Building and maintaining excellent business credit is critical to the financial success of a company. Like with personal credit, it can open more doors for you to obtain the financing you need to move to the next level. Business credit is becoming more of a factor for growing your business and obtaining capital. That’s why many companies in the credit and finance business sectors are promoting the use of business credit software and business credit building programs to build your business credit.
Before you jump into the business credit game, it’s important to know what type of business credit software is out there. In addition, it’s important to know which business credit builder programs have a reputation for working well. The best business credit building program providers get results and can prove it. In this blog I explain what is business credit software, what is a good business credit builder program and the truth about building business credit.
What is Business Credit Software?
A good example of business credit software is Nav. Nav’s business credit software is a free resource that enables you to track your business and personal credit scores in one place. All you need is a DUNS Number and you’ll be able to see your business credit scores from Dun & Bradstreet, Experian Business (and at least two other business credit reporting bureaus).
Nav’s business credit software will enable you to stay on top of of your credit activity. You need to keep up with how your activity affects your credit, what you’re doing right, and what you should change. Reviewing this information can also help you catch errors or fraud early on so you can dispute it. It used to be a rule of thumb to review your personal credit report and score at least once a year. Now websites like Nav have made it easy to access this information whenever you want.
The Bottom Line About Business Credit Software
Nav’s business credit software combine details about business credit, personal credit, and scores. It uses a simple format that is easy to understand so you can be aware of what’s going on and keep building good credit. Nav also sends weekly notifications to let you know if anything has changed.
The keyword in building good credit history is history. That means it happened before. It also means it happened over a span of time. Building a business credit history is possible with time and the right strategy. Put in the work to have good personal and business credit practices.Using Nav is a good start to implementing business and personal credit building practices.
What is a Business Credit Builder Program?
A business credit builder program is a system or process of obtaining business lines of credit or credit cards. These credit cards can be obtained from traditional banks, non-bank lenders, and/or retailers that provide business products and services. At LenCred, we can help you obtain all types of business credit financing for your business but our specialty is unsecured business line of credit and working capital. Through LenCred’s program, business owners obtain an average of $30,000 to $50,000 in unsecured business lines of credit that can be used for any business purpose. We’ve even had clients obtain as mush as $750,000 in unsecured business credit.
Facts & Myths About Business Credit Builder Programs
Companies offering business credit software and business credit builder programs on the internet have become prevalent. It’s important to educate entrepreneurs on the truth about these programs. Building business credit is becoming more important, especially since the SBA is requiring lenders to use a combination of a business owners personal and business credit to determine their eligibility for SBA loans under $350,000.
Therefore building business credit would be a good move for any business owner. However, it’s important to fully understand how many of these business credit builder programs work before you decide to invest your hard earned money into them. Below are myths about business credit builder programs that some companies will not make completely obvious to you (or blatantly lie about) when signing up.
Myth No. 1: No personal guarantee needed – This is the biggest lie I have seen perpetrated by companies offering business credit builder programs. The fact of the matter is that not all business credit lenders offer “no personal guarantee” options. Depending on what type of business credit you are applying for, you may or may not need a personal guarantee. (Providing a personal guarantee means they will check your personal credit history to determine your creditworthiness and use your credit history as “collateral” for the line of credit. This means if you make late payments or default for any reason, it will negatively affect your personal credit).
If you are applying for vendor trade lines, you may not need to provide a personal guarantee to get approved. The catch is that you can only use the vendor trade lines to purchase products and services from the vendor that issued you the line of credit and not anywhere else. A good example of this is obtaining a vendor trade line from Best Buy, Office Depot, or Quill.
Anytime a company like these approve you for a line of credit you need to understand that you will only be able to use that credit line to purchase products directly from them. Another example is an unsecured business line of credit. This type of business credit is issued by banks such as Chase and Fifth Third (or other non-bank lenders). You do need to provide a personal guarantee to secure this type of business credit.
You also need to have an exceptional personal credit history to get approved for this type of business credit. With vendor trade lines, you can have less than perfect personal credit and still get approved. Those are the biggest differences between vendor trade lines and unsecured business lines of credit — what it takes to get approved and how (and where) you can use them.
Myth No. 2: Use the funds anywhere, for any business purpose – Most companies who offer business credit builder programs are not honest in their advertisements about how you can use the business credit they will help you obtain. As I stated before, the two major types of business credit (and the types most of these companies will help you obtain) is vendor trade lines and unsecured business lines of credit. One of the biggest differences between these two types of business credit is how (and where) they can be used. With vendors trade lines you can only use them to purchase products and/or services from the vendor that issued you the trade line. For example, if you get a trade line from Dell, you will only be able to use it to purchase Dell products and no where else. However, with an unsecured business line of credit you can get it from just about any traditional bank or credit union and use it anywhere for any business purpose. There are no usage restrictions with unsecured business lines of credit like there are with vendor trade lines.
Myth No. 3: Get unsecured business lines of credit (or business credit cards) with bad credit – I recently saw this on the website of a popular company that offers business credit building programs and it is simply not true. With vendor trade lines you may be able to apply and get approved for them without having a good personal credit history (or providing a personal guarantee). However with unsecured business lines of credit that is not the case. Unsecured business lines of credit and business credit cards from traditional banks like Chase, Bank of America, Barclay’s, etc are cash lines of credit that can be used anywhere for any business purpose. It is mainly because of this that banks require borrowers to have good personal credit to get approved for unsecured business lines of credit (or business credit cards). Don’t believe companies who tell you it’s possible to get a business credit card or unsecured business line of credit without providing a personal guarantee or having good credit because it’s just not true.
Build Good Business Credit the Right Way
The foundation of good business credit is getting your personal credit in order. When the business is starting out, you may have to show collateral for a secured loan. If you don’t have it, lenders may use your personal credit to see if you qualify for a secured loan. Even if they don’t pull an actual score, they may use the report to determine financial patterns or activity.
Make sure you don’t have unpaid debts. Clear up any liens, collections, or charge offs. Your debt ratio should also make sense. You should stay below the 30% usage mark with revolving credit like credit cards. Try to pay off your balance each time you receive a statement. If lenders denied you credit in the past, review the suggestions to improve and take action.
The basic rule of credit is to show worthiness through your activities. Showing that you can borrow and repay on time builds your credit worthiness. You also need to use the right lenders with a good reputation. Look for business creditors who offer credit lines to pay for their products or services. Find a company with supplies related to your industry. Established companies receive a certain limit to buy items on credit. New businesses repay invoices based on agreed upon terms. Most offer payment returns of either 15, 30, or 45 days. Some terms extend to 60 or 90 days.
A List of Good Business Credit Providers
Uline– Shipping and packaging supplies for retail, food service, and janitorial industries. Uline offers up to $1000 instant credit with Net30 terms. Businesses can call or download an application to seek qualification for larger amounts.
Quill-The options range from office and industry supplies to business services. Quill also offers Net30 payment terms. Business lines of credit are subject to approval. The process is as simple as choosing the “Invoice My Account” option at online checkout. They will either notify you or call to gather information.
Office Depot– Along with Reliable, businesses can buy office supplies, furniture, and electronics. You’re required to have a Reliable account and credit is subject to approval.
Other business credit providers:
- Give Something Back
- Global Industrial
- The Home Depot
- Tiffany & Co.
- Ingram Micro
- American Express
- Radio Shack
- Neiman Marcus
- Sam’s Club
- Tiger Direct
- FedEx Kinko’s
- Comp USA
- Wright Express
- Apple Store
- AEL Financial
- Conoco Phillips
- Micro Center
- Best Buy
- Toyota Financial Services
- Corporate Express
Get Started with LenCred’s Business Credit Builder Program
The bottom line is that it would be wise to do your research and ask many questions before investing your money into a business credit builder program. You want to be sure you are obtaining business credit that will help you build a business credit history and that you can actually use to grow your business. The Advisors at LenCred will be honest and upfront about the results they can help you get with their business credit builder program. These are the kinds of people you want to work with when deciding to invest in a business credit builder program. They don’t falsely advertise what can be done through the program and will be honest about what you will get out of it.