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Guarantee of Obtaining Corporate Credit
Warning! You’ve probably heard many different companies make claims about how they can ensure your business or corporation gets credit. They may say things like, “with our credit building program, we guarantee you’ll get up to $20,000 or $50,000” and so on.
The key word is “up to” because you really don’t know if you will get the full amount of financing needed for your business. What they know that you are not the lending criteria of ordinary commercial creditors. They know the creditors most likely to say yes based on your business credit profile and personal credit scores.
These can be valuable services, as they can help decrease the time it takes to finance your business and help you find the creditors who are most likely to approve your credit application. What is not in the sales copy, however, is the fact that most credit building relies on credit from retail providers, such as local office supply stores or home improvement stores. home, to create a Dun & Bradstreet credit profile.
To get “real money” lines of credit, you’ll need a good personal credit score of at least 620, but preferably 680 or better. Don’t worry, bad credit does not prevent you from building credit in your business, the process may take longer.
Secured credit card or lines of credit
These services may even offer a credit card just for being their customer, but it’s usually just credit for their services and/or products. There have even been companies that offer programs where they claim you can receive up to $100,000.00 in cash credit for a fee of $5,000. Sounds too easy? Keep in mind that if it were that easy, most small businesses would find it easy to get the financing they need.
If you personally have $5,000 that you can use to build corporate credit, you’d be better off going to a bank like Wells Fargo and getting a secured business credit card that can be left unsecured with a good payment history. Just remember “Buyer Beware”. If it sounds too good to be true, it probably is.
Buying old companies / Aging your business
There is a popular belief that you can quickly get a large amount of credit by purchasing a Shelf-Corporation. Well, in some cases you can. After all, most business credit applications will ask for a personal guarantee if the business is less than 2 years old. To do this, you really have to research the so-called shelf corporations.
The first thing to investigate is whether or not a negative history is attached to the business and whether the tax ID number is as old as the business. It is also important to make sure that all the companies documentation is up to date and the company must have a bank account that is no less than 6 months older than the company, unless the company has been in business for a long time and the bank account is between 1 and 2 years old. Basically, this needs to be a real company that has been doing real business, not just documents someone filed hoping to sell it as an old corporation at a later date.
Do your homework, because there are many companies that say they have aging corporations or dormant corporations that they can sell to you. Always ask lots of questions and make sure the corporation you are buying from is a real business. Not just documents filed with the state.
last word
The business credit industry is not regulated by the government in the same way that personal credit is, so you will have to do your homework when you talk to a credit building service and ask a lot of questions.
Just because a company has been in business for a long time does not mean that they are not overcharging for their services or that you are receiving the type of service that is advertised. If the program sounds too easy or too good to be true, chances are you’re wasting your money. Keep this in mind. It takes years to establish a good business credit history, not months.