Principles of Building Business Credit

Hi Cae,

Below are my su g g e s tions:

STEPS:
1) I see from your profile that you are from New Jersey. What you can do is google the website of the name of your County. And then call them up and ask them where you can get a Business Permit. (I did a quick google search on Richfield NJ, and learned it's in the Passaic County. So call their phone # and ask for their business address, where you can apply for a business permit). I am from Texas and I don't know how it's done over there, but over here, you have to personally go to the County Office and sign a form, they call it here "Assumed Name Certificate" - or DBA (Doing Business As) or Business Permit or Business License. (If you're a Sole Proprietor this Certificate would suffice and allow you go do next steps)

Before going to the County, think about what you will "name" your business, have at least 3 names (they will check this in their database if your chosen "Business Name" has already been registered). There's a minimal filing fee, not more than $20 I suppose. Bring an I.D. too. (Driver's License, etc). This permit is going to be filed and recorded in the County Clerk's Office, which will have a DOC #, DBA #, date & time of filing.

2) Now armed with your newly County Registered "Business Name", you can then go to

www .IRS . gov (without the spaces)

website and apply for an EIN (Employer Identification #), so you can use this # (instead of your SSN) to open your business account. This will be useful as well so that when you open your Business Checking Account, this is also what you will give to the bank. When you pay vendors, or employees, and come tax time, it will be much easier for reporting. There's an article at the IRS website that explains having the EIN better than I could Applying for an EIN is quick - you can do it in minutes online. Print this document as well.

3) You can bring documents #1 and #2 to your bank of choice and open a business checking or savings account. While doing that, you can also simultaneously apply for an unsecured Business Credit Card while you are still in the bank. Your personal banker will help you with this (they usually get points or extra cash bonus for opening up new credit card accounts! ) That's how you build your business credit. In the event that you are not approved for an Unsecured Business Credit Card (most banks would be able to tell you within 15 minutes of sending an application, whether you are approved or not), Plan B is to apply for a "Secured Business Credit Card" - you can open one up with a "Deposit" of as low as $300 (your credit limit will be dependent on the amount of money you put up as "Security" for the Secured Business Credit Card.

4) Usually (well at least in my experience), after about 6 months of paying your Secured Business Credit Card on time), you will get invitations or applications in the mail for unsecured cards. (Sometimes too many! ) I have shared these tips with clients and other friends, because those who start out with trying to build some type of credit fall for those companies who say they will provide unsecured credit cards, with a limit of $300, BUT the cardmember has to get charged $150 first, or some exorbitant amount - it's unbelievable! So these tips are tried and tested and is the best and cheapest and safest route to go.

5) Once you get this started (after three months or so) you can check with Dun & Bradstreet (because of the Business Credit Card payments that you have established over a couple of months, they assign an automatic #, you can call them and ask what your Dun & Bradstreet's Number is then. Just good to know and keep for your records.

Another good source of reliable information is

www . sba . gov (without the spaces)

If your lender requires an LLC, you can (as I have seen it suggested also by other DGers) also check out

www . legalzoom . com

They have useful information out there as well. (I think rates begin at $99 + State Filing Fee). Good luck and Happy Investing! And congratulations for choosing to set up your business the right way! (By following the "RULES"! That's what I call laying a good foundation for good business! (Because you would be amazed at how others just do short cuts and just try to wing it! There are reasons WHY these laws were promulgated, to create order, to protect consumers, other legitimate businesses (who have done their own homework) and also to distinguish those businesses who choose to operate legitimately from those who do not. ) GOOD LUCK!

If you have an accountant and an attorney, it will be good to consult with them as well.

Hope this info helps.

Cris

Thanks Cris...I think I have read every post on this subject but, it seems like it is not enough.

Good luck!

You are welcome!

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