Wealthy & Wise: Why You Need Business Credit

About the Video: Wealthy & Wise: Why You Need Business Credit

Entrepreneurs need business credit to finance their operations, make investments, and grow their business. Business credit can help entrepreneurs to access funding for various purposes, such as purchasing inventory, expanding their premises, hiring staff, or investing in new equipment. Moreover, having a separate business credit profile can protect entrepreneurs’ personal credit rating and assets from any potential risks associated with their business activities. Overall, business credit is essential for entrepreneurs who want to build a successful and sustainable business.

Prefer to read? A full transcript is provided below.

Cort:
Hello and welcome to another episode of Wealthy and Wise. I’m your host, Cort Christie, founder of NCH. Today we’re going to be talking about business credit. Why every small business owner can leverage the growth of their business and accelerate the growth of their business by establishing proper business credit and then using it in ways to really allow them to access capital that would be never available to a startup. So, with me to help me package this, we have Danielle Creamer and she is our in-house expert, our guru of business credit and the manager of our business credit team. Welcome, Danielle.

Danielle:
Thank you. Thanks for having me.

Cort:
Absolutely, I’m glad you’re here. So, business credit is oftentimes misunderstood. People think it’s like, oh, I need a credit line. Or they think it just means I could get access to something. But there’s a whole foundation to preparing to even get access to money for your business that has to be laid first. Can you tell us about what that is and kind of how that, why it’s been an important to a small business owner?

Danielle:
Yeah, absolutely. This is probably one of the most important pieces of our process as we begin to build our clients business credit profile, reregister all of our clients with the business credit bureaus. And so, in order to do that, they do have to meet the minimum requirements of the bureau. And that is to have an established physical presence within the state that you’re filed to do business in. You do need to have a business phone line set up and registered underneath the LLC. You do need to have some sort of web presence, whether that be a website or if you have your telephone number listed with the 411 business directories, it would be ideal. And then you also need to have your business bank account set up. You need to be able to make all of those credit transactions out of the business bank account. So very important piece of the process to have set up so that Dun and Bradstreet knows and that the business credit bureaus know that you are a legitimate business and that you have the basic fundamentals to be able to start building and accessing credit for your company.

Cort:
One of the things that I think a lot of our viewers are thinking, is my business that I have or I have an idea but when can I start the process of building business credit? Do I have to open my store? Do I have to have actually cash flow coming in? What’s the timing of it?

Danielle:
Really great question. I usually tell clients you want to start building business credit right as soon as you establish your LLC within the state. It’s better to start that process early on and not needed at some point in time. But you’re behind the ball and don’t have any credit established yet to show what your business is even capable of at the smallest or lowest level.

Cort:
Interesting. I think, you know, so many future business owners or people that have a business today that are just getting started don’t understand the mechanics of getting this set up. And I oftentimes, you know, will have conversations with individuals to say, it’s just like what you did when you were young, when you got your first credit card and you didn’t have a FICO score until you established your first credit line. And this is just like that. It’s like the teenager or the early 20 something that, you know, got their first retail card. Maybe it’s at a clothing store or maybe it’s, you know, a secured card or something from the bank that they’re working with. But it’s really quite a similar process. But it’s very intentional the way that you’ve developed this program. And it accelerates what we consider great credit, quickly, you know. How do you do that? How do you speed that process up for a business that just got formed that isn’t actually operating yet?

Danielle:
Yes. So, we’ve actually tailored our program with many different vendors that our clients can access from our proprietary system that we’ve established. And we do separate all of those different vendors into the tiers based upon what the company will qualify for. And so in the Tier one process, basically the qualifications that you need for those vendors is just to be compliant, be compliant with the business credit bureaus, have the basics of a company, and then we walk our clients through that process and how to apply for that line of credit. How do you utilize that line of credit, manage it? When do you pay back these invoices for the best reporting results? And as soon as they have some of that activity hit that business credit report, they’re able to establish that A-plus business credit score. Usually within a three month, sometimes it will take clients up to six months to establish a score.

Cort:
And that’s really quick.

Danielle:
It is.

Cort:
You’re basically giving somebody like with a FICO score, you know, we always consider a FICO score above 750, as you know, great credit. You can pretty much apply for any credit cards that are out there, maybe go to the bank and get a small line of credit or a loan from the bank for your business. But you do that in 90 days to six months for a startup that’s just getting going. That’s amazing. That’s incredible. Now, you mentioned something earlier that as a new business, that there’s some fundamentals that you have to have in place. And for many, you know, people just getting going or just forming an LLC or a corporation to get started, it seems, dotting the list of things that they have to have in place before we can really help them build their business credit. How do you make that easy for them?

Danielle:
Yes, we outline everything that they need, so we give them recommendations on different sources that they can tap into to utilize, to make that process easy for them. We try to keep that cost as low as possible because we know that these are startup companies that are coming out and a lot of times there’s not a lot that’s invested into the startup process. So, we walk them through it, we give them those resources, make it easy for them, and they just basically jump through those hoops.

Cort:
Yeah, because I think there’s so many solutions for small business owners today in the modern world to get them, you know, a business address, a phone number. Websites can be generated and built very rapidly, whether you do it yourself or hire somebody to do it for you. And we’ve got all of those resources. Your team knows how to get this done very quickly so that you can move them along that credit building path so rapidly. Talk about some of the typical clients that you work with. Can you give us kind of a profile of a couple examples of people that have done really well and how do you coach them through that process?

Danielle:
Yeah, one of my favorites. We had a client establishing a plumbing business, and so he needed to access different lines of credit to be able to support that plumbing business. As he starts to lift off and get his clientele started and start to do these jobs and things. And so he went through our program, he was able to utilize the different vendor credit accounts that we have outlined in our launch pad. He was able to access up to $250,000 at the end of our process. And so that was huge for him, right? To be able to offset that cost and be able to put that on to the business, utilize those vendor credit accounts to buy the supplies that he needed to supplement and get the job done. So, he’s probably one of my best success stories we’ve seen in our credit department.

Cort:
That’s really cool. And you think of, you know, so many people starting a business, whether they want to start an Amazon store or a Shopify store, and they have to buy products, you know, and if they have business credit, they won’t have to pay for it the day that they purchase it. They can get a line from the vendor, sell the product, make money, then pay the vendor. You don’t get to do that if you haven’t established business credit. Or you think of somebody just starting a salon, whatever type of salon it is, you’ve got inventory, you’ve got product. And instead of having to pay for that product and coming out of pocket, you can get a credit line or trade line with the manufacturers of the products that you’re buying. They’ll fill your shelves for you as long as you’ve got business credit and they will then extend it to you. You know, and the list goes on and on. I think of all of our contractors like a plumber, a painter, somebody doing landscape, or cutting lawns. You know, if you need to go to a Home Depot or Lowe’s or some other store having a business credit line, that’s something that you can take to these major suppliers and allow your business to accelerate and grow faster because you’re not having to come out of your pocket. Or if you don’t have the money, you’re kind of stuck in, you have a really slow building business and this will accelerate the growth. It’ll create a lot of opportunities for you to really be successful in business, which is really neat. So, as you go through the process and you talked about this example of the plumber, once they get to the end, what kinds of, you know, everybody wants cash, right? Everybody wants big bucks available to them. You know, what kind of things do you make available if they’re successful at going through the process with us?

Danielle:
Yes. So, our team will walk them through, you know, different resources that they can tap into to access that type of cash, if that’s what they’re looking for. You want to make sure that you have that business credit score so that you do qualify for some of the resources that are available to our clients once they are through with the program.

Cort:
Yeah, interesting. And I know that, you know, credit cards with real money attached to them is part of, you know, the outcome of building successful business credit, potentially walking in the door of a commercial bank and all of a sudden saying, here’s my business credit, here’s what I’m doing, and that’ll help accelerate the likelihood of getting a loan for your business. There’s just a lot of things that you can take advantage of. Well, let’s talk about the process that you take them through. So, we do a lot or you do a lot and your team, your amazing team, to move people through this path. But it’s up to them to be responsive. Is that right? So, it’s sort of a partnership. Tell me how that partnership works with the customer and your team.

Danielle:
Yeah, absolutely. It is definitely a partnership when it comes to walking our clients through these different steps of the process. In order for us to be successful, we need your support as a client. And so we do set up weekly appointments with all of our clients to check in, see where you’re at with things. How are things going as far as the steps that we put in front of you all the way through the last tier of vendors that we have them in. And so, yes, client participation is huge in this process.

Cort:
And you and your team support a lot of people going through this process. How many are you supporting right now?

Danielle:
Right now, we have about let’s say we’ve got about 500 clients who start the year off with. Usually, we look at about 2,500 clients by the end of the year. So…

Cort:
That’s a lot of people you’ve moved through.

Danielle:
Yeah.

Cort:
And helped get their credit set up for their business. And I think it’s just so important that people understand that this is separate. This is not your personal credit, this is your business credit. You need to be intentional about it. You need to be careful with it. You know, unlike all the reasons why you can hurt your personal credit, it’s really simple with business credit. And what is it?

Danielle:
Yes.

Cort:
What’s the magic?

Danielle:
Well, with business credit, there are some similarities to personal credit and how it’s managed and how it could hurt you on the business side of things. So, you want to make sure you’re maintaining, you know, healthy accounts. You want to make sure that you’re paying them on time, that you’re not defaulting on any of these accounts. You want to make sure that you’re not using your personal credit every time when you’re trying to go after some of these vendor credit accounts. You want to be able to use the EIN number, use the business’s information to access some of these accounts. So, some of the same methods you would use to, you know, manage healthy personal credit habits, you’re going to translate that over to the business as well. So very similar.

Cort:
So, our start-ups that don’t have any money coming in their business yet, what do they purchase? What can you help them to do to actually establish some business credit when they don’t have money yet operating in their business or income coming in? How does that work?

Danielle:
Yeah, so what we do is you’re still, you have to invest into your business, right? And so, at the end of the day, what matters most is how you go about in setting up your business accounts. What you purchase with your business credit accounts, isn’t necessarily put to the forefront, Right? So, a lot of these companies are just starting up. So, you may need some cleaning products for your company. That’s an easy way to access a line of credit and still build business credit, even though you don’t have a lot of income that’s coming in. What you’re putting into it is an investment into the company. So, we can count that as a part of it and still access some of those accounts to start building credit.

Cort:
That’s really interesting. So, I know there’s a lot of tricks that you have to help people kind of speed up this process. We won’t give away all the secrets on this program today, but I know with the accounts that you manage and, you know, the hundreds of people that you’re working with every month that come through our doors and choose to utilize the service, it’s really amazing how successful you and your team are. And congratulations for that and your fantastic program and your management over that team. So, thank you.

Danielle:
Thank you.

Cort:
Absolutely. And for everyone listening today, I know that there is a way to set up business credit that is efficient, that’s expeditious, and that’s done right. And you can bumble along and kind of figure it out on your own. If you choose to. Or, you can use the services of Danielle and her amazing team at NCH. Call us even if you’re an established business, we’ll work with you on setting up your business credit or making sure that you accelerate the access to capital that you want for your organization. We’d love to hear from you, love to work with you. Call in. It’s free to talk to any of our consultants here about what you’re looking for specifically in this case, business credit. Ask them how it works. Ask them how much it costs. And I know you’ll love Danielle and her team. They do a fantastic job with all of our clients. So, I appreciate each and every one of you for tuning in today. Please like and subscribe to this program. It helps us spread the message. And reach out to us if you have any questions about forming a business entity, about the advantages of a Nevada business entity, or more importantly today, about setting up business credit. Thank you for tuning again to another edition of Wealthy and Wise. I’m your host, Cort Christie.

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.