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[S576]Small Business Credit Score

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If you just have started earning your business credit when you set up your business venture, then it's quite easy to get a good rating within 1 to 2 years of its operation.

This is not the case, however, when you have a bad credit rating. You either have to repair your business credit on your own, or hire a credit repair professional to get the job done. Only when you fixed your score can you start to build it up.

But before you can actually start building business credit scores, you need to have a credit identity first. This can be done by putting up your business as a corporation or an LLC. These two are perfect statuses to start your business credit. Since most financial lenders are eyeing clients in corporation or LLC, having your business as one will allow you to get a loan faster than any business enterprise.

You also need to set up a credit record with a credit agency, or Paydex. Credit agencies will keep track of your credit transactions, rate them and give them scores. This will be used to determine how good your credit rating is when a financial institution does a credit check.

Paydex scores by big companies like Dun and Bradstreet will keep records on how well your company is paying your credit bills. The score ranges from 0 to 100 the higher the score, the bigger the possibility your loan will get approved.

Now that you have established your credit identity, you need to apply for a loan before you can actually start building your business credit scores.

First, you can choose either a secured loan, where the lender will ask you to pledge assets or properties as collateral that will serve as security for the loan.

Note that this kind of loan will let you borrow a much larger amount (depending on your collateral), and a much reduced interest rate.

Another type of loan is the unsecured loan, which is perfect for those who don't want to put their assets at risk by setting it up as collateral. Since the risk to the lender is higher compared to unsecured loans, the financial institution might be very strict with its application, coupled with a higher interest rate and payment schemes.

Next is the type of credit you want to be used in your business venture. Below are the most common credits you can bring out in any lender in your area:

1. Business Credit Card
Quite separate from a personal credit card, this type of credit is more lucrative to be used in business ventures due to its reduced APR, and flexible interest rates (depending on the amount used within the month).

2. Short/Long Term Loans
These kinds of loans allow you to borrow a fixed amount of money from the lender to be used in any way you wish. Attached with fixed interests with payment terms ranging from 5 to 10 years depending on the amount borrowed.

3. Lines of Credit (LOC)
Lines of credits are more for business who are into operation 2 years or more. Credit lines will let you have a fix amount of credit on the bank, which can be used to pay for unexpected expenses that crop up during the operation of your business. The interest expense will depend on the principal amount you have left, and will reduce as you pay your debt until it reaches zero.

"This is especially important when you are financing a business without using a personal guarantee” Said Craig Aberle, an Expert on Business Credit and the author of Business Credit Secrets. “When credit extended is being considered, the bank has two separate decisions to make- Question #1 is “Should this business be extended credit"? and #2- "HOW MUCH credit should we extend?"

In many cases, the important point is to be approved for credit. The size of the line is irrelevant. For example, $750 is the credit line that staples will give most new approved applications. When an applicant's application is received, the very first thing they do is check if you have a business phone line, which is verifiable with 411.

"It's unfortunate that many businesses skimp on obtaining a business line and opt for a personal phone line, because the monthly bill is cheaper. They do not realize that this can cost them literally thousands of dollars and denial of access to funding to grow", he said.

Dun and Bradstreet, or D&B as they are commonly called, have an almost-monopoly grip on the Business Credit Report industry.

Although competition like Experian's Business Credit Score, Called Market Intelliscore, does exist, D&B has a virtual monopoly on the space, with most Banks and Suppliers Lending to small businesses focusing on the D&B Score and Report.

A sample Experian Intelliscore can be found at
http://www.acollectionagency.com/business/eb_commercial_intelliscore.php

Another Business Credit Report type is from Equifax Small Business. It is called the “Financial Account Acquisition Score”.

"The Equifax and Experian Reports will self build once you focus on the D&B score." Said Craig Aberle, Business Credit Expert. "It would not be a good idea to be busy trying to build this up on your own. It is not commonly used by most lenders you will be dealing with and it will grow automatically as your accounts grow and your business information gets shared- it will happen while you sleep!"

A major difference between D&B and Experian is that Whilst D&B will allow you to self submit information about your business, Experian will not, and will only take information from vendors they have relationships with.

"One of the tricks of getting into Experian's system is to order catalogs from vendors such as Rhode Island Novelty http://www.rinovelty.com/ , Uline supply http://www.uline.com and Dell http://www.dell.com, he said.

Who offers business Credit?

A free resource with basic information on some 40 vendors offering business credit is available free of charge at http://www.business-credit-secrets.com/sourcebook.pdf

Article Source : Pg. 8

Ted Aberle has sinced written about articles on various topics from Build Online Business. Ted Aberle is the author of Business Credit Secrets; How to obtain credit for your small business; What the Big Business Owners do to keep a potential business loss from screwing up their personal credit. The Web site is. Ted Aberle's top article generates over 480 views. to your Favourites.