DEVELOPING BUSINESS CREDIT
By: Allen T.. May, C.E.O. of Westwood Associates, LLC
A business credit card is associated with a business, and not fundamentally with the business owner personally. For that reason, some credit card issuers will not report the card as a liability on the business owner's credit report, nor will any future balances and payments get reported there. A hard credit inquiry will take place with the initial application, but the account won't appear on the credit report at all. Its important to note that a delinquency from a business credit card will usually show up a a black mark on your personal credit report. The business card is tied to the business owner, and it's his responsibility to ensure those payments are made and the balances are paid.
Aside from the personal credit report of each individual, every business has a credit report that records the credit accounts connected with it. When applying for a business credit card, the business report is often referenced in the card approval process to augment information on the business. Things like size and age of the business can be gleaned from the report. The business credit report is not typically used in the decision for approval since the data there is fuzzy and lacking. Even someone who doesn't  have any reporting on the business (e.g. a new business that's applying for its first credit card) can get approved for a business credit card based on their personal credit worthiness. After getting a business card, most banks will report the new business and associated account to the business credit bureaus, and a business credit report is thus established. While most banks will report a business credit card on your business credit report, many will not report it on the all-important personal credit reports.
When you think of "business credit" you should first think of "personal credit". Basically, the same rules apply to both your personal credit as it will to your business credit. Keeping in mind that a corporation or LLC are separate entities from yourself, they too, must develop and maintain a good credit standing in order to access capital. Like most people, when you were in college, your first credit card was probably a lousy $500 credit line from Citibank. They bombarded university campuses around the country. They set up booths on campuses to sign up unemployed, irresponsible 19 year olds. Crazy times they were. If you were enrolled in college and had a pulse, they would gladly send you a credit card. Some of us used it responsibility while others, like myself, took the new credit card to the mall just to make sure it worked. (It did and...thanks Dad for paying that off for me.) But that's another story for another post. Like, when American Express foolishly sent me, an unemployed college fraternity brother, a Gold Card. What were they THINKING? They said I had "excellent credit history" with Citibank! Ha! Ha!
Anyway, now that I've grown up and became responsible with my personal credit, and cherish my high FICO score, I turn to the mysteries of business credit. They're really not that scary once you dive into it. Just keep in mind that the process for building credit in your new company is the same process for building credit in your business name. The edge you have here is quite simple. You've already done it for your personal credit so you already will have a clear understanding of the layout.
Business credit is credit that is obtained in a company name. With business credit, the company builds its own credit profile and credit score. With an established business credit profile and score, the business will then qualify for credit. This credit in the company name and based on the company's ability to pay, (not the business owner's ability to pay) since the company qualifies for the credit, in some cases there is no personal credit check required from the business owner.
With business credit, the company can use its credit to qualify for revolving store credit cards likes Staples, Sam's Club, Costco, ExxonMobil, Lowe's, Wal-Mart,  as well as privately issued Visa and MasterCard's.. Moreover, American Express offers numerous corporate credit and corporate charge cards in the company names. In addition, the company can also qualify for lines of credit and loans, all of which are in the company name.
There are three primary business credit bureaus:
1.) Dun & Bradstreet
2.) Experian Business Credit
3.) Equifax Business
To check to see if you have a business credit file already with Experian, go to this link and run a search for your company name: http://www.experian.com/small-business/establish-business-credit.jsp
For a Dunns number, simple go to http://www.d&b.com Getting a number from Dun & Bradstreet is free and all you have to do is complete an online application and the number will be generated for you. I'll be blogging more about Dun & Bradstreet during this month. Its important that you have a clear understanding on how this process works.
Here are some other companies that will extend business credit that report to the above referenced business credit bureaus:
1.) National Pen
2.) NEBS
3.) Uline
4.) Grainger
5.) Quill
6.) Staples
When applying for a new business credit card, the financial institution will check your credit report to determine credit worthiness. Even when applying for a business credit card using your EIN, your personal credit report is almost always used in making decisions, and this does result in a hard inquiry on your personal credit report. So keep this in mind. Its also good policy to ask the creditor you are applying for which, if any, of the business credit bureaus do they report to. This is important because you want your trade history reported to the business credit bureaus on a regular basis.
To learn more about developing business credit, please feel free to reach out to me via email at: allentmay@gmail.com