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Old 04-05-2007, 08:23 PM
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Default Building business credit

Pepe, you don't need to incorporate to build business credit. When you set up your business, whether as a sole proprietor or a corporation, you'll get a FEIN or tax i.d. number. This is essentially a SS# for your business and will have it's own account with the credit bureaus. Anytime you open a bank account or get a credit card or a loan using this number it will build credit.

You'll still be required to personally guarantee any credit extended to the business whether you're incorporated or not. What this means is that in building your business credit you'll also be rehabbing your personal credit. So unless your personal is beyond repair it won't be much of an advantage.

It takes two years to establish a minimum business credit rating generally. However, this doesn't mean you'll have an excellent credit rating at that point. Chances are you won't have much credit history since it's unlikely you will have been extended much credit during that time. Also, when it comes right down to it, good personal credit is worth more to a bank than good business credit. Just something to keep in mind.

I'm not saying that getting business credit is a bad idea. But, the assumption that building two years of business credit will compensate for bad personal credit may be a little flawed.
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Old 04-05-2007, 09:02 PM
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Well said. 8)
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Old 04-06-2007, 04:19 AM
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Most of the time when you apply for business credit, they will check the credit rating of the owner. If you are incorporated or not, they will look at your personal credit. You may be required to pledge personal assets to guarantee the business loan, at least until you are established. You may start with a business credit card. It usually isn't difficult to find a bank who will give you a business credit card.
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Old 04-06-2007, 05:39 AM
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you don`t need to personally garuantee your business credit, i`ve got a few hundred thousand in business credit and none of it has a PG.
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Old 04-06-2007, 12:30 PM
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Most will require a personal guarantee until you are established. Each lender makes their own rules. In any case, most will want to see a track record of the business before making a decision.
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Old 04-06-2007, 04:36 PM
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Brian, how long ago did you open your first business account?
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Old 04-06-2007, 05:30 PM
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In my field the suppliers are very cautious, I have probably 10 to 15 different accounts and all of them wanted a personal guarantee and I'd say at least a third of them, my wife had to sign as well because she is on the house note. This was required of anyone who wanted credit not just me.

Having said that let me tell you that there's a lot of people that really screw over construction supply business so I don't blame them for being cautious.
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Old 04-06-2007, 10:32 PM
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Contractors are like brokers...a few good ones and a lot of fly-by-night operations :lol: If the business has less than 2 years of credit history, I doubt anyone will extend credit without a personal guarantee. Of course, all that means is that they ask for a SS#. If you've given that, you've guaranteed it and it's probably going on your credit record as well as the business's. The exception, of course, is credit cards. It's easy to get business credit cards without the guarantee. That's only pretend business credit though :lol:
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Old 04-07-2007, 12:44 AM
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Quote:
Contractors are like brokers...a few good ones and a lot of fly-by-night operations
I'd like to argue that but I can't, it's true. I've seen some of the work with my own eyes. :shock:

Let me also say, having been reading this board for over a year now, there's a lot of similarities between trucking and construction businesses.
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Old 04-07-2007, 02:15 AM
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From my house here in SoCal, if I walked out in the backyard and hit a 300-yard drive, I'd have a 50% chance of hitting either an unlicensed contractor or a non-compliant trucker :lol:
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