ENHANCE YOUR BUSINESS PLAN
Quick test in building corporate credit.
HOW TO OPEN A BANK ACCOUNT AND BUILDING CORPORATE CREDIT
Your business must have the following attributes:
- You must be a corporation or an LLC. If you're not incorporated, you're not considered to be in business. Sole proprietors may not obtain business credit. In fact, sole proprietors may only access personal lines of credit.
- At least two(2) years old
- At least 5 trade credits accounts. These are trade lines that are reported to credit bureaus.
- Credit file number
- Business credit score of 70 or below
- No 411 directory assistance listing
- All resources of information, from the local business license, your website, to the Secretary of State, must have the same information about you and your company. The reported address of the company must be the same. The officers of the company must be the same.
- Debt coverage ratio of 5:1 or better
- You should have at least $10,000 in your bank account for the last three(3) months. Your Average Daily Balance(ADB) is important. The banks consider any ADB of $10,000 to $30,000 a Low-5. Balances from $7,000 to $9,999 will delay any application process. These are funds that are left on deposit with the bank, and not used for operating expenses or any other reason.
business credit
Without business credit, expect to provide the following:
- Credit references
- Financial statements and tax returns for each owner of the company
- Financial statements, prepared by your accountant, and balance sheet.
- Personal financial statements
- Assets available for collateral
- The above documents for the last three(3) years.
How does applying for corporate credit impact your assets?
Serving as a personal guarantor for business loans places your assets at risk. This means the banks may sue you to recover personal assets to cover business liabilities. Not serving as a guarantor will protect your personal assets from any possible business failure. In addition, tapping into your own savings may not be advisable if lines of unsecured credit is available to the business.
Banks may also sue you for payment, if you used personal credit cards for business activity. If the business tanks, then you’re stuck holding the bills on a personal end.
Using personal credit to apply for business loans also reduces your credit score.
