If you have refinanced your home or have shopped for a loan, you are probably familiar with your FICO or Beacon score. This score represents your personal credit worthiness and a good score will save you thousands in interest costs while a poor score will have the opposite effect – if you can get credit at all.
In the world of business credit, your business (assuming you are incorporated) must have a credit score before it can get any significant credit without your personal guarantee.
If you have aspirations of growing your business, you will need access to capital and it is critical that capital is in the name of your company. If you are required to personally guarantee a “business loan” see it for what it is – a personal loan based on your personal credit with your personal guarantee of repayment.
This will eventually exhaust your ability for personally credit, sink your credit score, cause sleeplessness, and most importantly keep you personally responsible for the debts of your business. Under these conditions, it is very difficult to build and grow a successful business.
Most of the business owners I talk with do not know there are techniques that will allow them to build credit in the name of their business, nor do they know that personal and business credit never intersect. Poor personal credit will not have an impact on true business credit. Our CARE Program report (Request copy here) will describe this in detail.
This is where your Paydex score comes in. Dunn & Bradstreet is the rating company most widely accepted from vendors who will extend credit. You’ll also need a credit file at Experian and Equifax. Much like your FICO or Beacon score, your business credit files will determine your ability to get a business loan, working capital or a line of credit without personal guarantee.
If you visit the D&B website, you will find a lot of information that is not particularly well organized. You can go at it alone and find the appropriate paperwork, complete it properly, avoid an aggressive sales staff and their big up sell, and avoid the two or three mistakes that will cause D&B to simply close your file without issuing a Paydex number. If you are successful, you will have a Paydex number but will still need to figure out how to convert that score into working capital or a business loan to grow your business.
The world of business credit is much different than that of personal credit and is open to the influence of someone who knows how to work within the system. Access to capital can be a significant competitive advantage for your business and a qualified consultant with connections to small business lending companies and alternative funding companies should make you more effective with less time, effort and frustration on your part.
For more insight on how the world of small business lending works, request your CARE report today.
