Here’s what Wells Fargo Bank has said regarding Separating Personal and Business Finances...
"The
longer you delay establishing business credit,
the longer you delay taking advantage of business loans."
By
strengthening your business credit, you will not have to use the owner or
shareholder(s)’ guarantee(s) for loans, leases, credit cards and other sources
of debt financing. If your company has a strong operating history and
financials to support this, you can easily build your business’ credit. If you
have not already done so, do the following as soon as possible to build your small
business credit:
Make sure you are registered with Dun and Bradstreet
and have a D&B number. Then sign up for the free self-monitoring system.
Obtain credit cards from Staples, Office Depot or other
office product provider up to the amount allowed with no guarantee. Use
these cards to purchase your office supplies. Obtain credit cards from
Home Depot, Lowe’s, or other office improvement entity. Use these to
purchase any repair or cleaning items for the office.
If your business has lines of credit with any of your
vendors or suppliers, ask that they report this information – and the performance
- to D&B. If you do not have any lines of credit, ask for them.
o Each
year, see if you can increase the size of the credit line. Make sure you use it
as appropriate to keep the credit line there. Example: If you have a $50,000
credit line but always pay within 10 days by check, your credit line will
disappear. You should place your orders using the credit line, then pay off the
credit line every 30 – 60 days.
If you have a business loan from a bank or other
financial institution, even if it is guaranteed by you as the owner or by another
individual (i.e., investor), make sure that the loan is under the
COMPANY’S tax id and is reported on the COMPANY’S credit report. All banks
report to D&B regularly. Therefore, making consistent, on-time
payments on your company’s bank loan can very positively impact the
business credit.
Check your D&B report quarterly, but no less than
annually. Make sure that any loans, leases, or other debts showing are
correct. Many times entities report when they file a UCC (Uniform ) but do
not report when the loan is paid off. Hence paid off/retired loans and leases
may still be showing on the company’s credit, which makes it seem like the
business has a much higher debt ratio than it actually does.
Pay your suppliers within their
specified terms. Make sure that you are working with at least two
suppliers who report to D&B and/or Experian. Otherwise, your great
payment record will be completely unknown. If
the supplier does not report to Dun and Bradstreet, request a Letter of
Payment History from the supplier and submit it to D&B to add to your
business’ credit file.
Provide
reviewed or audited financial statements to D&B. You may not want to
provide these because your company is private but be aware, that lending
entities often provide abbreviated information to D&B for the purpose
of reporting. You want D&B to have accurate information. If you still
are leery about releasing your company’s full financial statements,
consider providing just the annual revenues and the balance sheet (or a
snapshot of it) via a statement from your CPA.
Finally, you
should have a business plan. Banks and other lending institutions will look at
the company’s credit profile, its financial history, financial projections, and
the business plan in making its decision. If you do not have a business, it
obviously cannot factor into the decision-making.
Author Bio:
Tiffany
C. Wright is an author, business advisor, and interim CFO and CEO who has
helped numerous small businesses obtain over $31 million in financing. To learn
more about how you can build your company’s business credit and remove personal
guarantees and other hits to your personal credit, view this course. If you would like to contact Ms. Wright
directly, you can email her at twright@tocafamilyservices.com.
