My Business Credit Journey to 1,000,000

In these harsh credit times, a start up business loan may seem extremely hard to acquire to most young entrepreneurs and even impossible if applying with bad credit. I am here to tell you not to give up as you have found the answer to your problems, business credit. In using the notion of building business credit to start a business, one must be very creative. Most banks won’t consider a loan to a new business with limited business credit and a personal credit scores less than 640. But there is a lot more to business lending than just the typical bank loan.

First, you have to separate your personal credit from your business credit as you would have read in my blog. Instead of simply trying to get a loan or raising capital in order to buy assets and equipment for your business, these can be leased or bought on credit from smaller community lenders, equipment leasing companies and specialty lenders; who tend to focus on solely business credit or in some cases, a combination of business and personal credit scores.

When you have bad personal credit, your best bet is to build your business’s credit score. I can safely say that 99.99999% of the money attained through building business credit will be cheaper than any investor’s money you may find, no matter how big the angel(other than free money from family).

After using these small credit lines to acquire equipment and minimal working capital, they can then be used as favorable credit history and leveraged into larger loans. I have had clients who have used some “store” credit or vendor credit and bought visa gift cards, which were then used to purchase equipment from other vendors which were needed. These strategies can be legally done, but keep close attention to the terms of the various lines of credit.

One example of how business credit terms is misused a lot is with many of these electronic retailers’ lines of credit, like Dell. Young entrepreneurs who seek start-up capital tend to buy many electronics with their credit lines and re-sell them for cash, in many cases, for less than the amount they are bought for. This should only be done if it is not restricted in your terms of use. I have seen many dell accounts closed after multiple “buyers” of these re-sold dells register their warranties. At this point the entrepreneur may have working capital but is left with a balance that has to be paid off and the loss of the use of the line of credit.

In short, keep at it, build your business’s credit and you will have no problem with funding your new business venture.

- mike