November 25, 2007 6:44 AM EST
Building credit references for your business is an important step in getting financing. Every application I take for a loan or a lease asks for "trade credit references".
How do you get them? You ask vendors for credit terms. Since you have a new business not every vendor will give you terms but you want as many as possible. You have to ask the question to each vendor "do you offer credit terms and how can I get an account?"
Major corporations are the easiest way to get credit terms. Office Depot, Dell, and many other large businesses that cater to small business all offer credit terms. Ask for an account, fill out the application, and once you`re approved use the account to purchase something. Make sure you pay their bill on time!! I can`t stress this enough.
This is how you begin to build a credit record for your corporation. As you get more accounts at the big companies and use them for purchases you can use these trade credit references to get accounts at smaller companies. Having good credit references from suppliers will be crucial. Take whatever credit terms they will give you and as you build a track record with them ask for a larger credit limit.
Credit reports go to the major credit reporting agencies from the larger corporations. You don`t want to called a "slow paying account" or "problem account" so keep your record clean by paying on time.
When businesses review your credit application they will call your trade credit references. They will ask the dollar limit of the account and whether you pay your invoices on time.
Your personal credit rating is an important factor in any business financing so make sure you`re in good standing with your creditors. Before applying for any business financing, review your personal credit reports from the three major credit reporting agencies and contest anything that is an error or mistated. Also request that old reports over 7 years be deleted if they are negative.
I don`t think the D&B account is essential to getting your company financed. We rarely ask for it unless it`s a very large financing involving millions of dollars. D&B ratings are used more for trade credit than for business loans and leases.
When you`re ready to get financed I hope you`ll remember my reply and discuss it with me.
Regional Vice President
Equity Corporate Finance, Inc.
888-498-8999 ext. 109