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Teach me how to build business credit

bailmeout 1,120 215 October 14, 2015 at 10:51 AM
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Hi SD fam!

Greatly appreciate some advice. I started a Salon business around 3 years ago and was approved for a Chase Ink card. This is the only business card I have with only a $2000 credit history.

I have been looking for a way to build up my business credit without having to take inquiry hits on my personal credit history.

I have been current with Chase Ink for all this time and paying huge amounts every month to keep the balance low as I do all my credit cards.

Any effective way to build up business credit?

Again, your advice is greatly appreciated!

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Joined Sep 2005
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#2
Why do you want to "build business credit"?

Most often, it's wiser to get a personal credit card and use it strictly for business expenses. A business credit card opens you up to more liability than does a personal credit card and in both cases you're still personally liable. That's why it's wiser to protect yourself and go with a personal credit card that you use exclusively for business expenses.
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#3
Business credit is a two sided pointed sword.

You need to have equity in your company to get credit... it is not like personal credit it is more about the relationship you have with the bank itself.

For example... I want to creat a LLC.... for property. The bank will not lend you shit unless you can prove that you have other equity already made in the business and they will only loan you up to 50% of the value of the building that you have ownership in full.

When you are small, personal credit is the only way. Almost all business loans will be expensive.

You can try Lending Club... but again, you will personally be responsible.

I have also heard of credit card machine loans... they will give you loan based on your credit card sales and they will chip your machine so each sale you do, they will get like 20% until your loan is paid off. They also charge you like 25% interest.

If you have a machine, you probably have gotten called to do this. And I think it is a bad idea.
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Last edited by joshuaNH October 15, 2015 at 01:54 PM
#4
Credit cards are the way to build it. Some of the cards will also look into your personal credit cards with them and then approve you. If you don't get approved, you call the reconsideration line and speak with a credit specialist. Check flyertalk forums on more info on that. Good luck.
If needed, apply for 0% for 12 months but keep everything in good standing. After a couple of years, you can get any loan besides your cc.
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#5
Almost all business credit cards are still tied to you personally, so whether business or personal, in the end it does not really matter much imo. Even when I had an Amex business Card through my employer, I was personally liable, which is why I never used it outside of the occasional misc charges on a business trip (and I rarely traveled). I let the company travel department (which was later outsourced to some firm) handle all tickets\hotels\car services and the like.

Business cards do offer you some features but as far as building credit for the sake of securing a loan from a bank, that also does not really matter much as someone else more or less has alluded to. It all ties to you in the end. They do offer an easy and more clear cut way to segregate expenses, esp for tax purposes. To build business credit though, a bank will want to see assets and collateral and a business plan. In the case of real estate for example, you can use a property to secure a loan as it is a tangible asset the bank can foreclose on in the worst case.

In the case where you are just a retail business that rents a location (as opposed to owning it outright), then getting a loan is a lot tougher. In many cases, even with a good business plan they will want you to personally back a loan to the business (assuming you have the assets). Once you are established and running and show profits year in and out, a bank likely will give you more leeway on a loan request, but that takes time. As the saying goes, banks only really want to lend money to people who do not really need a loan. And the small business has never really been a concern to the banks. They much rather sit back and gouge people with 0% interest rates, high fees and make their money off of mortgages, credit cards, big business accounts and playing the stock market with federally insured money. There are places like the SBA who cater to smaller businesses, but the requirements can be tough. It is what it is as they say.
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