My Business Credit Journey to 1,000,000

Our first mailbag is a little short, but there are two good questions that all small busines owners should have the answer to when they approach business credit, and business in general:  Let’s get started!

Are there any cash lines/credit lines that you would suggest applying to, banks that tend to give credit. Start date on my DnB is 6/25/08. Should I wait 90 or so days from there. It may be a bit early because when I apply for revolving cards like Shell, I have always been asked to call it in but get approved. So my numbers may still be updating. I got a Paydex of 80 when I applied with DnB but I paid for their credit builder so I was good to go. Let me know, thanks.

– Marco

Marco’s question is one of the most asked questions in buiness credit:  “When can I get some cash credit lines?”  It’s the reason that we are here, and it’s the reason that you even looked at buisiness credit, but there are a few things that you should have before you look after cash lines:

1. File age – How old is your DnB file?  If your DnB file starts in June, then it’s highly unlikely that you’ll get cash lines the next month.  Waiting and building your files age will always help.
2. Number of accounts – Quick lesson, it’s not the amount of account that you have, it’s the number of accounts that are reporting.  You can have about 60 different net-30 accounts, but if only 2 are reporting, you still look like a lightweight to potential credit vendors.  I like to wait until I see at least 10 lines reporting, with a tradeline of at least 5K before I go looking for credit cards
3. Personal guarantee – I hate to be the bearer of bad news, but you cannot get a line of credit from a bank in the USA without a PG o some sort.  Other companies will bait you along until it’s time to go after LOC’s, then ask you to get a “credit partner”, but it’s all the same thing, no PG, no cash LOC’s.  Now credit cards can be done without a PG, you just have to mind the first two rules before you take that plunge.

All in all, the best answer to your question is, unfortunately another question:  “What do you need?”  Remember, the purpose of business credit is to improve your business, so look around, what could you use?  That’s how you determine the next account for you.

My personal credit and assets leaves alot to be desired (Will probably be doing the personal credit repair through you guys) and I am looking at starting 2 businesses but don’t have any start up money…

  Do you have any advice to how I can do this?

– John

Start-up capital is the hardest thing to come by, especially if you need it.  I teach entrepreneurship to teens in the Columbus area through another company that I own (www.young-university.com) and I teach financing using the Ask BILL model.  BILL is an acronym standing for Bootstrapping, Investors, Lines of Credit, and finally Loans.  I created this model in the order that will be the most beneficial to your personal credit.  He first two won’t hurt your personal scores at all, bootstrapping starts you business on the smallest scale possible, and Investors know what they are getting into when they invest.  The other two, unfortunately, are the ones that everyone wants to have.

In John’s situation, I have some good news, and some bad news.  The bad news is that business credit is NOT the vehicle to create start-up money(legally).  The problem is that you already need a business to build business credit.  The good news is that most banks now are offering start-up loans and lines of credit if you can present a nice business plan, and have a score over 620 (yes, only 620).  I have a contact for folks in the northeast through Huntington Bank, but these loans are not easy to get, nor are they guaranteed.  But they are a step in the right direction.  Shoot me an email and I will get you a contact person to speak toabout these SBA programs.

And John, we would love to help you with your personal scores, let us know when you are ready, and we will do everything we can to help.

That’s it for our first Mailbag, please don’t hesitate to send your questions in to eyoung@mysmallbizcredit.com.  And don’t forget to place the word “Mailbag” in the title, so I can be sure to add it every Tuesday.

–Elijah