Having difficulty obtaining business credit without a personal guarantee?
Obtaining business credit can be a difficult thing to do. Lenders don’t want to finance your business if they don’t think you have a stake in the business. However, if you can overcome your doubts, you may be able to obtain separate credit in your company’s name. So what do I have to offer?
I have started four businesses in the last 13 years. In that amount of time, you can learn many business lessons. One of the most important is how to get credit for a business without my personal guarantee. From experience, I know that having business debt on your personal record makes your debt-to-income ratio a sight to behold. Now, there’s one thing I’ve learned about lenders.
Lenders want to lend money. It’s the only way they make money for themselves. But, they don’t want to give away money. In order for a lender to have enough confidence in a person or company to lend money, he needs some kind of guarantee that he will receive his payments. Where do lenders get their data to make a decision?
Lenders use credit reporting agencies to check the reputation of a business or individual to see what their credit history is. they cannot see the future, so their only measure of success is the past. The problem is that most businesses don’t have a separate credit history. That’s why lenders insist on having a personal guarantee for their loans. Do you know where a lender gets your information about you or your business?
There are different credit reporting agencies for business and personal information. We know there are at least three for personal history, but on the commercial side, there is one main organization that most lenders use, Dun and Bradstreet. In order for you to be successful in obtaining independent business credit, you must have an excellent credit rating with Dun and Bradstreet. And what determines a great credit score and D&B?
They have a rating system with a range from 0 to 100, with 100 being the best possible score. Their system is based on the number of days late in payments reported by their participating lenders. The score of 80 means that each payment is made on time. A score above 80 means you pay for everything before the due date, while 100 means you pay for everything before it’s billed. A score below 80 means you have some payments behind and you go down from there. Can you guess what score you need?
In order to get separate credit, you’ll need a score of 75 or higher or lenders won’t even consider you for an unsecured loan. But how do you build credit for your business?
There are steps you can take to get an acceptable score with Dun and Bradstreet. It starts with getting listed with D&B and getting creditors to tell them about you. With enough track record for your business, you should be able to get the credit you need to succeed. All you need to know is which companies will help you build your business credit.
