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1. 90% of Vendors and Lenders do not report to the credit bureaus
When building business credit, business owners apply for credit with vendors and lenders but are not aware that 90% of vendors or lenders that give businesses credit do not report to the business credit reports.
Let’s think about this. As a business owner applies for credit with 10 vendors or lenders and gets approved for all 10, the business owner might think that this would build business credit, but it may not.
After the business has been doing business with the vendors and lenders for years, when the business owner goes and applies for a loan and gets told the business does not have enough credit or a good credit score, it comes as a surprise.
Because of that, it is so imperative that before applying for credit with vendors or lenders that the business finds out if the vendors or lenders report to the credit bureaus, which credit bureaus, and how often do they report.
2. Traditional Banks vs other lenders
Having business credit helps a business get lending outside of the traditional banks. There are plenty of lenders that will extend a business credit besides the traditional bank. The truth of the matter is that when applying for a loan or credit from a traditional bank, they require collateral, good credit personally, and for the business tax returns, cash flow, profit and loss statements, just to name a few.
When the business truly takes the time and looks at what it is the business needs, the business owner would see that 80-90% of the business can operate off of the business credit, like Staples, Home Depot, Master cards and Visa cards. This takes the pressure off the business and the business owner. Now do you see why it is so imperative for a business to have business credit? By having business credit in most cases, you avoid needing a personal guarantor, having to have good credit, cash flow or collateral.
3. Low Credit Limits vs High Credit Limits
When applying for credit with lenders, one of the things the lenders look at to decide your limit, is how much money the business is using with the other creditors that are reporting on the business credit report.
For example, the business has 5 vendor accounts reporting to the business credit report and it is reporting that the business only spent $50 to $100 with these vendors. The lender may extend credit but the limit will be low.
So, the best thing to do is to apply for vendors that have the products and services the business will use. Use vendor accounts and pay them back as agreed. When this is done, the lenders will approve the business for larger limits.
Join my group here. It is filled with resources and support for entrepreneurs to build their business credit! See what it’s about, here’s the link:
https://www.facebook.com/groups/businesscreditmasterycircle
I will see you on the inside!
About the Author
Kimberly Lewis is currently the CEO of EPC Solutions LLC. She specializes in helping business owners establish excellent business credit scores and then leveraging those scores to access credit and cash for their businesses. For more information on business credit scores, business credit and business loans visit https://epc-solutions.net.