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Has a personal credit nightmare caused business credit fear? Business credit is a decidedly different game from personal credit. Here’s why: The rules of personal credit were developed and change to benefit financial institutions, while the rules of business credit are designed to help businesses succeed. The result: Business credit rules are simple, easy to follow, fair, and make sense.
You ask me over and over again, in your email, “Can I really build my own business credit?” Yes, you CAN! More important: It’s easy. Those hard-sell folks trying to keep their businesses afloat by opening a few accounts for you, in return for several hundred dollars, try to convince you there is something complex or mysterious about building business credit. It’s not true.
Ten Key Actions to Build Business Credit:
- Following instructions in Why You Don’t Need Intermediaries to Build Business Credit and the columns it links to, be sure you’ve taken all the steps to establish your business in accord with local, state, and federal regulations.
- Secure a business phone line and get it listed. Use the info in List Your Alternative Phone Line if you opt for a non landline phone.
- Register for a Dun & Bradstreet (D&B) DUNS number. You’ll need it when you apply for business accounts. It’s usually assigned in about a week. You can check its availability by going to the D&B website. Enter your company name, city and state. If a window opens with your company name and city, you have an account. Click on the Next button. Enter your personal information exactly as you did when you applied. You will receive two emails. One will contain your DUNS number and one will include your password. Use the link to log in to your account. Or you may receive two emails saying additional information is required. Unfortunately, you’ll have to call the number and talk to a sales rep. Please note: Anyone who says you cannot verify the DUNS number yourself is not telling you the truth. You simply need your password.
- Don’t engage in conversation with sales reps from credit agencies. Don’t answer questions about business details; your answers become public. Your competition can access it! Don’t allow them to make you feel they know something you don’t. They’re phone sales people with daily quotas. Say goodbye after you receive the information you need. Hang up the phone. They will probably still be talking; their job is to sell. Your job is to manage your resources wisely.
- Ask who manages small business accounts at potential banks before you open accounts. Interview bankers. Determine which banks offer the best services for your business and which seem most interested in helping you succeed. You want your bank to feel it’s your partner long before you open a commercial credit card account or apply for a loan. While it’s smart time management to bank online, simultaneously you want to become your banker’s newest BFF. Ask your banker for appropriate advice. Discuss growth plans and opportunities. Don’t expose potential financial weaknesses. Bankers are active in the community; they can be helpful in many ways. These tactics are smart any time. During ongoing credit constriction, you want your bank to believe in your business.
- Starting with Staples, Office Depot, or your favorite office supply store that reports monthly account activity to D&B, open your first business account.
- Pay off all purchases immediately – before an invoice is prepared. This will earn you 100 points on your Paydex score, the D&B business credit rating system. If you pay when an invoice is due, you’ll earn 80 points. The business credit system recognizes that you save a company money when you pay early so you are rewarded with a higher credit score for your action.
- Open additional accounts – one a month. Use each one and pay off charges immediately. You can access your D&B history 24/7 at no charge and with no impact on your scores. Watch to see what gets reported. Wait until the last account opened has been listed with D&B before you open the next one. Only open one account during a month. It will take about 6 months to open five accounts. Follow these rules to build an excellent Paydex score.
- Maintain impeccable financial records. Do it yourself or hire a part-time bookkeeper. Payroll services are inexpensive and provide peace of mind that comes with knowing all deductions are taken and all local, state, and federal payments will be made on time. Don’t dip into the till to fund your lunch or a night out. Pay yourself, then expense entertainment, mileage, etc. in accord with generally accepted accounting practices. If you’re audited, you’ll be happy you followed the rules.
- Starting the first year, do what major corporations do: Have your independent accounting firm certify your year-end financial statements. This provides a financial professionalism, which will set it apart from most small businesses and qualify it, in two years, for significant financing without a personal guaranty.
Follow these basics to build extraordinary business credit.