The Secret to Mastering Business Lending!

Here’s the code to building business credit & understanding the 4 tiers of lending.

Many businesses find it difficult to get approved for business financing options due to lack of personal credit or lack of knowledge on the corporate lending process. So many businesses fail because of lack of start up capital. Did you know 45% of startups fold due to lack of capital or profitability?

There’s so much a business can achieve once excellent business credit is conquered such as purchasing properties, covering unexpected costs, and more all separate from your personal credit. With entrepreneurship hitting an all-time height it’s time to shed insight on the key steps to building business credit and the ability to obtain business credit lending within 6 - 12 months.

Before business credit can be established a business must first be established as well. Here’s what is required before building your business credit.

• Incorporate your business (or at least begin operating under a DBA)

• List separate business contact information in directories

• Obtain an EIN and a DUNS number

• Open a bank account in your business’s name and run all business expenses through that account.

These steps will help establish your business as an entity with finances separate from your own. That means vendors will report credit information in your business name. meaning, your business credit will be born.

The benefits of mastering business credit bring an added breath of financial freedom. Just imagine the magnificent feeling of possessing business credit assets, becoming more attractive to lenders, limiting your personal liability, and accessing financing separate from your personal credit. That’s the advantage of having an excellent paydex score which has the possibility of reaching a high of 100, which is equivalent to an 800 personal credit score. Here are the secret ingredients to your 100 PAYDEX SCORE!

• Tier 1: Basic Credit Trade.

This tier offers B2B net 30 payment terms to businesses who purchase products through their company. Net 30 means you order your products and then pay no later than 30 days after receiving your invoice. These are companies granting business credit without the need for a personal or business credit check and they rarely require a personal guarantee. Tier 1 is the most basic stage and when a corporation is rightly prepared, it will serve as a building block for establishing credit for that corporation.

Tips: It is recommended to place an order the same day vendor accounts are set up and to order with at least four vendors at the same time. This method jump starts your credit building process, which takes about 90 -120 to report. Once reported it helps you move forward to the second tier rather quickly. You want to be sure to add a good payment method on file to ensure your invoices are paid on time.

Tier 1 Examples:

1. Uline.com – Reports to Duns & Bradstreet.

2. Grainger.com – Reports to Duns & Bradstreet.

3. Nav.com – $30 per month Reports to Experian, Dun & Bradstreet, and Equifax.

4. Quill.com – Reports to Duns & Bradstreet.

• Tier 2: Advanced Credit Trade.

The difference between Tier 1 and Tier 2 companies is Tier 2 will conduct a business credit check before extending credit. Tier 2 usually includes larger credit lines, longer terms and in some cases can be used for equipment financing. Most repayment terms are longer than 30 days and more vendors are available in this tier with a broader variety of services and products.

Tier 2 Examples:

1. Best Buy

2. Shirtsy.com – Printing Company

3. CreativeAnalytics.com – up to $10k credit limit Digital marketing agency

4. Lowe’s

5. Staples

6. Amazon Business account – Net 30 – 90-day terms

7. Wells Fargo – Business Secured credit card

• Tier 3: Bank Lending.

This is the most popular stage of business financing. In this tier banks are offering unsecured business lines of credit. Personal and business credit check and personal guarantees are required. The most basic level of bank financing, for the most part, is score and business history driven for credit cards. For larger lines and loans, you need to be prepared with a good business plan and financials. Banks and credit card companies are Tier 3 lenders. Bank loans are the most common in this tier. They require excellent credit and often some sort of security. They may also ask for other information like income statements and tax returns. The goal is to make it to this tier so that the option is there if needed.

Tier 3 Examples:

1. Wells Fargo – Business Unsecured credit card & line of credit.

2. Capital One – Unsecured Business Credit Card

3. American Express - Unsecured Business Credit Card

4. BP Gas – Fuel Card

5. Behalf.com – Pays net 30 invoices

• Tier 4: Investors.

Tier 4 moves businesses directly into the world of venture capitalists, angel investors and other investors. This level requires much more sophistication and a business that is out-performing or will out-perform its industry peers. As a rule, these investors prefer businesses that have been around a couple of years and can provide detailed financials and growth strategies.

Tier 4 Examples:

1. Google ventures

2. Crosscut

3. Space Angels

4. Emergence

5. Lux Capital

6. SBA 7(A) Loan

7. Bluevine

8. Kabbage