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Friday, August 26, 2011

Five Ways to Build Business Credit

Entrepreneur.com
Kelly K. SporsBY Kelly K. Spors | Yesterday|

… [Getting] credit is much easier when you don't need it. …Here are five options to get started.

1. Mind your personal credit rating. The biggest factor in many banks' decision to initially lend businesses money is the owners' personal credit ratings and they typically look for a personal credit score of at least the mid-600s, says Ami Kassar, co-founder and chief executive of MultiFunding LLC, a Broad Axe, Pa.-based company that helps businesses connect with lenders. … Moreover, lenders will also often check the personal credit of any investor or business partner with more than a 20% stake in the business, Kassar says.

Logo for The Home Depot. Category:Brands of th...Image via Wikipedia2. Apply for credit before you need it. To begin building a credit history for your business, apply for at least some sort of credit soon after starting up, Kassar says. A small business will often have to establish itself for two years before a bank feels comfortable offering a sizable credit line. … Some major retailers that supply to small businesses, such as OfficeMax or Home Depot, offer commercial credit accounts that can help build a credit history for your business.

3. Grow your credit and use it. Many businesses with enviable credit histories applied early for business credit cards and credit lines and used them as early as possible, says Wayne Sanford, owner of New Start Financial Corp., a credit consultancy in Allen, Texas. … Also, check to see if you have a profile with Dun & Bradstreet, a business data and credit reporting agency, suggests Gwendolyn Wright, a San Francisco business consultant and former first vice president of the Bank of San Francisco, a community bank. …

4. Forge relationships with more than one lender. Banks can change lending policies on a moment's notice and cut your credit limit overnight, so it can help to not have all your financial eggs in one basket, Sanford adds. …

5. Consider alternatives. Remember that traditional banks are not your only shot at credit, Wright says. … Other resources include asset-based lenders, which focus more on collateral rather than credit worthiness, factoring -- which lets you borrow against your accounts receivables -- and peer-to-peer lending and crowdfunding sites, such as Prosper.com and Kickstarter.com. …
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