What is Business Credit? Do I need it for my business? I have personal credit, but does business credit work the same? Can I get funding for my business without using my personal credit? How do I expand my business, without over leveraging my personal resources?
These are just some of the questions that I get from business owners. Having been in the world of business and consumer credit for over 20+ years, and it amazes me how little business owners know about the power of business credit, which is “NOT” regulated by the federal government like consumer credit.
It is like the CIA has pulled a hidden mask over the American business owner. Ok, don’t come after me CIA, I was joking….
In all seriousness, let me clarify this “Business Credit” thing? Business credit is the ability to get funding via “business loan, business Credit card, or business line of credit, solely based on the lender’s business underwriting model without using personal credit inquiries.
In plain English terms, “business credit” is credit worthiness on my business alone. In addition, business credit allows you to get payment terms from a business “vendor” that sells their service B2B. Meaning, they provide their services to you as a business customer upfront, and you agree to pay them within 5-30 days. (average business credit terms)
So, where does Business Credit come from? There are 3 major Business Credit bureaus, which are privately held “for profit” companies: Dun & Bradstreet(D&B), Experian, and Equifax. D&B is the oldest and most widely used business credit bureau, with Experian, then Equifax following behind respectively. These organizations build massive commercial databases with the goal to have all businesses in the United States covered. They sell the business information to lending institutions, and to Business to Business (B2B) organizations that sell their goods or services on credit terms.
Also, remember, business credit is not regulated by the Federal government. This impacts you when you try and get knowledge of what these bureaus are reporting on you. They all are trying to charge you to see your “own business information,” and charge you fees to work with you to build out your report that they are selling and making a profit on. Does that sound fair??
What does this mean for me and my business? Well, it’s important that you know what these bureaus are reporting on your business. (if they have anything at all) You should also have a good understanding how these bureaus collect their data, what data they collect, and how you can impact the data collection in a favorable position for your company.
If you are starting a new business, it’s important that you understand “business credit” early on, so that you can control your own “business story” with these bureaus. If you have a mature business, but you are looking to expand or take the stress off of your personal assets, then you quickly need to get a good understanding of what these bureaus have on your business. Business Credit should be fundamental to the “strategic plan” of your business. You should have a plan to build it out, manage the bureaus, and maintain quarterly at minimum your business credit profiles. Why?
- When you need funding, it should be stress free and based solely on your business viability
- When you establish relationships with vendors they should be offering “your business” credit terms
Would you believe that Lenders want to extend credit to businesses without personal credit?
- Why deal with the Federal Regulations that come with personal credit
- Banks view Business lending as more profitable than consumer lending
In conclusion, what is business credit? It’s the story of your business that you control, and it gives you the power to make strategic financial decisions for your business. Don’t be in the dark, about this fundamental concept needed for every business. Seize the power available to you!!
To learn more about Business Credit, you can contact Katari McDonald via email at email@example.com or via phone at 214-995-6113 He offers “Business Credit Consulting” services for business owners.