PRIMERA, INC.

  • CALIFORNIA SHELF COMPANIES
  • CALIFORNIA SHELF LLC'S
  • BUILD CORPORATE CREDIT
  • LIMITED LIABILITY

BAD ADVICE ON HOW TO BUILD BUSINESS CREDIT

Ignoring the wrong advice about business loans can have serious consequences for entrepreneurs. Taking the wrong advice can significantly delay the process of building business credit, hindering the growth of your company. Therefore, this article will provide information on what advice to avoid and what is accurate when it comes to financing your business. By following the right guidance, you can establish a strong credit history for your company in a shorter period of time

“You Don’t Need to Build Business Credit”

One piece of advice to avoid is the belief that a company credit score is
unnecessary. This is not true because having a good business credit score is
essential for obtaining financing for your company. Just as having good personal
credit is important for you to get money, a strong business credit score is important
for your company to get financing. If you have poor personal credit, it can be
difficult to get credit as an individual. The same goes for your business: if you don’t
have established business credit or have a low business credit score, it may be
difficult to get funding to grow your business.


Certain types of financing, including Cashflow Financing, Term loans, SBA loans,
Corporate Credit Cards, Gas Cards, and Auto Financing, take business credit scores
into account. Credit lenders use business credit ratings to determine how much they
will lend you and the interest rates and terms you will be offered. If your company
lacks a business credit history, you may be required to provide a personal
guarantee, which could put your personal assets at risk

“You Don’t Need a Business Entity”

Freelancers are increasingly common in today’s gig economy. Even if you are a freelancer, it is important to have a business structure in place. For example, if you are a real estate agent working for a brokerage, you may not need to set up a separate organization. However, many agents in this field are finding that establishing their own business entity can be beneficial in terms of reducing liability, increasing credibility, and enabling them to obtain credit funding.

“Just Go Open Some Business Credit Cards”

It is not a good idea for a new company to apply for multiple business credit cards at once. There are many different credit card options available from various suppliers, such as Chase or Bank of America. Some credit cards require a personal guarantee or credit check, which can put you personally liable for any credit card debt. Other credit cards have specialized rewards programs for specific industries, such as travel or automotive, or offer promotional interest rates for up to 18 months. Credit Line Hybrid, for example, offers 0% financing, the ability to stack credit cards, up to $150,000 in capital, cash advances, and the ability to build business credit with credit reporting agencies.

“Open as Many Accounts as Fast as Possible”

Business credit bureaus have access to records of how quickly you have obtained and used credit for your company. Credit lenders will not provide financing to a business that has received a lot of credit in a short period of time without using it. Equifax, Experian, and Dun & Bradstreet will review your business’s credit history and recommend credit limits to credit issuers to determine how much money your company should be eligible for. To get the most credit possible, it is important to understand how business credit bureaus determine a company’s creditworthiness. You are more likely to get credit if you apply for credit that your company will actually use regularly, rather than applying for large amounts of credit that will not be used

Don’t Buy Anything With Your Credit

Entrepreneurs often spend millions of dollars on Facebook and Google Ads each year. By using business credit cards to pay for these advertisements, business owners can build credit while also reporting to business credit bureau reporting agencies. These agencies are more likely to offer larger credit lines and loans to customers who spend more money. Using your business credit to make more purchases can lead to more financing opportunities in the future.

“Personally Guarantee All Your Credit Lines”

Personal guarantees, which make you personally responsible for any credit card debt, should be avoided whenever possible. While some types of funding, such as SBA loans and term loans, may require a personal guarantee, there are many credit financing options available that do not. Instead, you can consider asset- or collateral-based funding solutions that require you to pledge an asset as collateral. This could include stocks, bonds, 401Ks, commercial real estate, inventory, or equipment. These assets do not affect your personal credit. By starting with small vendor accounts and building payment experiences with major retailers, you can improve your business credit profile and eventually qualify for bank credit cards and auto financing.

“You Can Do It On Your Own”

One piece of bad advice is the belief that you can build business credit without seeking the help of specialists. Consulting with experts who are knowledgeable about a task you are unfamiliar with will often lead to better results than trying to do it on your own. If you work with a business credit specialist who has helped many borrowers and entrepreneurs build their credit profiles, you can significantly speed up the process of building business credit and get better results, more credit approvals, higher limits, and better terms.