It’s Not Too Late to Build Business Credit

I spent last weekend in Phoenix at the Rich Dad 3-Day Event called Raising Capital, with Robert Kiyosaki. I had been invited to speak about
building business credit.

The event was intense. The audience came from all over the
world, including Spain, Estonia, Germany, Poland, and Canada, and
they were there to learn specific strategies for raising money for their
businesses. On Saturday, I got a taste of what it must feel like to be a
candidate on The Apprentice when we started our day at 8 am and ended it at 12:30
am the next morning. By the time we finished, I was exhausted from hashing out plans for new ventures with
small groups we had formed.

There was a lot of interest in my topic, building business
credit, which I consider an essential tool for entrepreneurs. Business credit
allows owners to help protect their personal credit ratings by keeping
business debt off of their personal credit reports, and it allows them to
negotiate terms with vendors, thus improving cash flow.

While the business credit environment has changed
dramatically over the past year, it is still very possible to build business
credit. But you must do it correctly, and you must be realistic. Here are a few
tips:

Trade credit is still the most popular type of business credit.
Trade credit allows you to purchase things you need for your business
(supplies, inventory, etc.) and pay for it later. Because so many businesses
are anxious to move product these days, you can often get very good terms.

Business credit cards are still a better bet than personal
credit cards, but they are much harder to get than they were a year ago. And you
have to watch out for sudden rate hikes if you do hold one. If possible, use a business credit
card that does not report your payment history to the major credit agencies
unless you default. This will help protect your personal credit rating from the
negative affect of high balances. But be warned: Unless your business is large
enough to negotiate away personal guarantees, all business cards will report a
negative payment history on your personal credit reports.

Business credit agencies work differently than the personal
credit agencies. Because there is no federal law that protects you if your
information is wrong, it’s important to make sure that you set up your profiles
correctly. You will be establishing credit histories with commercial credit
reporting agencies such as DNB, Experian Small Business and/or the SBFE, as
well as with specialized agencies such as PayNet Inc. (leasing industry) or
Lumbermen’s (construction industry).

Times are tough for a lot of people. But entrepreneurs are optimistic, and they are moving forward. If anyone can pull us out of this recession, it's going to be the small businesses and their entrepreneurial owners.

Gerri Detweiler
– Personal finance author and Credit Advisor for Credit.com. Gerri
contributes budgeting, debt recovery and savings information online.
She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis

Tagged as: business cash flow, business credit, business credit ratins, business credit report, credit cash flow, raising captial, robert kiyosaki, trade credit

Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.