Can a Nonprofit Organization Establish Business Credit?
Like any business, nonprofit organizations, whether small or large, need services like banking, payroll, and merchant card processing for accepting contributions.
In addition, any nonprofit will need its own credit card and vendor credit with suppliers in order to purchase products and services for the benefit of its customers.
You should consider incorporating your nonprofit so it’s treated as a separate legal entity just like a for-profit corporation, but its main objective is service rather than profit.
Now there is one piece of advice I give to all clients of my business credit practice -- whether they operate as a for-profit company or as a nonprofit organization. I tell them to separate personal credit from business credit.
If you apply for any type of corporate credit using your personal guarantee then you are still putting your personal credit and personal assets at risk, regardless of whether you’re a for-profit or nonprofit.
Now, don’t get discouraged -- because as a nonprofit organization there are still many opportunities for you to establish business credit without putting your personal credit at risk. For example, Wal-Mart offers a Community Business Credit Account specifically designed for nonprofit organizations such as charities, hospitals, schools, or religious organizations.
When you apply for the account you will need to provide the legal name of your organization, your tax exempt 501 (c)(3) number, and DUNs number.
You will also need to determine how many authorized buyer cards you want with the maximum set at 99. I also suggest that you consider selecting the purchase order option.
Now on this new business credit account you are required to furnish your social security number but I would suggest leaving it blank if you have a strong Dun & Bradstreet file with an 80 paydex score and at least five or more trade accounts with decent credit limits.
You can complete the new business credit application online but you will need to print it out and fax it upon completion.
Now keep in mind you can build business credit with this account and receive larger extensions of credit but each month you will have to pay the balance in full because it’s a net 30 account.
The Wal-Mart Community Account Application is specifically designed for nonprofits so if you’re company is a for-profit business then you will need to check out Wal-Mart’s Business Credit Account.
There are many financial institutions that cater to non-profit organizations as well. For example, Wells Fargo even provides a Charitable Management Group specifically designed to help charitable organizations achieve their social and strategic goals.
There are also companies and special credit cards designed for nonprofits so it is in your best interest to take advantage of all the ways you can get business credit for your organization.
My advice is for you, as a nonprofit, to establish business credit with companies like Wal-Mart that are willing to provide business credit cards or accounts that cater to non-profit community organizations.
Marco is founder of the Business Credit Insiders Circle which helps small business owners start business credit.
You may contact Marco directly at: ceo@startbusinesscredit.com
Follow Marco on Twitter @MarcoCarbajo and read more of his insights on how to establish business credit for your company.
