I am learning about obtaining business credit. This is important to me because currently our action plan to keep buying properties has hit a small road block.
The original plan was to purchase a Vegas property in cash (cash is king), cash out refinance the property to get the cash back out, and buy another property. This was to be repeated as many times as possible until the cash supply dries up.
The problem occurred with the very tight lending policies of the banks, as well as a rather new rule of most major banks allowing a person/investor only 4 conventional mortgage loans.
Other options are hard money loans, angel investors, etc. but my first and favorite way to borrow money is with the bank.
At a recent BOSS Inc U event, attorney Rod Butters introduced the concept of business credit. I, of course, had to sign up for the program.
Step 1 is setting up your business entity. I use a Nevada LLC set up for me by BOSS’s Michael Bowman – a sweetheart of a attorney. He is like a labrador retriever in human form. Cute, big, and cuddly.
It is very important that the business looks and acts like a business. Register with the State and IRS, which will generate an EIN number – this is like a social security number, but for businesses. You will need a physical place and local phone number for the business. Setting up a company website helps to validate your company in the eyes of the creditors. BOSS did all this for me too, for a very reasonable fee. They will do my annual filings and keep me up to date and on track because I pay them a small monthly fee to do my books.
Step 2 is signing up for some credit building accounts. One that I never heard of before is Wright Express – a fleet card service which is a good way to purchase the gas you will use as you run around doing business related errands. Another is opening a MerchantCard that reports to the different credit bureaus so you start building up your credit history in a good way. Your credit will be based on the business, not your personal records, and, as Martha Stewart says, that is a good thing.
Step 3 is checking up on your business credit score if you have any, as well as your personal credit score. Some business credit will use your personal score to determine your credit strength until your business can truly stand on its own and obtain lines of credit. You will also sign up with Dunn and Bradstreet, and check out Experian, and Equifax to see if your company has any credit records on file.
I still have Steps 4, 5, and 6 to go, and will keep you informed as to what I have going on as I strive to build our purchasing power with untapped business credit.