I'll add that in my case operated as sole proprietorship 'cuz knew wasn't going to keep that going past the expiration of the existing contracts of only a couple years' additional duration as the farm would be far too labor-intensive to keep up both.
But, I did open an AmEx credit card in the dba name to have it for travel and other miscellaneous small stuff and to have that billed to the consulting firm name and that also was then another reference to give.
I was fortunate in one way that the farm had/has numerous open accounts locally w/ all the ag suppliers, equipment dealerships, etc., and they were also useful for putting on credit applications to show payment history (if the vendors did ever both to actually check rather than just have forms on file; I've no idea if they did or not). So, if you have any of those, don't forget about them as references that can carry over to add credibility to the applications to bank for the business.
One last point...if you _don't_ have open accounts w/ your local distributors of whatever "stuff" you routinely use, consider doing so...whether it's the fuel supplier, the tire shop, a general parts/tooling house, even the local Ace Hardware you use regularly will take business credit app's...use whoever/whatever are your local suppliers to help (again, of course, assuming you have such, and if you don't consider cultivating same).
I pay them off monthly, too. I even have my checking account set up to automatically make a monthly payment of the minimum +$10 on the first of the month, to avoid a fee if I forget which I did once many years ago.
One month a year, I pay slightly less than the balance so some carries over to the next month. VISA gets a pittance in interest and doesn't increase my fees because they aren't making anything off me. It hasn't affected my credit rating.
If you do this, then be certain to use those accounts _only_ for business stuff--you don't want to be mixing up personal and business accounts and have to then justify stuff as business expense on taxes if there's obviously some stuff that isn't mixed in.
There is one thing to beware of: Business credit cards are not covered under the lability limitation of personal cards, so if someone steals the card or the number, you may be liable for the total. Unlike personal cards. There was an article in The Wall Street Journal about this some years ago. I would ask some pointed questions.
Further to that, if the bank is even a little bit hesitant, offer to secure the loan by placing a sum equal to the size of the loan into a CD which th ey use as collateral. I did that in 1984 to establish credit for my new cor poration. I think it was about $5K. That was enough to bring a flood of cre dit applications from my vendors. Getting net 30 terms just hasn't been a p roblem since then, though I prefer to use the credit card, just for the con venience of having to pay only a single bill at the end of the month.
On the other hand, in the 29+ years of being in business, I have NEVER boug ht anything that I couldn't pay cash for. I pay off the credit card in full every month, and don't owe anybody a nickel.
I had a conversation a couple of weeks ago (and I've had several such conve rsations over the years) with a banker who wanted to sell me some rather la rge loan. I told him of my cash policy, and he very indignantly asked me, " How do you ever expect to get ahead in the world if you won't take a risk?" I explained to him that my mortgaged is paid off, I have no debt, and comf ortable savings, and that I doubted that he could say the same for himself. And, by the way, I expect to get ahead by not wasting my time talking to p eople who are trying to insist that I'll never get ahead without buying som ething I don't need from someone I don't know or like.
If one is terribly concerned, one can get a separate personal CC and use that strictly for business. The problem is then twofold--
1) have to remember to segregate usage religiously for it really help any accounting-wise, and
2) more pertinent to Iggy's problem it won't do anything to aid the credit rating of the business entity which is the present issue...
I've never done that (pay interest, even a pittance, by deliberately underpaying a total due that is) and have never had any charges/fees increased owing to not paying interest (altho none of the cards other than the AmEx have any annual fees, anyway, and there's very little reason to have one that does--I've kept the AmEx solely because it accumulates frequent flier miles at a fast enough clip that it has effectively paid the annual fee through using them).
To build up credit scores, you need to pay some interest. Sucks, doesn't it? Paying off a $100 purchase at $10 for 11 or so months builds up better credit than paying off $3k worth of purchases in the same month. Go figure...
While that's said a lot, based on my experience I don't think it makes that much difference--pay off the $3k (or whatever) monthly bill for the same year and you'll have no trouble getting whatever you want approved...
Get 90 days or more behind in the same period and you're toast, however...
I'll bet Iggy's _personal_ score is just fine(+); his problem is he has no record of payment for the corporation to reference.
(+) Again, presuming there's not some other problem to negate the CC current payment history...
Gunner Asch on Thu, 04 Jul 2013 15:43:06 -0700 typed in rec.crafts.metalworking the following:
When I found out I had the wrong checkbook with me - couldn't change to a "finance deal" because the paperwork had already gone through. Family friend, so no big deal.
-- pyotr filipivich "With Age comes Wisdom. Although more often, Age travels alone."
I looked into a line of credit with our merchant bank and it took an inch thick stack of paperwork and something like $100 in service charges.
Wells Fargo sent me a no-yearly-fee credit card with a $100,000 credit line for free. Never used it, but it's there if I need it and the form was about 1/3 page.
Most of this stuff has been mentioned, but here's what's worked for me over the past 30+ years and 4 business entities, both proprietorships and S corps.
-Set up a line of credit. The fact that it exists is more important than how you use it. It demonstrates that your bank is comfortable extending credit, i.e., they've done some of the work that a prospective vendor would need to do, especially for business with no credit history. Make sure to include in your credit references the contact info of the bank officer you'd like to respond to inquiries. Let it lapse after you have a couple years history, if you don't need the financing.
-Prepare a pdf of credit references that you can email or hand to vendors. Very few places will require you to fill out their form if you supply the info they request on your form. Four vendor references, bank info, EIN, and resale certificate, if applicable, will satisfy most businesses.
-Establish open accounts with the places you're currently paying cash, especially those who know you personally. Use them as references.
-D&B is a waste of time and money for most small businesses. The number of annoying calls I've received from D&B far exceeds the requests from vendors for a DUNS number.
-When processing a credit app, most vendors seem to call only a couple of the references listed. I have 4 references on my standard form, including McMaster-Carr. I only learned recently, from someone who actually insisted on checking all 4, that McMaster does not respond to credit checks.
-As far as I know, your credit score is irrelevant. As I said above, it seems most checks involve a call to a couple references about how much credit they've extended to you and what your repayment pattern has been.
-When selecting your references, pick those that offer early payment discounts, and take advantage of it. New vendors like to hear that you pay "on discount." And where else are you going to get 1% or 2% per month on your money these days?
-Twenty years ago few of the sort of vendors I deal with accepted credit cards, now the opposite is true. When dealing with a new vendor I'll usually ask whether they prefer to spend the time processing a credit app, or pay the couple percent vig to the CC company.
-Last I knew, the advice given by someone else that business CCs don't offer the same protections as consumer CCs is accurate. Same holds for debit cards. So while a debit card on my corporate acount would be convenient, I'm reluctant to use one. (My personal debit card has been compromised twice in the past 5 years.)
Very good synopsis...agree and coincides w/ my experience when setting up the consulting as new entity almost entirely re: having the bank reference and other vendor open accounts.
I don't use the debit card part because it doesn't have the protection so while one of the cards is combo by what the bank put in their side I've never activated the PIN from my side.
I agree there's not the consumer protection on business credit cards--one has to judge on what points one wants the convenience and weigh the risks. AmEx Small Business was pretty vigilant in their monitoring and gave heads-up on out-of-ordinary activity. Of course, again, one doesn't have the $50 limit protection, granted.
Perhaps the better solution is to retain a personal card that is only used for business--don't know if comes to audit what IRS will do about questioning such expenses; never had to deal with that side of a potential "gotcha'!". I suppose I'd just sick the CPA on it and let him sort it out... :)
The bad part of that is that if something were to happen to the business the credit card debt would still be personal even though purchases were for the purpose of the business...
Was just thinking of that when somebody called in to Dave Ramsey in the last couple of minutes before the local summer-league baseball game pregame broadcast w/ a mother in precisely that predicament...how coincidental is that????
look, it's simple. Put $10,000 on deposit in the bank in the name of your business. Borrow $5,000 using the $10,000 as security. Pay it back. you will get a very low interest rate and it's reportable. Or buy something else for your business on credit, using cash in the bank to securitize the loan.
I used to maintain a separate personal card for business expenses, but got tired of the shrinking grace period and increasing late fees. Debit card only now. I keep careful track of the business expenses and periodically write myself a reimbursement check.
That never occurred to me. I guess the lesson is to never let the amount due for reimbursement get too large, regardless of whether the expenditures are made by cash, credit card, or debit card.
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