Getting a business loan can be a relatively simple matter, if you have good credit. If you have a good credit history, many banks and other lenders will be willing to help you with equipment loans, corporate credit, or any matter of loan used to expand your business. But what if you have bad credit?
Bad credit is bad news to any lender: it tells them that you're not willing to pay your bills on time, or that you can't make the money you think you can, or that you're needlessly borrowing money you don't intend to pay back. To a bank, bad credit is just a big red X stamped across your forehead; beg all you like, you're probably not getting a business loan.
So what can be done? Getting a business loan is based rather squarely on good credit, so what can you do if your personal credit is in trouble? One thing you can do is to go to another source - a lender outside the bank. By taking your matter to another lender, you can usually find someone who's willing to take your case. There are many lenders out there who specialize in getting a business loan to those who have bad personal credit. But beware; while these lenders can help you find the money you need now, there's a serious price to be paid later. Because of the risk they're taking getting a business loan for you, these companies will often charge you out the nose in interest. It might be worth it if you know you can pay it back quickly, before that interest accrues, but you may want to try to improve your credit first.
If you've got bad personal credit and you're trying to establish better business credit, it will be easiest if your business credit isn't connected to your personal history. This can be done, but it'll still take some time to build up the credit history on your business. The first step is to establish your business as a separate legal entity from yourself. This can be done by setting up your business as a corporation, which will effectively create a separate legal personality for your business. That means that the law - and the financial sphere - will treat your business as its own separate person, and you won't be directly connected with it.
The next step is to build credit for your separate business. You'll have to establish a bank account for your business, and this will require an EIN, which is an Employer ID Number. This number functions for your business much like your Social Security Number functions for you, as an identifier to banks and creditors. By using this number, you can set up a bank account and credit card accounts.
A note on credit card accounts: there are two kinds of business credit card account. One is a business card with personal guarantee, and one is without personal guarantee. This translates as the presence (or absence) of a Social Security Number. When a credit card company opens an account with you, they're basically offering you a blank check, and trusting that you can pay them off in the future (with interest, should you keep them waiting.) It's a form of a loan in of itself. By providing the credit card company with a Social Security Number, you're essentially providing them a fallback, in case your business fails to pay them. While this usually won't stop your business from being seen as a separate entity, some may not want the business card tied to them in any way. You will, however, be much more likely to be able to open an account if you provide your Social Security Number, so you may want to discuss the options with your credit card company.
Corporate Credit Concepts specializes in "KEY PHRASE". For more information about "KEY PHRASE" and how it might benefit your business, please CLICK HERE for a free phone consultation.