Like anything else involving credit, building corporate or business credit without a personal guarantor takes time and requires a bigger dose of patience. It is important to note that personal credit is always linked to business credit at the beginning stages of any business, and it may be impossible to separate the two. However, it is possible to build business credit without personal guarantees. It only takes time, patience and know-how.
Instructions
1. Create a business structure. The first step in building corporate credit is to create a legal entity and structure for your business. You should decide whether you want an LLC or a corporation. Do some research and get the necessary advice you need to set up your business properly. There are several online companies that can set up your business structure for a fee, once you provide them the needed information. LegalZoom.com and BizFilings.com are two examples. Make sure you also obtain a Federal Employer Identification Number (FEIN).
2. Open a business bank account. After creating your business, it is important to open a business account at a bank. Make sure the account remains in good standing with a healthy average daily balance. Most creditors like to see a bank reference that is at least six months old. It is impossible to build corporate credit without personal guarantors if this crucial step is missing.
3. Prepare a business credit package. The next step is to start applying for credit. To do that, you will need to prepare a credit package which you will send to creditors when applying for business credit. You should assemble the following:1. A cover letter including all the pertinent contact information for your company and of a person authorized to make financial decisions.2. All banking information, including a Tax ID number, bank accounts and statements from the last three months and a Dun & Bradstreet number.3. At least three business credit references from suppliers or other companies that have extended credit to your company.4. At least two business and owner character references. This is to show that your business is in good standing in the eyes of the people it serves. Customer testimonials will suffice.5. Company financial statements, future financials including cash flow projections, tax returns for the last two years and even a business plan.
4. Start building business credit. Using the above credit package start applying for business credit. Apply for business credit cards and lines of credit from local banks. A good place to start will be at banks where you already have business accounts. Office supply stores as well as warehouse stores like Costco and Sam's Club or gas stations are a good place to start for credit cards. Make sure that the credit applications you fill out do not ask for a personal social security number. That is the way to avoid personal guarantees.
5. Monitor and build your business credit score and report. This is done with a Dun & Bradstreet account. Having a good DUNS record is like having a good personal FICO score. Please see resources below for a link to an article on build a good DUNS record.
