Stick Like Glue Radio #186 On this special episode of Stick Like Glue Radio, I interview business credit expert, Ty Crandall. Ty is the author of Perfect Credit and Business Credit Decoded. Don’t miss this powerful show!
On this special episode of Stick Like Glue Radio, I interview business credit expert, Ty Crandall. Ty is the author of Perfect Credit and Business Credit Decoded. Don’t miss this powerful show!
Main Questions Asked:
What is business credit, and how should entrepreneurs think about it?
Is it possible for a business to get credit without a personal credit check?
What is tied to your EIN profile?
Are the credit bureaus in the consumer world the same as in the business world?
If you are a sole proprietor, are you still tied to your social security number?
How does business credit scoring work?
How does someone go about getting their credit repaired?
What is FICO?
Why type of businesses should have business credit?
How does a business start a profile and score?
How fast can a business expect to have a credit profile?
Key Lessons Learned:
74% of people will go to family and friends for startup business funds and use their own personal credit.
Consumer credit wasn’t designed to start a business, so the limits are significantly less than what you will find with business credit.
30% of your consumer credit score is based on utilization.
When you go to get a bank loan or credit line, they will pull your personal credit if you provide your social security number, but they are also pulling your EIN number.
Business credit is fundamentally a credit profile linked to your EIN number.
Don’t Use Your Social Security Number
You’ll never get an application that doesn’t ask for your social security number. If you are willing to personally guarantee your debt, they won’t stop you.
You don’t need to provide your social security number.
If you leave your social off the application, you are forcing them to use your EIN.
By not supplying your social security number means you aren’t personally guaranteeing.
How to Build Your Business Credit
The reason Apple and Walmart have $100M credit lines is that they have established deep credit profiles.
Any business can establish a credit score for their business and use that to qualify for credit.
If a credit card isn’t willing to approve you solely on your EIN, then you need to accept that you will be providing a personal guarantee and credit check.
Choosing an Entity
By default, certain entities make you personally liable.
In a sole proprietor or partnership, you are the business.
Choosing a corporation or LLC means you are not personally liable for what takes place within the business.
Business Credit Scoring
The PayDex score is only based on how you pay.
If you pay your bills on time or early, then you get a good score.
Bad scores depend on how late you pay.
It’s possible to get a good score in 60 days and $2-5K limits at Amazon and Office Depot.
Credit reports should be reviewed at least once each year.
Any negative information should be disputed to ensure they meet the requirements for accuracy, timeliness, and that it’s verifiable.
This is a company that issues credit scores.
The company deals with algorithms that take data of an individual and creates a score that determines your risk of default.
Business Credit to Help You Grow
The biggest companies have mastered using other people’s money to grow, and understand the benefits.
When you get to the point where you need a credit line, if you don’t have business credit established, your chance of getting approved is lower.
Get business credit from the start of your business and don’t be personally liable.
1. Recognize you are applying for credit with no social security number.
2. Have a business address or get one.
3. Have your professional website, email, cell phone details.
4. Find vendors that: i) report to the business credit reporting agencies and ii) will give you credit even if you have none such as Uline and Quill.
5. When you get 5 vendor accounts, start getting store accounts.
6. When you get 10 total accounts, you can start approaching Costco and Home Depot to get their commercial cards.
It takes about a week to set up the creditability, 60 days to set up the store credit, and about 120 days total to get cash credit.