Small Business Credit Cards or Loans: Which to Use

New or small business owners have a responsibility to secure sufficient financing for the cost of current operations, as well as future growth. If your business is not entirely self-sustaining, or you need a little boost to fuel a jump to the next level, how do you know which financing options are best? You may be asking, “How do I get a business credit card for my business?” We will answer that below. We’ll address if small business credit cards a smart move? What about loans and lines of credit?

Where do you go when the bank says, “NO”?

How to get $25,000, $50,000, or even $250,000 to fund your business (even if you don’t have perfect credit).

Do yourself a favor and quit tweeting, texting, and turn off the TV for the next couple of minutes. Grab yourself a cup of coffee. Turn off all the distractions; it is that important! What I’m about to share with you is the greatest secret to getting $25,000, $50,000, or even $250,000 to fund your business – even when the bank says “NO!” and if you don’t have perfect credit.

I HAVE TO WARN YOU.

Do yourself a favor. Don’t listen to the credit card companies. Forget everything you’ve heard. You can hurt your chances of getting the financing you seek if you listen to them.

IT’S A FACT. Why? The banks and credit card companies are more concerned about raking in record profit margins and reaping huge bonuses! They don’t care about your business.

Credit card companies want you to keep piling up debt on your high-interest personal credit and hold you personally liable for your expenses.

Do you think if it takes you 10, 20, or 30 years to pay it back, they care? Do you think they care if they lower your spending limit for an arbitrary reason, and it affects your business? Or if you destroy your personal credit while you try to build the business of your dreams?

Of course not. Not when it means more money for the credit card companies! The banks are no angels here. Business lending is still at pre-recession lows. Do you think lenders are interested in taking a risk, however small it may be?

Here are the inside secrets my top paid attorneys and CPAs didn’t even know about, and I’m going to reveal it right here!

The fact is there’s a little-known secret that most small and mid-size business owners don’t know. Truthfully, most credit card companies don’t advertise it.

The CPAs I’ve hired weren’t knowledgeable about it. The business lawyers that I’ve paid up to $700 an hour had no clue. However, I’m about to share it right now, and it won’t cost you a cent.

Business credit is perfect if you are:

Just starting a business. Newer firms must have access to credit and capital and not rely on a personal guarantee. The sooner you get started, the better.

Do you have an existing business? Did you know that even if you’ve been in business for ten years and don’t have a business credit profile, you can optimize your current credit profile to get the funding your business needs – fast!

Are you thinking of buying a business or franchise? First, you should form a new entity for the purchase. Then, you’ll want to establish strong business credit, so once your sale closes, you’re ready to jump in.

I will not make you read every word of this report. Nor will I force you to jump over hurdles to learn the secret. I’m going to deliver it to you straight and then teach you how to make this secret work.

HERE IT IS: You can get access to business credit, which is usually for large corporations. Small and mid-size business owners can get the credit they need without a personal guarantee.

Whether you’re just starting a business, have an existing business, or if you’re buying a business or franchise, you can now access business credit.

You might be asking what if you don’t have perfect personal credit, and is it an issue?

The short answer is that it doesn’t even matter if you have a less than perfect personal credit score. You can still get business funding.

Guess what? You do not have to depend on your personal credit to finance your business. You can rebuild your credit and create a business credit profile to get the funding to fuel your business growth.

Think about not relying on just your individual credit cards to fund your marketing and advertising, purchasing inventory, or pay for your business expenses. You can sleep easier every night, knowing one misstep won’t cost you your total savings. You can get access to much-needed business funding so you can grow. That’s when a dream becomes a reality for many business owners.

Can you get the funding you need without putting your personal credit and assets at risk?

The answer lies within how business credit is different from personal credit.

For most business owners, business credit is a mystery. Three business credit bureaus create credit profiles. These profiles are for every business using a business name, with a business address, and they have a Federal Tax Identification Number (FIN), or they have an employer identification number (EIN) (that you get from the IRS).

Virtually every creditor relies on your company’s credit profile to evaluate if they want to extend you credit. The creditors will use this also to determine and how much credit they’ll give to you at any one time.

The Big Three Business Credit Bureaus are:

Dun & Bradstreet

Experian Business

Equifax Business

The business information provided to the bureaus is entirely not required. No business must send it in, so as a result, the business credit bureaus may not receive any information about your company and its credit (vendor payment) transactions.

The truth is you could go for decades, thinking you are racking up business credit without any of it reported to the business credit bureaus. Unlike personal credit, it does not happen automatically. This inside knowledge is why you need to know how the system works!

Most creditors want to see a score of at least 680!

Personal credit, FICO scores range from 300 to 850, with a score of 720 or higher considered excellent.

On the other hand, business credit scores have a range of 0 to 100. A score of 75 or more is an excellent rating.

Your score is not just contingent on whether you pay your vendor bills on time. The amount of credit available also impacts the score, the amount of time you’ve had a credit profile, including but not limited to the number of inquiries made on your credit profile.

The big mistake I see with business owners is that they use their personal credit to apply for credit cards, office leases, and the loans they’re going to use in their business.

This approach, unfortunately, hits their personal credit score negatively!

Let me try to explain. The average consumer who has a job gets just one inquiry per year and has 11 credit obligations (seven credit cards and four installment loans).

Business owners are not your average consumer.

They carry both business and personal credit. This fact of life usually increases the number of inquiries by a factor of two, which ultimately reduces their credit.

These business owners also carry higher balances, which reduces their available credit – and their score declines even more.

Meanwhile, they never build a business score that could help them access much-needed business credit in the future.

Fact: Although lenders will look at a business owner’s personal credit, you don’t need perfect personal credit to get started. That’s why we work with clients to help them build their individual scores while at the same time, grow their business credit profile.

MYTH #1: To get business credit, I first need excellent personal credit.

You must start with your personal credit.

Many lenders look not only at the business’s ability to repay a business loan, and these lenders will look at the individual business owner’s credit profile applying for the loan. Don’t get frustrated!

MYTH #2: My cards from American Express gives me access to business credit.

FACT: Although your credit card from American Express or your Capital One Spark may say “Business” on the card, your name under the business name tells creditors you personally guarantee it. Unfortunately, it’s still considered personal credit.

Do you have perfect credit? Most business owners don’t. You can restore their personal credit scores. It’s often more straightforward than you think.

A recent report from CNN shows that up to ninety-five percent of all the credit reports have mistakes, and at least thirty-three percent of those errors are harmful enough to cause a denial of additional credit. It happens all the time! Unfortunately, most individual credit profiles are inaccurate. The result is that many individual consumers and business owners are denied credit even though it’s not their fault.

No wonder business owners are having trouble getting the credit they need! It doesn’t have to be that way. Fix those errors. Audit your personal credit profile and go through it line by line and make sure everything is accurate according to your rights under the Fair Credit Reporting Act.

Take the time to separate your business expenses from your personal credit. This strategy reduces the debt ratio and begins to turnaround your personal credit score while at the same time building your business credit.

In many cases, you can see your personal credit scores begin to a turnaround in less than 60 days! At the same time, you can also build your business credit.

MYTH #3: If I get turned down, I’ll keep trying other creditors until someone eventually says yes.

FACT: Persistence is usually an admirable trait, but not when applying for credit. Every application counts as an inquiry. And after the 3rd one, most creditors won’t even consider a request for at least 90 days!

The key is to establish good business credit scores with all three business credit bureaus. How? You need to find the vendors, suppliers, and credit card companies that can give you a little credit without using your personal credit score as the basis.

The next step is to have them report your business payment history to the credit bureaus. Next, you must complete all the basic lender approval requirements.

Just about every lender works with an essential checklist of about 20 items.

Some of them are straightforward things like you must have a business license and a dedicated phone line listed under the legal business name with 411 directory assistance. If you’re missing just one of these 20 items, however, your loan is automatically denied.

TIP: Begin with the foundation for building business credit. Most business owners, on their own, skip this step. Before you know it, it’s 1, 2, and 3 strikes you’re out!

I’m sure you’ve heard the expression, “3 strikes and you’re out.” The same is true when applying for credit. Every time you resubmit your application because you’re missing something from that checklist counts as another strike. More than three means you must wait at least 90 days to reapply!

Not complying with one of the 20 requirements on the checklist makes it easy to decline your loan request.

Let’s face it. Creditors are looking for any reason possible to deny loans. It used to be that one out of every ten business loan applications were approved.

Begin by first looking at your setup structure – starting with your company name. Even if you’re incorporated or have been in business for a while, you need to check to see if your business conflicts with other companies or if it could potentially cause Trademark infringement.

Here are just the first four steps in that process:

Credit name search with Dun and Bradstreet.

Check online to see if there are any businesses with the same or very similar names listed with D&B. Use D&B’s, “Find a Company” search. Your business name should already be with D&B, and it must be unique

National name search with Knowx.com. Make sure your name does not conflict with other businesses nationwide using www.Knowx.com. The cost is $65, but it’s well worth it.

You need to check for trademark infringement. Check online with the U.S. Trademark office to make sure your business name will not cause a trademark infringement. You can do that for free.

Finally, you need to search the various online directories to see if your business is correctly listed. If your business does show-up, be sure that all the pertinent information is correct. If your company doesn’t show up, be sure to create a free business listing with the various directories. This acronym is commonly called the NAP. Name – Address – Phone.

You also need to check whether your business is in the 411-directory assistance, whether you have a toll-free number, whether all agencies list your business the same, and much, much more.

MYTH #4: “I just need to shop for the right bank that wants my business.”

FACT: Changing banks may do you more damage. Creditors want to see a banking history, and the longer the history, the better off you’ll be.

You see, you’re doing more than just helping you build strong business credit. You are improving the overall “health” of your business while significantly increasing your ability to succeed.

One of the best methods to do that is called factoring, in which you get cash for your receivables. Invoice factoring is a relatively easy way to increase cash flow that most business owners don’t even know exists. It’s not a loan. Your ability to pay or even your debt-to-income ratio is not crucial with factoring. This type of loan depends on your customers’ ability to pay what they owe. You get your cash in 24-48 hours!

One of the significant components lenders look at is your bank account. Did you know that everything in business credit and business lending starts from the moment you start your company’s business bank checking or savings account?

Your company’s banking history is vital to your future success in getting a business loan.

WARNING! DO NOT MOVE BANKS. The longer your banking history is, the better.

Like anything else, there’s a right way and a wrong to build business credit. Our system walks you through the process of building strong business credit scores with the Big 3 among business credit reporting agencies.

Many businesses set up as sole proprietors or partnerships and operate for years under the mistaken assumption that they have business credit. Wrong! The erroneous assumption is fostered, in part, by the business credit reporting agencies because they give a sole proprietor a credit file and even assign business credit scores.

So why isn’t it reported as business credit? Because all loans and credit lines extended by lenders, banks, business credit card holders, etc. are tied directly to sole proprietor or partner personally. You could be doing business, but you’re not truly a “separate business.”

MYTH #5: “I already have a Paydex score with Dun & Bradstreet, so I have built business credit.”

FACT: It’s true D&B is a valuable part of the equation to building business credit, but they only represent one-third of the task. Experian and Equifax are of equal value, and they serve different markets.

THE SOLUTION? You must build business credit scores separate from your personal credit. Your business must be an incorporation (INC or S-Corp) or a limited liability company (LLC). When you build business credit, the business loans and lines of credit you secure are not tied to your social security number but your EIN and will not report to your personal credit profiles.

It’s also important to understand which credit agencies will best serve your financing needs. If your objective is to obtain business loans or lines from a bank, then Equifax is the most critical component of your credit building process.

Equifax operates the Small Business Financial Exchange. This “exchange” is where all the banks share the business data amongst themselves. The challenge is if you do not build business credit scores with Equifax, you may be hurting your chances for real bank business loans.

Many business credit card providers, leasing companies, vendors, and even commercial landlords rely heavily upon Experian BIS (Smart Business Reports).

We bet you did you know that building business credit is not complete without having a robust Experian Smart Business profile and score.

Vendor credit or tradelines are among the fastest and easiest ways to establish business credit.

A vendor LOC (line of credit) is when a company (vendor) offers your company a line of credit on “Net 30, 60, or 90” day terms. This line provides you with an opportunity to buy their goods or services up to a maximum pre-determined dollar amount, and you have thirty, sixty, or ninety days to pay the bill in full.

So, if you purchase $500 worth of goods today, then that $500 is due within the next 30 days without interest.

It’s a terrific way to ease cash flow and begin reporting to the business credit bureaus. When the first “Net 30” account reports your tradeline to Dun and Bradstreet, the DUNS system automatically activates your file and your number (if it isn’t already).

WARNING! There are more than 500,000 vendors that extend business credit, but only 1.2% of them report to the national business credit reporting agencies.

The objective is to have at least five Net 30 accounts opened – and reporting. They don’t have to serve 100% of your needs initially.

Later, once your scores are stronger, you can add better vendors as you need them.

Four tips to building vendor credit:

There are enough vendors that offer credit to choose from so that if one or two insist on opening an existing credit file first, move on to another.

Do yourself a favor and always try applying first without using your SSN. Some of the vendors will request it, and some will even tell you on the phone that they have to have it. Try submitting it first without it and use only your EIN.

If a vendor asks you to place an initial prepaid order first, do it. Then move on to having a Net 30 account opened.

Another tip is to pay your vendor accounts as close to Net 15 days (and not wait until day 30). The quicker you pay the vendor credit, the stronger your business credit scores will be.

Unfortunately, we see claims all the time from advertisers who say they can build business credit in 30 or 60 days, but that isn’t the truth. We wish it were faster. It usually takes ninety to 120 days until the accounts report.

As the business owner there is nothing you can do to accelerate it. If anyone tells you otherwise, is not being honest with you.

You must be patient. Allow the proper time for the vendors’ reporting cycles to get into the system. It takes ninety to 120 days to build business credit scores. It typically takes three cycles of “Net” accounts reporting go create credit scores where you’ll see the impact on your business credit scores.

Create national revolving credit accounts

To build business credit, you need to obtain three business revolving credit card accounts. These revolving accounts report to the business credit agencies in different ways and carry more weight than the vendor credit accounts.

A business revolving credit account is one that allows you to pay a “minimum” per month and not the full outstanding balance. These accounts are another terrific tool to ease cash flow. They usually report to Experian and sometimes to D&B and Equifax. Bet you didn’t know this: there are more 500 business credit card issuers, but only 40 award credit without a personal guarantee! We give them to you so you can avoid the hassle and frustration while building your business credit.

These revolving credit accounts will help build your business credit on a larger scale than just the Net 30-day vendors alone because of how they report.

WARNING! There’s no point in applying for revolving credit accounts if you haven’t done steps one through five.

Why?

Because unless you do, you’ll get declined. These revolving accounts will be checking to see that your company established its business credit files.

There is a good chance that they may check your business bank rating and look to see if you have open vendor lines of credit. Lastly, in many cases, they will also want to see that your Dun & Bradstreet business file is open.

TIP: It doesn’t matter which revolving credit card accounts you open and make purchases. The key is to begin establishing the accounts.

Get a bank loan that you can use to access cash and improve your business’ credit rating. Establishing “bank credit” makes your company more convincing in the eyes of almost all other lenders.

It’s similar to the day you personally get approved for a home loan. It’s the day, and the event, that makes ALL other lenders take notice and puts you on their credit map.

However, too many business owners think that obtaining a bank loan is an impossible dream. Well, it isn’t.

IMPORTANT: Do not let your balances exceed 30% of your available credit. Anything above that will negatively impact your credit score.

Here’s another secret I bet you’ve never heard before: The credit card issuers don’t report your “available” credit limit. The advantage here is most potential lenders assume your “available” credit limit” is the “highest reported balance” they find on your business credit profile.

What that means to you is when you initially receive an actual business credit card, the strategy is to run it up to its limit (not over). Once you do that and after you receive your first bill, you need to pay it down to the 30% level immediately.

Moving forward, you need to maintain a balance of around 30% or less to keep the optimal level to build your business credit score. Here is the final point.

Whether you’re a newer business owner or a veteran business owner and you want to separate your personal credit from your business credit, you can do it.  One strategy is to apply for business credit cards.

Small Business Credit Cards 

It’s essential to choose a financing option that will help you to build credit for your business, rather than yourself. Business credit cards for new companies or even cards for startups may require you to have good personal credit to qualify but will help you to build credit for your business as you continue to use the credit card.

This option will enable you to separate your personal and business credit scores and finances, as well as establish the funding you need for your business and qualify for more substantial loans in the future.

Can I Use My EIN to Get a Credit Card?

Yes, you can get small business credit cards with EIN. An EIN, or Employee Identification Number, is helpful when applying for any funding for your business. You will need it for most business transactions. Using your EIN for all of your business-related financial operations will help you to build credit for your business and keep your personal credit from being affected.  If you are careful, you can even get small business credit cards without a personal guarantee.

What is the Easiest Business Credit Card to Get (even with poor credit)?

If your credit score is less than ideal, you will most likely want to explore the same options for business as you would for personal credit. Usually, that means a secured credit card. Secured credit cards give you more control over things like the spending limit and often have lower fees. They are also a great way to build business credit as long as you are consistently making on-time payments.

Here is a list of the more prevalent business credit cards.  Check what are the minimum requirements before applying and look for the best small business credit card offers.  You may even see if you can find small business credit cards without a personal guarantee.  (The list below is a sample of business cards available and we are not recommending or endorsing.)

  • Chase Ink Business Unlimited Credit Card
  • Chase Ink Business Cash Credit Card
  • Chase Ink Business Preferred Credit Card
  • Capital One Spark Cash for Business
  • Capital One Spark Miles for Business
  • American Express Blue Business Cash Card
  • The Business Platinum Card from American Express
  • American Express Business Gold Card
  • The Blue Business Plus Credit Card from American Express
  • Capital One Spark Cash Select for Business
  • Bank of America Business Advantage Travel Rewards World Mastercard Credit Card
  • Marriott Bonvoy Business American Express Card
  • Delta Reserve for Business Credit Card
  • Platinum Delta SkyMiles® Business Credit Card from American Express 
  • Hilton Honors American Express Business Card

Can you get a business credit card with bad credit?  Believe it or not, the answer is, “Yes.” Here is the strategy.

What can I do if I do not have the personal credit score to qualify?  Many savvy business owners will find a credit partner. A credit partner is a business partner, perhaps a family member, or even a good friend who is willing to help you.

They do this by guaranteeing the credit lines for you.  In essence, you are borrowing their excellent credit until you can strengthen your personal credit score. The good part is that once you rebuild your FICO score to 700 or better, you can take over responsibility through small business credit card balance transfer or other strategies.

Don’t be shocked when we tell you some 40% of the business owners, we know start with a credit partner.  The only requirement (besides their ultimate responsibility for the payments if you default) is that this person becomes the registered agent for your company.

Benefits of Using Small Business Credit Cards

One advantage of using business credit cards to make business-related purchases is that you may be able to earn rewards. Some cards will offer low or no interest rates starting, and some will give you cashback or travel miles for airfare. Try researching “best business credit cards for travel” or “best small business credit cards 2020” before making a final decision to see if you are eligible for deals or benefits.  See which charge cards for business offer the best rewards rates.  As mentioned above, these can be travel rewards and cash rewards; however, they may come with higher annual fees.  Do your homework first.

What Are My Other Options for Small Business Financing?

In addition to small business credit cards, there are a few options you should consider while doing your research. Depending on your credit score and history, and your individual needs, you may be able to qualify for something that works better for you. The best approach is to meet with a financial advisor or a lender who specializes in working with small businesses. They can answer questions and explain all your options to you in detail, plus make recommendations based on your situation.

Business Line of Credit

A business line of credit can be for the same things as a business credit card: payroll, expansion, inventory, equipment, etc. You can withdraw actual cash rather than solely paying with credit, and you may be able to get a higher credit limit.

Business Loan

You may also qualify for a small business loan, which will provide you with a set amount of funds to repay in monthly installments. This type of funding is extremely versatile, and can is customizable to your financial situation. It can also be for virtually any business expense, from seasonal staffing or operational costs to a renovation or equipment upgrade. A business loan will also help you to build good credit for your company.

Learn more about business financing options and business credit cards by scheduling an appointment with Sunwise Capital. We specialize and are experts in helping small businesses get the funding they need to succeed.

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