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30 Do’s And 20 Don’ts In Starting A Small Business

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Wednesday, January 14, 2009

How To Establish Credit For Your New Small Business?

As a new business owner, you will be using your personal credit history and potentially personal assets to secure any credit lines from institutions. It is possible that you may be able to get 30 day terms on purchases from a couple of vendors, but for the most part you will be paying by credit card or COD. Over time, you will obtain 30 day terms from your vendors. As far as banks are concerned, you are likely to be required to go the SBA route which requires the business owner to nut up roughly 25% of the assets in the firm and, depending on your credit history, collateralize the loan with some assets. Even this loan will require you to personally guarantee it. As the firm grows and acquires assets, loans can be setup with security from the firm itself and if your business is strong you may be able to avoid a personal guarantee on this loan eventually.

With regard to Dun and Bradstreet, I wouldn't bother contacting them. If you have been in business a while, they will already be tracking your credit. Furthermore, if you are just starting your business, they will begin tracking your credit via the firms you do business with. The only benefit to contacting them is to see what is on your credit now. This will cost you about $300 if I recall correctly. As a small business, your credit references and history with your vendors carry far more weight with potential new vendors as you set up terms.

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