Why We don’t do Business Credit
One of our key partners here at Tradeliner in the past was highly involved in helping people achieve business credit. At one stage, we actually offered business credit services including a client login portal, a very intuitive backend and back office that guided a client through the business credit stages.
The idea is to assist people methodically step-by-step in achieving credit without using a FICO score. “No personal guarantee” credit, or No PG. Helping them get a “Paydex” score was somehow the goal, but offered little value to the consumer, and ever less to the small business owner. There were many challenges with this process and the fact is business credit is difficult to deliver, and banks simply are not likely to lend on a Paydex. I have yet to see it happen…have you?
This article will compare the two processes and show why in detail we do not engage in helping people get quote ” no PG credit”, credit that does not require a personal guarantee. Its an enticing concept, and many fall of it. but, overall FICO is king.
A FICO Score will no question be your biggest asset, and will get you funding easier with many more lenders faster.
So…here is how it goes. First, many times services will offer a shelf Corporation. A shelf Corporation is a company that could have many issues that the consumer does not realize until it’s too late, yes the Corporation may be dated, seasoned, but there could be land-mine type issues that will surface when it comes time for the application process to begin, and that is not good, after you just spent countless month building business credit.
Business Credit Rarely Delivers
This is one of the many problems with this industry is you could be building credit on a expired company that was later reinstated but the process was not completed correctly and will be flagged by business lending institutions.
Secondly, during a period of time when financing his become so strict, every “T” is crossed and “I” dotted these days is simply not prudent to pursue something as far fetched as business credit in the short term.
Yes, there are real businesses with storefronts, restaurants etc. that do establish some degree of business credit over a period of time, and this can work to their advantage, but in the and the lender will want collateral, if you don’t have a Fico you better have assets.
Adding A FICO To Your Corporate Credit Profile Works
But even then a person is better off adding a personal Fico score to support the business loan application as simply a “ghost guarantee”, which simply means a personal five ago will guarantee the loan if it defaults however the credit will not be reported on a monthly basis and affect the personals credit score during the payment.
Business credit, corporate credit, business Trade lines these are the terms you will see for this particular industry. There are some, which have proven to get business credit utilizing Seasoned Trade Lines on a corporation. Now this changes the game a little bit simply because once again you are dealing with a ” seasoned trade line “.
Even a lower final score can help support a solid business credit profile that has a number of strong business credit Trade lines that are seasoned. The primary asset here is, the final score 640 and higher, and the extensive corporate credit.
In the end, compared to a strong 750 ago score with multiple seasoned primary Trade lines, and a perfect payment history, there’s just simply no comparison in the ability and speed to get credit. We have seen many files that have open collections, medical bills, and charge-offs, even an old BK that was overshadowed by all the new and seasoned positive credit history that was recently added, but was added for the purpose of getting credit.
You have two options when building a personal credit profile, remove negative items, add new season credit history. Some credit history will be stubborn, but this does not mean you cannot apply to certain tradeline lenders to get approved. You may not get the amount that you’re looking for, but this can always change your later stage.
Business Credit Tradelines if Seasoned Can Have Impact
If you are pursuing business credit now, you may find you’re going to end up with small accounts with OfficeMax, Staples, and stores like this, they will lead you to believe that you will ultimately obtain a $50,000 unsecured credit line …and I am here to tell you this simply will not happen without a personal guarantee behind it.
I have yet to see or hear of anyone truly getting a unsecured business credit line using the common corporate credit Paydex approach.
This is how they drag you out for months and up sell you a long way, be careful of these services I have yet to see a person get a 50,000 unsecured credit line utilizing business credit without season Trade lines on any seasoned company that we have seen, but when it comes to a 750 FICO score, well thats almost an automatic approval if you have the balance of primaries and seasoned tradelines to support the file, and at 1/3 of the cost.
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