit does offer the opportunity to acquire certain lines of credit that can be used for personal use (although they should not) that you may not be able to get with your current personal credit, (cell phones, electronics, car leases, some lines of cash credit) this should not replace your personal credit. Two things that support my opinion are; 1. Building Business Credit WILL NOT give you the opportunity to get a mortgage under your business name, and 2. Once you use your Business Credit for personal use, you have “pierced the corporate veil” as they say. If an any point you default on these accounts, once the creditors can prove that you used these lines of credit for personal use, with or without a PG, they can hold you personal liable for the debt.

Myth 2.

You can get upwards of $1,000,000 of cash lines of credit without a personal guarantee and without financials.

THIS IS NOT TRUE. Unless you can show that your company is doing more than 20M in sales, forget about it with no PG. I am sick and tired of all these “companies” on craigslist and other classified ads selling the idea that you can get 2.5M in credit with one of their great shelf corps with established paydex scores. THIS SIMPLY DOES NOT HAPPEN. Cmon, these banks are not stupid(at least not anymore).

Myth 3.

You cannot get useful business credit with bad personal credit.

Although bad personal credit may restrict you from acquiring 1M in business cash lines of credit, YOU CAN get business credit with bad personal credit. Thats the premise of “NO PG” credit. There are a few banks that will give you cash lines without a PG. Although the limits on these cash lines cannot exceed 50K, and in most cases, no more than 20K will be initially offered, it is possible. I have personally gotten cash lines of credit of 10K and eventually gotten credit line increases(CLI) until I have exceeded 50K. Other than these cash lines, this does not account for the thousands of dollars (and in some cases, 100s of thousands) in business vendor lines of credit.

Myth 4. 

As long as I never sign a PG, if I do not repay the lines of credit the banks cannot come after me.

Although this is suppose to be technically true, it is NEVER that simple. Creditors usually stop at nothing to get owed money when personally borrowed, but there are laws protecting consumers from being bombarded with calls and various times. On the business credit side, there are no real laws governing what creditors can and cannot do. These guys WILL call you at all hours of the day and night and in some cases, they will have the accounts reported to your personal credit. This is not a common situation but it can happen. This does not mean that this derogatory report  cannot be easily removed from your personal credit, but I am just clearing up some misunderstandings because too many clients ask this question.