Avoiding
Common Business Loan Mistakes
Surveys
show that 94.7% of small business owners feel
their only lending resources are local banks or
personal credit cards. This common sense advice
will help you avoid these common business loan
mistakes, regardless of your personal credit
history... and avoid pledging your personal
property as collateral.
First of all, getting approved for a commercial
loan is definitely easier than getting personal
loans... regardless of your personal credit
scores. Additionally, getting the right types of
corporate credit is absolutely critical: if you
want to protect your personal assets, minimize
the risk of a personal lawsuit affecting your
business, and to your ability to weather the
economic changes that happen overnight.
All business owners must be much more proactive
about developing relationships with the right
types of lending institutions. You usually want
to start your application process with
out-of-state, national lenders... not your local
or regional banking institutions. National
lenders typically won't require a personal
guarantee or your social security number.
Follow this simple roadmap to obtain a small
business startup loan, a business debt
consolidation loan, a bad credit business loan,
or a government business loan... although I
strongly recommend that you find a commercial
loan expert who can help you through the process
of building a strong corporate credit rating.
Finding a competent business loan expert will
give you a head start on your competition &
also let you focus on running your day-to-day
activities... instead of dealing with the
hassles of establishing a strong business credit
rating. An excellent business credit score can
help your company's image, overnight. And,
finding a small business loan expert isn't that
difficult. You just need to know where to look.
Now... let's get started... before you start
applying for any business loans!
1. How is your business structured? Is it a sole
proprietorship, C-corporation, S-Corporation,
Limited-Liability Corporation (LLC),
Partnership, or Trust?
2. How long has your business been recognized by
your State & Local government?
3. Has your company ever had derogatory
information reported against it to either of the
two (2) most popular business credit reporting
agencies, Dun & Bradstreet or Experian?
4. Are your commercial permits, licenses and
registrations current?
5. Does your business have a physical address,
or are you trying to use a U.S. Post Office Box
instead?
6. Is your business telephone number recognized
by directory assistance?
7. Are your incoming telephone calls
professionally answered in your business name?
8. Have you established a business checking
account?
9. Have you registered & asked for an
Employer Identification Number (also known as an
EIN) from the IRS?
If your answer to the first question was a sole
proprietorship, partnership or trust; I urge you
to re-establish your company as a corporation or
LLC. I'm not going to provide you with legal
advice, but many CPAs and attorneys highly
recommend LLCs (Limited Liability Corporations)
as a way of protecting your personal assets
& estate... in the event of any lawsuits
being filed against your company.
As a sole proprietor, your personal assets are
at direct risk of seizure or forfeiture when
faced with most types of legal action.
Additionally, if you are applying for business
loans in a corporation's name... most lending
institutions will not require you to provide any
personal guarantee!
A corporation can still face difficulties
applying for business credit, if it has been in
business less than two (2) years or had previous
credit problems reported against it. Here are
some ways to fix these problems.
- Purchasing a "shelf corporation" or
"aged corporation" that's been in good
standing with your State government (for longer
than 2 years) can drastically improve your
chances for small business loan approval.
- You can attempt to repair your business credit
rating by writing dispute letters to Experian or
Dun & Bradstreet, which isn't always
possible.
- Some corporate credit experts will help you
find, select & purchase an established
"shelf" or "aged"
corporation, some of which already have strong
credit ratings established... saving you alot of
hassles!
I cannot stress this enough... you MUST have a
physical address (not a PO Box) if you want to
establish a solid business credit rating. The
same thing is said for telephone numbers &
the way incoming phone calls are handled. Would
you lend money to a company that does not appear
to have a physical address or documented
telephone number?
And, don't forget to always keep your commercial
permits, licenses & registrations current...
and always keep copies of these documents in
case a potential lender asks for this
information.
Business checking accounts are a must. Again,
this proves stability to your potential lenders.
Here are a couple of tips for you, in case
you've had any checking accounts closed by a
financial institution. Pay off the outstanding
balance (if any) that's being reported by the
bank, or open a checking account at a bank or
credit union that doesn't use the ChexSystems
credit reporting system. Most credit unions
don't use ChexSystems, and you can always find a
list of banking institutions in your area that
don't use ChexSystems... by simply doing a
search on Google, Yahoo or MSN.
Small business credit ratings are tracked using
your business name, business address and
employer identification number (EIN). You can
apply for & receive an EIN at the IRS's
website (irs.gov). You can also call the IRS,
but be prepared for long waits.
Then you'll want to obtain a D-U-N-S number from
Dun & Bradstreet, the largest business
credit reporting agency. You can apply for this
without any fees at Dun & Bradstreet's
website (dnb.com), and you'll usually receive
this number within thirty (30) days. Do not
apply for this number until you've prepared your
self thoroughly, because any information you
give to them... goes into your credit file...
permanently.
After you've obtained your D-U-N-S number,
you're probably ready to start establishing some
vendor credit. Vendor credit is where many
business owners start establishing business
credit ratings. Simply go to staples.com,
officemax.com or officedepot.com to get started.
Then, you'll also need to fax your business
telephone bill & the credit application to
them... on your business letterhead (which you
can create using your favorite word processing
software if you don't have expensive
stationery). They usually don't require any
personal guarantees (if you've followed the
outline above), and you'll usually receive a
starting credit line of $750.
This is critical & I repeat... critical!
Always pay your invoices before the grace
periods begin... especially on unsecured credit
cards or vendor credit lines. Dun &
Bradstreet will lower your credit score for
every day a creditor reports your bill as unpaid
while you're within your grace period. Whereas,
personal credit scores are not lowered unless
you are 30+ days past your due date.
Dun & Bradstreet reports what's known as a
Paydex score (your corporate credit score), and
a score of 80 is very good... with 100 being the
highest score you can achieve. Your Paydex score
is issued once you've established a known
vendor/credit relationship with at least five
(5) creditors.
There are shortcuts that will help you get much
more than $750 alot faster. When using a
business credit expert, most small business
owners (even startups) can be approved for
vendor credit lines of $25,000-$50,000 and open
credit lines of $50,000, $250,000, $500,000 or
more... in as little as 45-60 days... by using
their knowledge of the application process &
"shelf" corporations.
Now, it's your choice. Are you going to go
against the grain & try to establish
business credit on your own (which could prove
costly to your business health, growth &
survival)? Or, will you choose to utilize a
corporate credit expert... allowing you to
remain focused on your daily business needs?
Most business owners make the mistake of trying
to do this on their own... usually trying to
find grants, investor "angel" money,
or falling back onto the "personal credit
card sword". Don't be a casualty like the
rest. Learn more about how you can use the same
tools that informed, educated millionaires have
been using for decades.
Author
Bio
Lee Kendrick has been featured by several
national magazines as a credit expert, finance
professional & public speaker.
Register for his newsletter at http://leekendrick.net/credit-expert/
& discover how you can be approved for
$250,000 or more in as little as 45-60 days
regardless of your personal credit.
Article
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