Building corporate loans is one of the immense opportunities for small business owners. It enables our organization to secure funding for unexpected expenditures, operations, growth costs, and investments.
There are so many different corporate finance categories, including business cards, small business loans, accounts receivable, merchant cash advance, credit lines, equipment lending, secured / non-secured credits, and many more.
These forms of funding have been around for a long time, so you’d think we’d know more about the business loans by now. After years of research and implementation of all aspects, several facets remain secret. And because it’s so complicated, we try to simplify details on how it operates to make it more understandable.
This has contributed to many misconceptions about business credit building. Let’s look at the top 10 myths circulating about corporate credit, beginning from the start.
10: Sole ownerships may form
A separate legal arrangement is not called a sole proprietorship. It is considered a personal extension of you instead so that you have no defense against it. Therefore, each time you apply for credit for your company, you have to include the number identifying your company with your social security number.
As such, you are liable for all debts and agreements which you enter into in the name of your company; in the name of your company, you are also responsible for all your partner actions.
9: Personal business credit does not affect the corporate veil
When you use your own credit for your company’s benefit or activity, it can lead to a “alter ego” judgment by a regulatory or financial institution and a corporate cover being pierced. This will
directly risk personal properties and make the owner or owner directly responsible for the sanctions or recovery of any debts incurred by the company or company.
8: Gain unrestricted real estate investment company credit
Certain sectors, such as real estate investment, are extremely risky with the credit offices of companies. If you intend to invest in real estate, you would want to ensure that the corporation you build for does not invest in real estate. Most banks immediately refuse you because your business is in a high-risk sector. You do have the possibility to invest in immobilizing land, but you will have to create a company that is engaged in business growth, management, business consultancy, marketing & advertisement, training and development and so on.
7: The repair of credits is illegal and can not be carried out.
False. False. Consumers have the right in compliance with the Equal Credit Reporting Act to restore their own credit. If you plan to use a credit repair company, check with the BBB your track record. Furthermore, if you pay for the service prior to rendering, make sure that the company complies with the Credit Repair Organizations Act (CROA). * Credit Union Support Organizations (CUSO), not profit-making organizations, are excluded from CROA.
6: All providers, vendors and lenders report to the credit office
Not true! Not true! There are more than half a million vendors and suppliers willing to extend credit lines to your business, but fewer than six thousand such businesses report to their corporate offices. Nor is all these businesses publishing on a monthly basis any more troubling. Some report just once every six months to the company offices!
5: All company credit cards submit to the corporate credit office
There are currently more than 500 business cards on the market, but fewer than 40 cards are issued without personal credit inspection or personal guarantee. These select cards report only to the company offices and not to your personal credit reports.
4: Each organization has a business profile with the credit office.
A Dun & Bradstreet profile allows a company owner to apply for a DUN and to include business details first. Corporate Experience and Small Business Equifax can build a profile report for your company until the lender or provider with payment experience has given a data record for your company. Before developing a profile, many other business offices require business owners to complete a registration process.
3: Buy a shelf company and get all the credit you would ever need
Shelf businesses have some benefits when it comes to credit simply because a company that is five years old has a far bigger impact on a lender than a company that was in operation for just months.
With this, a shelf company alone does not help you to get all the credit you need because several other factors are taken into account. For instance, if you’re a ten-year-old shelf business that wants a $100k credit line, you’ll need to view a bank’s ranking, balance sheet history, finance, tax returns, profit and loss reports etc.
2: What you need is a high paydex score for a credit line
While a good business credit file plays a role in qualifying banks, several other factors are considered. Your bank ranking, balance, NSF track record and personal credit ratings are included in this.
1: An 80 paydex score is all you need to obtain unrestricted financial help
This is by far one of the main misconceptions of corporate credit, since an 80 paydex score with Dun & Bradstreet is said to be 720 personal credit. Although this may be valid to some extent, some essential specifics are not stated by many. For example, you can claim four positive trade references, with the maximum credit limit of $200 on all four accounts and you still have an 80 paydex.
Since DNB’s rating system requires at least four positive trade references, so if the four limits you have are minimal then your company will hardly be accepted for thousands of dollars in cash credit, leasing credit or business lines.
In addition, having a DNB file just means that the credit reporting agencies have only one personal credit file. All you have is a personal Equifax credit file, but there’s no Transunion or Experian file. You will never be eligible for a mortgage because the creditworthiness may not have a full financial picture for lenders.
This also applies to your company. To show your organization a full credit photo, you need a profile with the three main offices.