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There is a story that is often told, but is rarely internalized and put into practice. It‟s a
story by which all successful investors live—and it‟s the same story by which most
hopeful investors fail. The story is a simple one, often replicated by the successful, and
frequently dismissed by the insolvent. In The Fast Track to Business Funding, Gabriel
Shirey clearly outlines the steps taken by the rich to build and maintain a flourishing
business. All business owners should spend more time studying the commonalities and
processes by which successful investors acquire cash and use other people‟s money.
They should ask themselves:

“What do successful business owners know that I don't?”

“What are they doing that I am not?”

“How did they get started?”

“Who advised them, and what can I do NOW to change the path of my own financial

We understand why you would consider spending your hard-earned money on a business
credit-building program. That‟s why we are determined to prove that choosing The Fast
Track to Business Funding instead is one of the smartest—and most cost-effective—
investments you may ever make.

This book demonstrates step-by-step how you can have access to other people's money
without using your personal credit—without any risk—no matter what your current
circumstances. It doesn‟t matter if you‟ve just declared bankruptcy, if your personal
credit is embarrassing to even discuss, if your properties are in foreclosure, or if you've
never even invested. When you understand the steps followed by ALL successful
investors as outlined in this book, your current situation will have no bearing on how
large your business will grow, the funds you can access, or the life you can live.

                                                          The Fast Track to Business Funding | 2
About the Author

Gabriel Shirey has changed the mindset of investors across the world, and the way they
invest. The Fast Track to Business Funding will transform the way business owners
understand their financial options, explain in detail how to obtain massive amounts of
funding as quickly as possible, and give you—the business owner—the tools you need to
build and sustain a vibrant company in any economic climate.

                                                     The Fast Track to Business Funding | 3

1   Business Credit 101
    What Is Business Credit For?
    Who Is Business Credit For?
    Business Credit: A Must for Small-Business Owners

2   Building the Foundation
    Putting the „Business‟ in „Business Credit‟
    The Benefits of Incorporating

3   Finish Your Homework before You Play
    The Steps to Business Credit
    Applying for a Federal Tax Identification Number
    Obtaining an EIN
    Opening a Business Bank Account
    Must-Haves for Establishing Business Credit

4   Who's Behind the Curtain?
    Dun & Bradstreet
    Other Bureaus

5   Can You Count to 100?
    Applying for a D-U-N-S number
    Your D&B Business Credit Profile
    PAYDEX Score
    Your Credit Profiles with Experian and Equifax

                                                  The Fast Track to Business Funding | 4
6    The Business Credit Dos and Don’ts
     The Dos and Don‟ts with D & B

7    White-Out May Be Necessary
     Correcting or Updating Your Profile
     Removing Information from Your Profile
     Removing Financial Information
     Removing Negative Reports
     Removing Collection Filings
     Making Changes to the „Public Filings‟ Section

8    The Proof Is in the Pudding
     The 5 Cs of Creditworthiness
     Business Plans
     Bank References

9    Look before You Leap
     Obstacles to Advancing the Business Credit Structure
     Payment History
     Personal Credit Checks
     Personal Guarantees

10   Net Accounts
     Advantages and Disadvantages

11   Revolving Accounts
     Advantages and Disadvantages

                                                 The Fast Track to Business Funding | 5
12   Business Credit Cards
     Annual Income
     Business Credit History
     Advantages and Disadvantages
     How Much Credit Can You Get?

13   Applying for Business Loans
     Different Types of Loans
     Advantages and Disadvantages
     SBA Loans

14   Connect the Dots
     Timing Is Everything
     The Business Credit Blueprint: Credit-Level Schedule
     Level One: Net Accounts
     Level Two: Revolving Accounts
     Level Three: Business Credit Cards
     Level Four: Business Loans

15   Conclusion

                                                 The Fast Track to Business Funding | 6
The Fast Track to Business Funding

                     The Fast Track to Business Funding | 7
1 Business Credit 101

What Is Business Credit?

Business credit is available for entrepreneurs that incorporate or form a limited liability
company (LLC). When you incorporate your business or form an LLC, your company
becomes a separate legal entity. As such, your corporation is eligible to obtain its own
line of credit—known as “business credit”—that is completely separate from your
personal credit, your personal finances and your personal liability. Business credit allows
your corporation or LLC to obtain its own credit cards, business loans and other credit

Who Is Business Credit For?

The concept of business credit was created for corporations and LLCs. Since corporations
and companies have distinct existences apart from their owners, a distinct line of credit
naturally follows suit. A corporation or LLC can build up a business profile with business
credit bureaus and establish a business credit score, just as an individual can build a credit
profile with credit bureaus like Experian and Equifax to establish a FICO score. When
potential lenders extend a line of credit to a corporation or LLC, they will usually pull an
assessment of the company‟s creditworthiness from the business credit bureaus.

                                                        The Fast Track to Business Funding | 8
Business Credit: A Must for Small-Business Owners

Business credit isn‟t just a nice thing to have as a business owner. It‟s essential to have in
order to remain a business owner. That‟s because in order to make money, a business
must first have money. This can be a catch-22 for many newly formed businesses, as the
Small Business Administration reports that lack of capital is the main reason 80 percent
of all small businesses fail within their first two years of business. And of those
businesses who survive their first two years, 90 percent of them fail within the
subsequent five years—usually because the business cannot finance growth. Every
successful business will find it necessary, at one time or another, to borrow money to
finance its growth and livelihood. Without business credit, many small businesses cannot
produce the capital necessary to survive.

Financial institutions prefer to lend to businesses that aren‟t experiencing financial stress.
Therefore, it is imperative for you as a business owner to take advantage of business
credit opportunities, even when your business is not in need of the level of credit offered.

Protect Your Personal Credit

Without business credit, a small-business owner must rely on his or her personal credit to
finance a business. According to the Small Business Administration, 92 percent of small-
business owners who are trying to grow their business are damaging their personal credit

Small-business owners do the most damage to their personal credit when they run their
businesses as sole proprietorships. Sole proprietors have to use their personal credit to
fund the growth of their businesses. This means that every business trade line comes at
the price of a personal credit check. Establishing 20 to 30 trade lines within the first year
of business is not unusual, and trade lines are essential to building up business capital.
However, hard pulls (third-party credit checks) damage personal credit, and can severely
limit or stop the growth of the business.

                                                        The Fast Track to Business Funding | 9
Business Credibility

Many banks, vendors, and lenders will not do commerce with sole proprietors or small-
business owners that have no established business credit. These associates will want to
see a credit history in the business‟s name. A credit history that is co-mingled with the
owner‟s personal credit looks unprofessional, and that can be an automatic deal-breaker.

Saving Money

Corporation and LLC owners who have established business credit save thousands of
dollars by qualifying for lower interest rates! This is because business loans usually come
with much lower interest rates than personal loans. Even in the beginning stages of
establishing business credit, simply having a business credit profile will lower a
business‟s interest rates significantly.

For example: Let‟s say you are a small-business owner with a personal-credit FICO score
of 650 (the national average), and you apply for a $125,000 business loan without having
established business credit. The lender cannot verify your business‟s credit history and
classifies you as a “high-risk applicant,” so your loan is assigned to a high-interest-rate
bracket of 13 percent. On the other hand, if you were to have the same FICO score of
650, along with a business credit profile, the interest rate would most likely be cut in half.

                                                       The Fast Track to Business Funding | 10
Look at the financial difference between the two scenarios over a ten-year loan period:

          Terms                    With a Business              Without a Business
                                    Credit Profile                 Credit Profile

       Loan Amount                    $125,000.00                   $125,000.00

       Term of Loan                    10 Years                       10 Years

       Interest Rate                      7%                             14%

    Monthly Payments                    1451.31                        1940.83

      Total Payments                   174157.20                     232899.60

  Business Credit Savings             $58,742.40

                                                     The Fast Track to Business Funding | 11
2 Building the Foundation

Putting the „Business‟ in „Business Credit‟

Before you can start building business credit, you must have a business for which to build
it. Whether you are planning to start your first business venture, or have been running
your own business for years, you cannot build business credit as a sole proprietor.
Business credit was created expressly for corporations and LLCs. As previously stated,
only those who are incorporated or have formed an LLC may obtain business credit. Sole
proprietors (DBA‟s) or partnerships do not qualify. Therefore, forming your business as a
corporation or LLC is the first step in obtaining business credit.

There are a few formalities and procedures you need to follow when incorporating your
business, and it is crucial that you do not proceed with your efforts to obtain business
credit until these steps are completed. Here‟s the good news: besides being necessary for
obtaining business credit, incorporating is the best thing you can do to protect yourself as
a business owner, protect your business, establish your business as legitimate and
professional, and save thousands on taxes!

                                                      The Fast Track to Business Funding | 12
A Brief Introduction to the Corporation and Limited Liability
Company (LLC)

When you go into business, the law demands that you elect a business entity under which
to structure. Four main business structures exist in the United States. These are:

             Sole proprietorship
             Partnership
             Corporation
             Limited liability company (LLC)

Sole Proprietorship

The sole proprietorship is the most basic business structure available. When you were
selling lemonade as a kid, you would have been considered a sole proprietor. This is a
business entity with no legal separation from its owner. The owner is the business, and
the business is the owner. Basically, a sole proprietor is any Joe Schmoe with a business
license. Of all the business structures, the sole proprietorship takes the least amount of
effort to establish and operate. A person need only obtain a business license to be a sole
proprietor, making the monetary investment to form this business structure lower than the

Ease is the only real advantage of the sole proprietorship, and that advantage does not
come close to making up for the numerous disadvantages of this business structure.

The first disadvantage of being a sole proprietor is a loss of credibility. No one takes a
sole proprietor seriously. Remember that the kid selling lemonade is considered a sole
proprietor—hence, there is a juvenile stigma attached to the business owners of sole
proprietorships. The IRS won‟t even refer to sole proprietors as business owners; rather,
they call them “hobbyists.” Sole proprietors are notorious for going out of business
quickly, so any sole proprietor that actually does makes some money arouses the
suspicions of the IRS. That is why sole proprietorships are audited more than any other
business structure.

                                                      The Fast Track to Business Funding | 13
Because sole proprietors are not taken seriously, they report having a hard time
establishing business-to-business dealings. This difficulty leads to hundreds of missed
opportunities and can be absolutely detrimental to establishing business credit.

Perhaps the biggest missed money-saving opportunity in a sole proprietorship comes in
the form of taxes. Today‟s economy is fueled by small businesses, so the government
tries to encourage the growth of the small-business industry by offering numerous
deductions to small-business corporations and companies. Most of these deductions are
not extended to sole proprietorships—after all, what‟s the point if the majority of them do
not make a profit?

While a loss of credibility and the lack of tax deductions are definitely disadvantages of
the sole-proprietorship structure, there are some outright dangers that threaten you and
your entire family‟s livelihood when you‟re running a business under this structure. This
brings us to the next, and by far the most disadvantageous, sole-proprietor drawback:
unlimited liability.

A sole proprietorship has no legal separation from its owner. Therefore, sole proprietors
are personally liable for any lawsuits that may be filed against their businesses. A sole
proprietor could potentially lose his or her house, investments, car, dog, etc. if the
business is found liable in a lawsuit.

Aggravating this business handicap to paralyzing proportions is the pro-lawsuit society in
which we live. Sue-happy lawyers are attracted to sole proprietors because they can go
after two sets of assets (the business and personal assets of the owner), thus killing two
birds with one stone. Furthermore, it is easier to sue the owner of a sole proprietorship
than to sue the owner of a corporation or company. This is because sole proprietors‟
business information is also their personal information. And, this information is public
record—making sole proprietors that much easier for lawyers and “serial plaintiffs” to
find and terrorize.

                                                       The Fast Track to Business Funding | 14
Finally, because a sole proprietors‟ personal identity is the easiest to find, it is also the
easiest to steal. Sole proprietors are victims of identity theft more frequently than any
other type of business owner.


A partnership is a business structure owned by two or more people. These people,
referred to as “partners,” agree to share the investment in a business enterprise. Each
partner can put forth a different percentage of the investment than the others. The losses
and profits are split up in proportion to each partner‟s investment, and are taxed as if each
partner were an individual sole proprietor, using pass-through taxation.

Since partnerships basically consist of two or more sole proprietors going into business
together, these companies are afforded the same advantages as the sole proprietorship.
However, they are also exposed to the same dangers, and hindered by the same
disadvantages. One additional risk of a partnership is that one partner can be held
personally liable for litigations brought up against the other partner, regardless of whether
or not he or she participated in the alleged misconduct.


A corporation is a legal, separate entity that provides limited liability to its owners. When
entrepreneurs form corporations or organize limited liability companies, they are virtually
creating another “person,” one that is recognized by law as a legal entity separate from
the person(s) who formed it. As a virtual person, the corporate structure has its own
identity, including its own name, its birth certificate (articles of incorporation or
organization), its own address, and even the equivalent of a Social Security number.

Though the corporation is not an actual person, United States law affords this structure
the same rights as if it were a human. Likewise, the corporation can be held responsible
for any actions that may infringe upon the human rights of others. Sole proprietors have

                                                        The Fast Track to Business Funding | 15
no distinction from the businesses they run, making their personal acts and the acts of
their businesses one and the same. In contrast, the owners of corporations act only for, or
on behalf of, their businesses from a legal standpoint. This separation between
corporation and corporation owner is called the “corporate veil.” The distinct existences
created by the corporate veil provide corporations with their most appealing feature:
limited liability.

There are two primary types of corporate structure: the S-Corporation and the C-


The S-Corporation is named for the tax section under which the structure files (IRS Code
Subchapter S of Chapter 1). The S-Corporation structure is primarily utilized by Fortune
500 companies.

C- Corporation

The C-Corporation is also known as a “close corporation.” It, too, is distinguished by the
tax section under which it files (IRS Code Subchapter C).

The Benefits of Incorporating

There are many advantages to the corporate structure, the three most predominant being:

    1. Credibility
    2. Tax savings
    3. Limited liability

                                                     The Fast Track to Business Funding | 16

The corporate structure provides the professional credibility lacking in the sole-
proprietorship structure. People will notice the “Inc.” at the end of your business‟s name
and think, “Wow, this person really means business.” Because the business world
considers corporate owners to be serious and legitimate business people, lenders offer to
extend lines of credit to these business owners that are completely separate from their
personal credit. This type of credit is an invaluable resource that plays a major role in a
business‟s success.

Tax Savings

The government knows that small businesses stimulate the economy. So, to encourage
small-business growth, the government offers thousands of tax deductions to corporations
and LLCs as incentives. Sole proprietors do not qualify for these deductions, because the
IRS sees them as “hobbyists” and not legitimate business owners. An average person has
access to approximately 25 tax deductions, but a business owner has access to more than
300 legal deductions and credits.

It‟s important to take full advantage of the tax savings offered to incorporated businesses.
Remember, one secret of the rich is that they not only make money, but they also keep
the money they make. Business-tax benefits come only to owners who know how to
capitalize on them.

Since the government rewards businesses with huge tax breaks, locating a qualified tax
professional is one of the smartest moves a business owner can make. Considering the
fact that the tax code and regulations contain 50,000-plus pages of information, it‟s no
wonder business owners miss billions of dollars in tax deductions every year. That is why
a great tax professional will be one of your most important allies.

                                                      The Fast Track to Business Funding | 17
Limited Liability

Finally (and most importantly), the corporate structure offers its owners, shareholders and
other participants asset protection through limited liability. The advantage of limited
liability should not be taken lightly. The asset protection, provided by the limited liability
of the corporate structure, is reason alone to incorporate!

The basic idea of asset protection is that you place your assets into an entity that will
fortify them against potential creditors (or lawsuits found against you), but that will also
still allow you to maintain control over those assets.

Limited liability refers to the extent of the corporate owner‟s personal liability. The
corporate veil separates the corporation from its managing participants, creating a
separate and legal identity between the two. This means that a person who is acting on
behalf of the corporation (such as the director, shareholder, etc.) is liable for any
negligence committed by the corporation only to the extent of his or her personal
investment in the company. If the owner‟s corporation is sued, his or her personal
assets—such as a house—are protected from the lawsuit.

Don‟t think a lawsuit won‟t happen to you. As great as the “American Dream” may be,
the United States may very well be the most dangerously litigious place in the entire
world to own a business.

According to a 2006 Bureau of Justice Statistics survey, a new lawsuit is filed in the U.S.
every 2.02 seconds, contributing to a social epidemic known as “frivolous-lawsuit
disease.” Filing a frivolous lawsuit against a person is about the only way to legally rob
someone in the U.S. In fact, the FBI estimates that there are more than 300,000 “serial
plaintiffs” in this country earning an income through frivolous lawsuits alone. That‟s
right—people can make a living off of suing other people, even if they don‟t have
justifiable complaints or injuries.

What does this mean for you, the small-business owner? Your chances of being sued
within the next four years are one in four!

                                                         The Fast Track to Business Funding | 18
Small-business owners acting as sole proprietors may bear the brunt of the burden,
having paid out more than $20 billion out-of-pocket to cover lawsuit expenses in 2005

But, don‟t let these staggering statistics scare you away from fulfilling your dreams of
starting your own business. The corporate structure provides a form of protection that
makes it safe for you to do business in America‟s litigious society.

The corporate veil does more than protect your personal assets in case of a judgment
found against your business. It also protects your financial flexibility, and future, from
the paralyzing effects of simply being involved in a lawsuit. If you‟re a sole proprietor, a
lawsuit can have devastating personal and professional effects on you. Your standard of
living in today‟s society is largely impacted by your ability to gain financing from
lenders, and this ability can be squashed if you are a sole proprietor who is currently
involved in a lawsuit.

Corporations offer better protection against identity theft than sole proprietorships. When
you are a sole proprietor, you are required to list your name, address, and phone number
as public record in order to obtain a business license. Sole proprietors are also required to
use their Social Security numbers for certain business transactions. The corporation or
LLC has its own address and phone number, and even has a Social Security number
(known as an EIN). All of these can be offered in substitution for the owner‟s personal

Sole proprietors are forced to submit the information identity thieves just love to have:
information that will become a matter of public record.

Businesses are the victims of identity theft as frequently as individuals are. Just one
stolen piece of consumer information can cost a business more than $90,000 in fines,
class-action litigation, public-relations cleanup, credit monitoring, and so forth. The
Javelin Identity Fraud Report concluded that in the year 2005, identity theft cost
businesses $56.6 billion.

                                                      The Fast Track to Business Funding | 19
Of the four business structures, sole proprietorships are the most likely to fall victim to
identity theft.

One reason for sole proprietors‟ vulnerability to identity theft is that sole proprietors are
often required to use their Social Security numbers several times a day, in conducting
business with other lenders and vendors. A person‟s Social Security number is the piece
of information most valued by identity thieves. The more frequently you give out your
Social Security number, the more likely you are to have it stolen. Internet-based sole
proprietors are particularly vulnerable to this type of theft.

Furthermore, the sole proprietorship‟s information and the owner‟s information are one
and the same. This means that a sole proprietor must consent to have many pieces of his
or her personal information—the information identity thieves just love to have—become
a matter of public record.

According to the Better Business Bureau:

     “There are numerous ways information can be compromised by a creative
     data thief. Given the openness of our society and the abundance of data
     exchange… Among the methods that identity thieves have used: Using public
     records to obtain personal information. Local records… may contain
     financial records or SSNs.”

This lack of privacy is one of the reasons sole proprietors have their identities stolen
more frequently than any other business owners.

The biggest disadvantage to the corporate structure is that it requires more paperwork and
maintenance (otherwise known as “corporate formalities”) than the sole proprietorship or
LLC. It is also more expensive to form than a sole proprietorship.

                                                        The Fast Track to Business Funding | 20
The Limited Liability Company (LLC)

The limited liability company, referred to as the LLC, is a hybrid that combines the pass-
through taxation of a sole proprietorship with the limited liability of a corporation. The
LLC is relatively simple to form and operate. It can be considered a corporate structure,
but it does not require any of the aforementioned corporate formalities. The LLC is
quickly becoming the most popular choice of structure, not only among small-business
owners, but also among millionaire CEOs.

As a hybrid of the sole proprietorship and the corporation, the LLC has all the advantages
of both structures, but without the corporate formalities, or the drawbacks and dangers of
the sole proprietorship. For nearly 99 percent of all serious entrepreneurs, the LLC is the
way to go, and that‟s why it is the fastest-growing and most popular business structure
today. In fact, many long-time corporate CEOs are beginning to convert their large
corporations to LLCs.

There really are no disadvantages associated with the LLC. It requires a few more
investments than a sole proprietorship (such as a more expensive filing fee), but again,
this initial cost pays for itself ten-fold within the first year of doing business under an
incorporated structure.

There are several sub-types of corporations and LLC‟s, each developed to suit different
structuring needs. You will find a particular LLC or corporation structure to best suit
your business needs and aspirations. It‟s important that you know the different types of
LLCs and corporations, so you can choose the best structure for your type of business.

                                                        The Fast Track to Business Funding | 21
Before making your choice, consult a business specialist, and make sure he or she has
expertise in business-structure formation. A business specialist will teach you the pros
and cons of each structure, and help you choose the right one for your business. He or she
can then help you understand the legal requirements necessary for your chosen structure
to remain in “good standing”.

This all might seem like a lot of information, but remember, you don‟t have to do this
alone. Consult a professional with expertise in corporate formation, taxes, and the
construction of business credit.

                                                     The Fast Track to Business Funding | 22
3 Finish Your Homework before
  You Play

The process of building business credit is similar in concept to building a house. If you
want a sound structure, you must build it correctly. Not only must the builder use the
right resources and materials for the structure, he or she must also use them in the correct
order (i.e., you don‟t build a roof before you build a foundation).

The Fast Track to Business Funding will assist you in building your business credit
structure from the bottom up. This book will show you the correct resources and
materials to use—and when to use them—to construct your credit, so you will have a
secure structure upon which to build and support your business.

Here is the basic blueprint of business credit, laid out for you step by step. Each step will
be covered in great detail in the following chapters. Again, it must be stressed that before
you can start building business credit, you must first have a business for which to build it.
If your business is not structured as an LLC or corporation, you will not be able to
establish business credit. Make sure you have incorporated your business (or formed it as
an LLC) before proceeding.

                                                       The Fast Track to Business Funding | 23
The Steps to Business Credit

1. Establish a business presence.

Once you have incorporated your business or formed an LLC, you need to establish a
business presence. You must have a physical business location, a listed phone number, a
business bank account, a federal tax ID number, and so forth.

2. Ensure compliance.

It is important that your business complies with everything the business credit bureaus
will check, so make sure you apply for a Dun & Bradstreet (D&B) D-U-N-S number, and
establish accounts with Experian and Equifax, before you apply for the credit bureaus‟
services. Your creditworthiness will be based on your business‟s credit profile as reported
by these three companies. The Fast Track to Business Credit will show you how to obtain
a business credit profile from each of these business credit bureaus, and will also explain
what your potential lenders will see when they look at your business credit profile.

3. Begin establishing trade lines with net 30 accounts.

Trade lines—also known as “trade credit”—are lines of credit extended by a particular
vendor to your corporation or LLC. Your business credit profile is influenced by your
business‟s payment history with these trade lines. Your business‟s first trade lines will
usually be net 30 accounts.

4. Grow your business credit with revolving accounts.

Once your business has established a business credit profile (based on your payment
history with your net 30 accounts), your business may begin to establish revolving
accounts with its vendors.

                                                      The Fast Track to Business Funding | 24
5. Apply for business credit cards.

Once a business has established net 30 and revolving accounts, it can apply for business
credit cards. The trick is to obtain an initial credit card, make timely payments for a few
months, and then request that the issuing bank extend a larger line of credit to you.

6. Apply for business loans.

Obtaining business loans that are backed by your company—and not you personally—is
the goal of all business credit pursuers. It can take a while, but if you are persistent, and
follow the Business Credit Blueprint in Chapter 14, you can reach this goal.

7. Maintain your business credit profile.

Much like a house, your business‟s credit structure will require continual maintenance to
ensure the soundness of its structure. Once you have built up your business credit, you‟ll
need to ensure it stays that way. The Fast Track to Business Funding will teach you how.

The successful small-business owner begins to build business credit immediately after
starting his or her business. Whether you have been in business for more than two years
or for only two days, taking the steps to build your credit can make the difference
between building a successful business, and becoming one of the 90 percent of other
small businesses that fail.

The first step in building a business credit profile is to obtain a D-U-N-S number from
D&B. Basic information about your LLC or corporation is requested on the D-U-N-S
application form. D&B will then verify this information to make sure it is correct.

When the information provided by a business owner does not match the information
D&B collects through other sources (including phone directories and personal visits to

                                                       The Fast Track to Business Funding | 25
the business‟s address), D&B often red-flags the business and puts it on the “high-risk”
list. Being placed on the high-risk list will ruin a business‟s credit future.

Even if a mistake is minor, and D&B doesn‟t catch it, correcting mistakes with D&B can
be very difficult, time-consuming and frustrating.

Other than the initial information you‟ll give to D&B when applying for your D-U-N-S
number, there are numerous other compliance checks D&B will perform on your
business to guarantee legitimacy before it posts your business‟s profile report.

Unfortunately, D&B does not reveal a list of criteria concerning these additional
compliance checks. For business owners applying for their first D-U-N-S numbers, this
can be a very risky step in their business credit-building processes.

It has been reported that D&B conducts more than 2,000 different compliance checks in
its evaluation process of your LLC or corporation. D&B will check the following when
confirming information for your business credit profile:

           Your corporation‟s or LLC‟s status with the secretary of state
           The start date of your corporation or LLC
           Your corporation‟s or LLC‟s business license and the date it was issued
           The physical address of your registered office/business location (D&B will
            make sure it is an actual physical address where actual business is being
            conducted, and will verify whether it is a home or office building)

Representatives of D&B have been known to actually stop by the registered address and
request to see business operations. Refer to 411 to ensure that both your business‟s
address and its phone number are properly listed, and verify your branch locations.

Look up your listed officers to see if any of them are managers or officers with other
corporations who have received D-U-N-S numbers, and if so, verify the status of those

                                                        The Fast Track to Business Funding | 26
D&B can red-flag your LLC or corporation, or place it on their high-risk list, if your
business has a managing officer or member who is also an officer or member of a
corporation previously listed as high-risk by D&B. Hopefully, you are beginning to
understand how influential this initial registration with D&B is to your business‟s overall

Applying for Your Federal Tax Identification Number

After forming your corporation or LLC, the next step is to apply for your Federal Tax
Identification Number. Your Federal Tax Identification Number is also called an
Employee Identification Number (EIN). This EIN is your corporation‟s or LLC‟s
equivalent of a Social Security number. The Internal Revenue Service assigns EINs
(unique nine-digit numbers) as a means of identification for businesses operating in the

Obtaining an EIN is imperative for small-business success. How well could a person
establish him- or herself as a legitimate citizen of this country without a Social Security
number? The same applies to trying to establish your legitimate business without an EIN.
Without it, your business will not have any credibility and very little opportunity amid
other businesses.

EINs are available for corporation and LLC owners. When you separate yourself from
your business entity by incorporating or forming an LLC, your business is entitled to
establish its own personal identification, just as if it were an actual individual. The
opportunity to obtain an EIN is one of the many benefits of incorporating your business.
You can use your business‟s EIN in place of your Social Security number; this will
protect your personal information and privacy, and ultimately safeguard you from falling
victim to identity theft.

EINs are necessary for businesses to obtain business credit profiles, establish business
credit, and open business bank accounts. You‟ll also need an EIN to hire employees for
your business, open trade lines with vendors, set up accounts with wholesalers and drop-
shippers, apply for business loans from lenders, and file your business‟s taxes.

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Obtaining an EIN

To obtain an EIN, you can call the IRS at (800) 829-4933, or apply online through their
Web site.

The online application process is simple, and can be completed in less than five minutes.
Remember to use only alphanumeric spaces and characters (avoid periods, dashes, etc.)
when filling out the IRS SS4 forms.

Once you have incorporated your business and obtained an EIN number, the next step is
to open a bank account in your company‟s name.

Opening a Business Bank Account

Since your LLC or corporation is establishing separate credit from your personal credit,
make sure you open a separate bank account, so you can separate your business finances
from your personal ones. Many banks offer special accounts to suit small-business needs.

Once you have opened a bank account, there are a few more things you need to do to
properly establish your business before you start building credit for it.

Before you apply for business credit, ensure that your business has met the following
basic requirements.

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Must-Haves for Establishing Business Credit

        A corporation or LLC structure
        An EIN
        A bank account for your corporation or LLC
        A business phone number—this number needs to be listed in the local
         business directory or 411. Make sure the telephone operator can locate it upon
        A physical office or virtual office—this is the actual building in which you
         run your business, or it may be a virtual office. Home-based offices are
         acceptable, but they may compromise your anonymity. P.O. boxes are not
         considered acceptable office addresses.
        A registered agent—this is a person who can sign for legal and government
         documents, and who can answer phone calls made to your business number
         during normal business hours, Monday through Friday, 9:00 a.m. to 5:00 p.m.
        A filed statement of information (officer‟s list)
        A separate business e-mail address

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4 Who’s Behind the Curtain?

When you incorporate your business, your company becomes a separate entity. As such,
it is eligible to obtain its own line of credit. Obtaining a business line of credit is similar
to obtaining a personal line of credit, in that potential lenders will refer to the business
credit bureaus for a rating on your business‟s creditworthiness before extending your
business a loan.

Business credit bureaus can perform more than 2,000 compliance checks on your
business before reporting a business credit profile. They do this by collecting and
verifying information about the business from numerous sources, such as payment
histories from trade lines, and information about the business from the owner[s]. The
business credit bureaus then evaluate the information—and provide an assessment of the
business‟s creditworthiness—in what is called a “credit profile” or “credit rating.”

Warning: If your business fails to comply with any of the various compliance checks, the
business credit bureau will blacklist a business by putting it on a high-risk or “no credit”
list. Your business credit structure will be destroyed before it is even built. There is no
recovery from this. You will be left with no other choice than to tear down your entire
business structure, and build a new one in its place.

Lenders and other financial institutions depend on these credit profiles to assess a
corporation‟s or LLC‟s creditworthiness. Therefore, a business credit profile influences
whether a business will qualify for loans, and if so, what interest rates and what credit
limits will be assigned.

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Higher credit scores pose lower credit risks. The higher a business‟s credit score is, the
lower the interest rate—and the higher the business‟s credit limit—will be. If your
business credit score is too low, the lender will classify your business to be too risky to
loan to, and will deny credit.

There are three major business credit bureaus: D-U-N-S and Bradstreet (D&B,) Experian
and Equifax. D&B is the largest and most predominant of the three and the one with
which you as a business owner will have to work most closely.

1. Dun & Bradstreet (D&B)

Dun & Bradstreet creates a business‟s credit profile using information supplied by both
vendors and the business‟s owner[s]. D&B is unique in compiling information supplied
by the business owner. This is why a business must obtain a D-U-N-S number with D&B,
but will be identified by its EIN with Equifax and Experian. D&B also:

          Requires five trade references before establishing a business credit profile
          Issues ratings based on your business‟s financial statements
          Rates businesses‟ creditworthiness with a “PAYDEX” score based on their
           prior payment experiences (a PAYDEX score is the business equivalent of a
           FICO score). PAYDEX scores range between 0 and 100. A score of 75 or
           higher is considered a good rating.

Warning: D&B will place those businesses that do not meet their informational
requirements on a high-risk list. This will eliminate a corporation’s or LLC’s eligibility
to obtain business credit. D&B is known for the persistence of its sales agents.

                                                       The Fast Track to Business Funding | 31
2. The Experian Group

Experian is the second-largest business credit bureau. Experian was originally a leading
personal-credit rating bureau, but has now expanded its services to include business
credit ratings. Experian‟s protocol is to:

          Use a business‟s EIN instead of assigning a separate numeric identification
           like D&B‟s D-U-N-S number
          Use an “Intelliscore” (the business equivalent of a FICO score, which
           calculates the total percentages of a business‟s late and on-time payments.

Unlike D&B, Experian refers only to the information reported by the business‟s trade
lines. Experian requires only three trade references when building a business profile,
while D&B requires five.

3. Equifax Small Business Enterprise
(888) 201-6879

Like Experian, Equifax is a leading personal-credit-rating bureau which has now
expanded its services to include business credit ratings. It‟s important to know that

          Is the bureau credit card agencies pull from—and report to—most frequently
          Uses a business equivalent of a FICO score known as the “Small Business
           Credit Risk Score.”

The Small Business Credit Risk Score predicts the probability that a new business or an
existing small business will encounter financial negligence or bankruptcy in the next
year. This rating is determined by the reported financial transactions from the business
banks, leases, trade accounts, public records and so forth.

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Other Bureaus

There are other business credit bureaus besides D&B, Experian, and Equifax. However,
you will find that very few vendors or lenders request those other bureaus‟ services. (division of Infogroup) uses a grading system to rate credit risk. Scores range from 70 to 100 and, are
then assigned a letter grade from A to C. (A score of 95+ is awarded an A+, 90-94 = A,
85-89 = B+, etc.)

Grades are determined by four factors: 1) Years in business, 2) number of employees, 3)
public records, and 4) the projected stability of the business, based on the success and
failure rates of similar businesses. also:

          Recommends the amount of credit that lenders should extend to a business
          Includes information on the business in its reports (including a list of the
           primary officers and directors and their phone numbers, business location,
           annual sales, number of employees, how many years a business has been
           incorporated, yellow page ads, credit card acceptance policies and additional
           corporate involvements).

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Accurint™ Business

Accurint™ is a hybrid of the Better Business Bureau and LexisNexis (a provider of
businesses information and services), and offers information on business profiles.
Accurint provides payment histories without using any unique scoring system to interpret


ClientChecker focuses on small businesses and freelance services, and also assists
contractors looking for information on businesses with which they might work.

This bureau does not use a credit-rating evaluation, but offers the satisfaction rates of
previous customers, and the opinions of prior contractors that have worked with the

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5 Can You Count to 100?

When a corporation or LLC applies for any sort of loan or financial funding, such as net
30 accounts, revolving accounts, credit cards or business loans, the vendor or lending
company will evaluate the business‟s credit profile to determine its creditworthiness.
Approval of a trade account or a loan will depend upon your business‟s credit rating.

Ultimately, the purpose of building up your business credit profile is to qualify for
business credit cards and business loans that are completely separate from your personal

As mentioned previously, business credit bureaus supply potential vendors and lenders
with a business credit profile. The three major business credit bureaus each have their
own area of focus. D&B is used by landlords that might lease you office space as well as
trade-line vendors with whom you may have net 30 accounts. The majority of credit-card
companies rely on Experian‟s business credit reports, while Equifax reports are mostly
queried by banks.

Since your business credit begins with vendors‟ net accounts, moves on to credit cards
and eventually ends with business loans, it is wise to focus on establishing an account
with D&B first, followed by Experian and Equifax.

All three business credit bureaus will start building a credit profile for any business that
has its payment history reported by a lender or vendor, regardless of whether or not the
business has set up a profile with any of these bureaus. If you have been in business for a
while, there‟s a chance that you already have a credit profile with one—if not all—of
these business credit bureaus. By going to their Web sites, you can search your own
business to see if you are already recorded in the bureaus‟ systems.

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D&B is the only business credit bureau that collects information from the business
owner. Therefore, you can establish an account with D&B before you establish your trade
lines by obtaining a D-U-N-S number. With Experian and Equifax, you will not be able
to start your own account, so you will have to wait for some lenders or vendors to report
your business‟s payment histories before a credit profile will be established.

Applying for a D-U-N-S Number

The first step in establishing a business credit profile with D&B is to obtain a D-U-N-S
number. Most vendors, lending institutions and credit card companies require a D-U-N-S
number on their credit applications. The D-U-N-S number is the tool lenders use to
access your business‟s credit profile from D&B. They will then use this information to
determine your business‟s creditworthiness.

You need a D-U-N-S number for four main reasons:

       1. It establishes professional credibility.
       2. It allows your customers and vendors to easily locate your business and learn
           more about your company.
       3. Many institutions and companies will not do business with you unless you
           have one.
       4. Without it, you cannot build a business credit profile or officially record any
           of your business‟s payment history.

Fortunately, you can apply for your D-U-N-S number the moment your business is
officially incorporated or formed as a LLC. Obtaining a D-U-N-S number is free, and this
service is available online. Apply for a D-U-N-S Number at Click on the
“customer resources” button in the headings at the bottom of the page, and choose “Get a
D-U-N-S Number.” You will be guided through the process of getting a D-U-N-S
number (and will receive a few up-sale pitches). Remember, you can get a D-U-N-S
number for free—so when you are prompted to choose between “Establish a credit file

                                                      The Fast Track to Business Funding | 36
with ScoreBuilder and get a D-U-N-S number” or “Get a D-U-N-S number only,” choose
to only get the D-U-N-S number.

A day or so after you submit your application, you will receive an email informing you
that D&B has received, and is processing, your application.

Receiving your D-U-N-S number can take between 30-45 days following your
submission of the application. When a month or two has passed, you can go to D&B‟s
Web site and perform a “Find a Company” Search. This search is free, and it will show
you if your business has been listed.

If you want or need your D-U-N-S number immediately, you can call D&B at (877) 753-
1444. For an investigation fee, an agent will give you a D-U-N-S number over the phone.

Your D&B Business Credit Profile

As previously mentioned, a credit profile with D&B can automatically be established
once lenders and vendors begin to report your business‟s payment histories to D&B. If
the payment history of a business that is not in D&B‟s system is reported, D&B will
assign a D-U-N-S number to the business and will create a credit profile for that business.

Obtaining your own D-U-N-S number helps D&B collect the information it needs to
build a profile for your business, including a business address, phone number and email
address. It‟s important to remember that your business credit profile is absolutely free.

If your business‟s credit profile does not already exist when your first trade line begins to
report your payment history, D&B will then create one from the information you have
provided. D&B will then verify your business license and corporation status. D&B will
subsequently gather further information on your business, such as your tax returns, trade
and bank references, and financial statements. Finally, D&B will check for any existing
amounts of credit extended to you. After calculating your PAYDEX score, D&B will
assign a general credit rating to your business.

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Once you have established a few trade lines that will report your payment history to
D&B, check to see if your D&B business profile is active by going to and
ordering a “Company Profile Report” for your business. This service costs $12.99, but if
you receive a message stating that “this business file is not yet active,” this means that
your trade lines haven‟t yet reported to D&B and a service fee should not be charged to
your credit card.

Once your trade lines begin reporting, you can purchase a hard copy of your D&B credit
profile (known as an “eValuator report”) at a cost of $39.99. This will allow you to see
the very same information that will be seen by your potential vendors and creditors.

Understanding D&B‟s Comprehensive Reporting

The “Comprehensive Report” from D&B combines several business credit ratings
including the PAYDEX score, Financial Stress Class, a company‟s credit score and
background information, facilities, number of employees and any public filings or
lawsuits. The comprehensive report better encompasses the full spectrum of a business‟s

Even though D&B may want to sell you its comprehensive report package, you really
don‟t need it. Most inquiries into your credit profile will be focused on your PAYDEX
score, and you can personally submit any additional information to the inquiring parties
or businesses.

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D&B‟s PAYDEX score reflects a business‟s overall credit risk. D&B calculates this
PAYDEX score based on payment histories reported by your business‟s trade references.
These references will inform D&B as to whether or not your business paid a bill early, on
time, or late.

PAYDEX scores ranges from 0 to 100 (a score of 75 or above indicates a low credit risk).
These scores are based on a dollar-weighted average. For example, if three trade
references report that your business was 30 days late in paying off net accounts worth
$100 each, but two of your business trade references held accounts worth $10,000 each—
and were paid on time—your business‟s PAYDEX score would still be relatively good.
Likewise, if your business is timely in paying off the smaller accounts, but is late when
paying an account with significantly larger debt, your PAYDEX score will reflect upon
this negatively.

The following table shows how D&B calculates each trade reference‟s payment history to
determine a PAYDEX score.

Payment History                                 PAYDEX Score

Payment made 30 days early*                     100

Payment made 10 days early*                     90

Paid on time                                    80

Payment made 8 days past due date               75

Payment made 15 days past due date              70

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Payment made 22 days past due date                     60

Payment made 30 days past due date                     50

Payment made 60 days past due date                     40

Payment made 90 days past due date                     30

Payment made 120 days past due date                    20

*Notice that early payments boost your PAYDEX score.

While D&B offers many services that further illustrate a business‟s creditworthiness,
most companies will only be concerned with your PAYDEX Score as well as trade lines
that are already reporting on your D&B account.

Remember, trade-line reports can be gathered over time, your PAYDEX score will grow
with your business, and it‟s all absolutely free!

Your Credit Profiles with Experian and Equifax

Unlike D&B, Experian and Equifax report on information provided by your trade lines
alone, so you do not need to register your business with them to establish a credit profile.
Once a vendor begins to report to either of these bureaus, your profile will automatically
be established.

If you have been in business for more than six months, your company might already have
an Experian or Equifax profile in the works without you even knowing it.

                                                            The Fast Track to Business Funding | 40

Visit the Experian Web site to see if your company is already listed in Experian‟s
database. If your company is listed, then you can purchase a small-business report from
the site and view your business credit profile.

Experian‟s prices currently range from $8.99-$49.95, depending on how much of your
company‟s profile you wish to view. Before you purchase your own Experian report, you
can view sample reports.

If your company is not yet listed, this means that no trade lines have yet reported to
Experian. This wait time can require a lot of patience from the business owner. Don‟t
worry, though—once you have established trade lines with a few national accounts or
credit cards, your Experian profile will be well on its way to being established.

If you encounter any mistakes or reporting errors in your Experian profile, visit the
“Corrections to Profile” section of Experian‟s Web site.


Your Equifax profile should begin to develop once your company has established one
bank loan and a few credit cards.

In contrast with D&B and Experian, Equifax has yet to establish a strong Web presence,
so this limits your ability to interact with your company‟s profile. You cannot obtain your
corporate-history report until one bank loan and three credit cards have reported to

Equifax will supply you with your company‟s credit report each time it is accessed by a
potential lender. Your report cannot be acquired without your permission, so you will be
informed as to when you will receive a copy of your business credit profile.

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6 The Business Credit Dos and Don’ts

When you are building a credit profile with Dun & Bradstreet, there are a few details you
must take into consideration. These tips can also be applied to Experian and Equifax, but
this advice will mainly focus on dealing with D&B—the bureau with whom you‟ll be
interacting most.

First, while most personal credit bureaus are regulated under the Fair Credit Reporting
Act, the business credit bureaus are under no legal constraints to ensure that the
information in your profile is accurate. While the business credit bureaus do wish to
uphold a respectable reputation, and will therefore verify the initial information provided
them, they can be difficult to work with when you‟re trying to correct a mistake that has
been reported on your business profile.

If you want to avoid the frustration of trying to get D&B to correct mistakes on your
profile, the trick is to make sure you provide accurate and identical information to your
banks, your trade lines, and on the D-U-N-S number application.

Another thing to remember when working with D&B is that, like most any other
company, they are in the business of making money. While D&B makes some profit from
the businesses for which they build credit profiles, the majority of their income comes
from two sources.

First, there are the vendors and lenders who make credit inquiries. When a vendor or
lender wants to assess another business‟s creditworthiness, the business often pays D&B
for permission to view the business‟s credit profile. D&B offers several packages to these
vendors and lenders. The more the vendor or lender is willing to pay, the more
information will be accessible to that vendor or lender. However, the majority of vendors
and lenders only access a business‟s PAYDEX score.

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The second—and largest—source of income for the credit bureaus comes from selling
business credit profiles to other companies.

Unlike personal credit bureaus, which are mandated to protect your personal information
under the Fair Credit Reporting Act, the business credit bureaus can sell your information
to anyone willing to pay for it. The more information these bureaus can collect about
your business, the more information they can sell. The more information they can sell,
the more money they can make. Therefore, D&B agents may try to collect as much
information about you and your business as possible; however, this information is not
necessary to establish an adequate credit profile.

Any information you provide to D&B might be sold to many other companies. So, if you
have information that you do not want to essentially become public record, you should
not divulge this information to D&B. Remember, privacy is one of the many advantages
of structuring your business as a corporation or LLC. Do not unnecessarily give away this
privacy. You might receive calls from D&B asking for more information than you
initially supplied to them with when you applied for your D-U-N-S number. D&B‟s
sales agents earn a commission by obtaining extra information from business owners, so
it‟s in your best interests to know your rights and minimum requirements. When you
apply for your D-U-N-S number, take care to only provide the necessary information
(i.e., that which is marked by an asterisk). If another company makes a credit inquiry and
wants to know more about your business beyond your PAYDEX score or your D&B
rating, D&B will contact you to collect the additional information. It is up to you as to
how much information you provide to them. Always remember that D&B might benefit
from the sale of this additional information.

If you receive a phone call from a D&B agent shortly after you apply for a D-U-N-S
number, and the agent requests that you provide them with more information, the best
thing to do is to be very polite and courteous to the agent. Then, explain to him or her that
your business is a privately held company, and your policy is not to release confidential

                                                      The Fast Track to Business Funding | 43
D&B may also call you for reasons beyond information acquisition. While D&B makes a
majority of its income by selling business information, it also benefits from the “up-
selling” of businesses for which they build profiles. You should expect some sales pitches
from D&B after you apply for a D-U-N-S number. Make sure you remember that your D-
U-N-S number and PAYDEX score are the only things you‟ll need, and D&B provides
them at no cost to your business.

Dun & Bradstreet‟s „Credit Builder‟

For approximately $600, D&B will call several of your trade lines to verify your business
accounts and collect a payment history. Once this information is verified, D&B will add
these trade references to your credit profile and generate a PAYDEX score.

The advertised benefit of this service (known as the “Credit Builder”) is that it speeds up
the process of creating a credit profile for your business. However, D&B requires that
your trade references be established within their system for at least a year before they can
qualify as a credit-profile reference for your business. The majority of businesses are not
in D&B‟s database—therefore, even if you invest in the Credit Builder program, this
does not guarantee that you will receive a credit profile more quickly than if you‟d
allowed the profile to build itself naturally (after your trade lines report your payment
history to D&B).

A few D&B sales agents have been known to threaten blacklisting if a business owner
does not want to purchase the Credit Builder program. Don‟t forget that these sales
agents are aggressively pursuing a commission, and you—the business owner—are in

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The Dos and Don‟ts with D&B


          Try to e-mail D&B with any questions, concerns or comments before calling.
           If there is something you need to change on your profile, you can fax your
           requests to D&B. D&B is usually responsive to emails and faxes, but if you
           don‟t receive a response, give them a call.
          Remain very polite when speaking with a D&B agent, even if the up-sale
           pressure is strong.


          Inform D&B that you are part of a business credit-building program or that
           you have even read a book on building business credit. Remember that D&B
           is not regulated by the government, and they have the power to blacklist your
           business. If they know you are familiar with their practices, they may just
           “red-flag” you rather than try to make money from someone who knows he or
           she doesn‟t have to purchase additional D&B services.

If you are calling because you need D&B to do something—such as when you need to
make a change to your profile or protest a statement—be sure to do the following.

          Take note of the agent‟s name and any other identifying information, as well
           as the date and time of the conversation.
          Ask the agent for his D&B email address so you can contact him directly if
          If at all possible, record the conversation. At the very least, make sure to take
           notes on what was said in the conversation. Be specific about what the agent
           committed to do to your account (e.g. the agent said he or she would update
           the spelling of your name).

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After your call is complete, send a follow-up email to your agent. Thank him for his time
and assistance, and remind him of any promised commitments to your profile. For
example: “Dear [Agent So-and-So], thank you once again for helping me update my
business‟s profile. I look forward to seeing the new number within the next few days.
Sincerely, [Your Name].”

It is also recommended that you get any over-the-phone commitments verified in writing
by the agent. Ask him if they could write down his comments and send them to you in an

If you‟re feeling pressured into volunteering more information than you need to reveal,
remember that most lenders go directly to the source for confidential information. The
lender will ask the business owner, not a credit bureau, for financials and other closely
held information.

If you talk to a D&B agent who you find to be helpful and easy to work with, ask to
speak with his or her manager, or email the agent‟s specific department and commend the
agent on the customer service he or she provided to you. Not only is this a good thing to
do for any high-quality service representative, but you can also keep that agent‟s number
and contact him or her directly if you ever need something from D&B. A good
relationship with a D&B agent can be invaluable to you.

If, on the other hand, you find yourself interacting with a rather difficult agent, be polite,
but a find an excuse to get off of the phone. You will probably have better luck if you call
back later and talk to a new agent.

Be persistent. If D&B is not following through on a commitment, keep emailing and
calling until your request has been fulfilled.

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7 White-Out May Be Necessary

According to D&B‟s Web site, the company makes more than 1.5 million updates to its
database each day. These updates primarily come from third-party sources such as public
record databases, vendors and lenders with whom they do commerce, business
directories, and so forth. With all of these entities in the database, there is a good chance
that one of these numerous third parties may report inaccurate information.

Having incorrect information on your D&B profile can hinder the growth of your
business‟s credit profile, and thwart opportunities for you to obtain business credit. If
D&B finds incorrect information on your business profile before you do, one possible
consequence is that they might view the inconsistencies as a red flag and mark your
business as “high-risk.” If this happens, it is very difficult to correct the mistakes on your

Furthermore, if the information you provide to D&B is at all different from the
information you give to your trade lines—even if it is just a single-letter misspelling—
your payment history may not properly report to your profile. When your trade lines are
not reporting, your business credit is not growing.

If you do catch a mistake within your business credit profile, do not despair! At some
point, nearly every business with a credit profile runs into this problem. The advice in
this book is based on years of experience in dealing with D&B, and offers you the best
guidance on how to correct the information on your profile.

If your profile requires only simple corrections or updates, you can usually make them
yourself. If you need help with multiple (or more complicated) errors or updates, you
may want to contact a D&B agent. He or she might try to sell you an investigation

                                                       The Fast Track to Business Funding | 47
package before fixing the errors, but you do not need to purchase anything to have your
account reported accurately.

For simple errors, the easiest way to change your profile is to do so online at the D&B
Web site. The site‟s eUpdate feature allows you to access your business credit profile,
make changes, correct mistakes and update or remove information. The eUpdate is a
useful tool for ensuring that your business credit profile displays accurate information.

To make changes or updates to your D&B credit profile, go to D&B‟s Web site at D&B will ask you to verify some of your company‟s information for
security purposes, and will then e-mail an eUpdate password to you so that you may
access your account.

Should you choose to use eUpdate, here are some useful suggestions:

          Do not make changes to your profile unless you are certain that you know
           what you‟re doing.
          Not only should the changes be correct, but they also need to be correctly
           made. If you correct a detail, but mark it as an “update,” it can significantly
           affect your overall credit rating.
          While it is important to keep an eye on your business credit profile, do not
           access your account more frequently than once a month. D&B keeps a record
           of every time your account is accessed. If you log on too many times (more
           than once a month), you can raise a red flag to both D&B and your potential
           lenders. Frequent log-ons can also negatively impact your PAYDEX score.
          Do not update your business credit profile more than two times within a six-
           month span. If you make too many changes to your credit profile, D&B might
           become concerned that you are trying to manipulate your report. D&B will
           then flag your account with a note stating “There have been a high number of
           updates at the request of the principal on this report.” Most lenders will not
           extend credit to your business if such notes or red flags are present on your
           credit profile.

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          Do not enter more information than is necessary on your business credit
           profile. One of the reasons D&B offers the eUpdate option is to entice owners
           to provide more information on their businesses. Sometimes those “fill-in-the-
           blanks” can be so tempting! Don‟t be lured by this.

Correcting or Updating Your D&B Profile

Your D&B business credit profile has several sections, each intended to organize
information about your business. The first section deals with the ownership of the
business. If you‟re making corrections or updates in the “Ownership” section, remember
that potential lenders look at the amount of time your company has been in business. The
longer a company has been in business, the more favorably lenders will look upon its

If you are the CEO of your company, and you notice your name is misspelled in this
section (for example, let say your name is John or Jane Doe, but the D&B profile has
your name recorded as John or Jane Dough), you will need to correct this error. However,
you must make sure you verify the change as a “correction” rather than a “control
change.” A control change would be appropriate if there had been an actual change of
CEO. But if it is just a spelling error, mark it as a correction—otherwise, D&B will
consider it a change of CEO and will list your company as a new business, which deletes
your previously established credit.

There is also a “Management” section in your D&B profile. You do not need to add
additional information to this section, but there may be a few instances when disclosing
this information might be a strategic move for your company. If there is anyone working
in your company who is prestigious in his or her field, adding that individual to your
profile could enhance the reputation of your company.

Remember, anyone listed on your D&B profile can access the company‟s account and
make changes, and he or she could also be contacted by D&B for any number of reasons.
In many cases, D&B will contact these people to both verify the information you have
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provided and collect additional information about the business. Don‟t be surprised if
D&B calls your bookkeeper, accountant, or another associate to try and get your
business‟s financial information from them. For this reason, you may prefer to only
include the owners of your company on your D&B profile.

In the “Operations” section of your D&B profile, you can provide information describing
your business‟s industry, the number of personnel you employ, and other information
regarding your financials and sales revenues.

In this section, you can supply a description of your business, your standard industrial
classification code (SIC), and your number of employees. However, we strongly suggest
that you do not fill in any information regarding your financials or clientele (including
your sales revenues, payment terms, number of business accounts your company has, or
types of customers your business serves). This is considered confidential information,
and you have a right to keep it private.

A D&B agent might tell you that records of your business‟s sales revenue are needed,
because potential lenders will want to see these records before extending your business
credit. This is true, but you can give your sales revenues to the lenders yourself—you
don‟t need D&B to give it to your potential lenders, or to anyone else that is willing to
pay for your financial information.

Removing Information from Your Profile

The information on your D&B profile is not set in stone. Although it might prove
difficult, it can be removed if the right steps are taken.

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Removing Financial Information

If you have already provided D&B with your financial information (or if it was somehow
leaked by someone D&B may have called in an attempt to obtain it), there are steps you
can take to remove your financial information from your D&B account and profile.

Send a certified letter or fax to D&B requesting that your financial information be
removed from your report immediately. They will usually comply within a week, but if
they do not, call them up and demand that the information be removed.

If D&B has financial information on various departments within your business, they may
only remove a portion of your financial information. Be persistent until they have
removed it entirely.

Some credit-building services may suggest that you advertise your financial information
if your business is successfully generating high sales revenues, but we advise against this
as well. While advertising high revenues might make you appear more creditworthy, you
are also broadcasting your business as a perfect target for a frivolous lawsuit. Don‟t think
that the people who make a living filing frivolous lawsuits against innocent businesses
won‟t scan D&B‟s Web site to find the businesses with the most to lose. A lawsuit is not
only a horrible experience, but it will also show up in your D&B profile, and will
severely impact your business‟s appearance of creditworthiness.

Removing Negative Reports

Because many businesses will not report your payment history to D&B, your business
profile will reflect only a selected group of trade lines. It is important to keep these trade
lines happy as they are the sole contributors to your PAYDEX score and D&B rating.

Sometimes late payments, misunderstandings, or clerical errors can result in negative
items being reported to your D&B profile. The best way to avoid negative marks from
showing up on your credit profile is to pay your business associates on time. However,

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mistakes are sometimes made by both the business owner and the lender. There are a few
things you can do to try and remedy any negative items on your credit profile.

With only a select few of your trade lines reporting, one negative report can damage your
PAYDEX score and your credit rating. Therefore, you will want to dispute a negative
trade reference and have it corrected or removed from your credit profile.

First, you need to know which trade line has filed a negative report about your business.
D&B will not divulge how your trade lines are reporting your payment history, but they
will tell you who is reporting. You can usually find out who is reporting any negative
payment history by putting two and two together.

Look at the list provided by D&B of the companies that are reporting your payments.
From this alone, you might be able to figure out who made a negative report. If not, you
might have to do some investigating. If you know which company it is, you can contact
the lender or vendor and try to work things out amongst yourselves. The person who
reported the negative payment history can have it erased simply by requesting that D&B
do so.

If you can‟t figure out who is reporting negatively on your business, or you cannot work
something out with the person or company that is doing so, you still have other options.

You can try to counteract the negative report by flooding your profile with trade
references that report on-time or early payments. Unfortunately, finding trade lines
willing to report positive payment histories is usually difficult … so this may not be your
best option.

If the delinquent report is too large to counteract, you can approach D&B with a dispute
claim. Contact D&B and tell them there is a trade reference you wish to dispute. You can
only dispute three trade references at a time. Once those disputes are resolved, you can
dispute three more negative references if necessary, and continue to do so for as long as

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Once you make a dispute claim, D&B will then try to contact the trade reference for
verification of the negative report. If D&B confirms that the trade reference was correct
in reporting a delinquent payment, the negative reference will remain on your account.

However, the trade reference might recheck their records and notice that they indeed
made a mistake in reporting your payment as delinquent. If this is the case, the D&B
agent will correct the trade reference on your account, and the negative report will be

What often happens, however, is that D&B tries to contact your trade reference but is
unable to obtain a confirmation. Most businesses do not want to talk with the people from
D&B, or may just be too busy to do so and so will thus avoid them. This is to your
advantage. Any trade reference that does not respond to D&B‟s requests within 15 days
will have their negative report dropped from your credit profile. So, even if you know
that you were delinquent with a payment, it may still be worth your time to dispute it,
since the trade reference may not respond to D&B in a timely manner and the negative
report will be dropped.

Be aware that you have two reports with D&B: a current report and a historical report.
When you request a copy of your report, D&B only provides you with the current report.
However, each year D&B also compiles all of your business‟s information into a
historical report. This report is available to potential lenders or vendors. Once a negative
trade reference is cleared, you will see a difference in your current report. Nevertheless,
the negative trade reference may still show up within your historical report. It is
important to request that your D&B agent also remove the negative trade reference from
your historical report. Follow the normal procedure when talking with a D&B
representative, and make sure to follow up to ensure that this is completed.

Trade references stay on your credit report for 16 months before being dropped. If a
negative reference is nearing the 16-month mark, you may just want to leave it alone, and
let the problem take care of itself.

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Removing Collection Comments

If you are being taken to collections over any unpaid debts or items, this can have a
profoundly negative effect on your D&B rating and your PAYDEX score. Your D&B
profile will display comments such as “Credit Refused” or “Bad Debt.” If a potential
lender sees these red flags when making a credit inquiry, you can kiss any chance to
receive business credit goodbye.

Fortunately, D&B does not conceal who has filed a collection against your business. This
allows you to approach the vendor or lender to try to work out a compromise. Usually,
the companies who put a collection filing on your report are the ones most concerned
with being repaid. You can often work out an agreement with these creditors stating that
they will request any bad debt or collection filings to be removed from your D&B profile
once you fulfill your debt.

If all else fails, dispute the collection filing with D&B. There is always a good chance
that the vendor or lender will not respond to D&B within 15 days, and the collection
filing will be dropped.

If the collection filing really is an error on the part of the lender or vendor, or you have a
legitimate reason for not making a payment to a specific trade line, you can send
supporting documentation to D&B to prove your claims. Even if D&B doesn‟t judge your
documentation as proving of your case, they will change the collections filing to
“Payment History Unknown.” This will not affect your D&B rating or PAYDEX score.

In some cases, the negative report is an error on the vendor‟s or lender‟s part. If so,
contact the lender or vendor directly to fix the clerical error or misunderstanding.

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Making Changes to the “Public Filings” Section

D&B is known for making routine checks into public-record databases. Because of this,
any lawsuits, liens, or bankruptcies filed against your business will eventually show up
on your D&B profile and will be detrimental to your business credit opportunities.


Sometimes, if you are involved in a lawsuit and settle out of court, D&B may still show
that the suit was found against you. You will need to provide D&B with documentation
that the lawsuit was settled. If you filed a “Stipulation of Dismissal” or a “Satisfaction of
Judgment” after you settled the lawsuit, you should have no problem getting D&B to
correct the mistake on your profile.

UCC Filings

UCC filings that show up on your D&B report can be either good or bad. Having a few
UCC filings will show potential vendors or lenders that there are other companies who
have already found your business to be creditworthy. However, several UCC filings may
suggest that you are burdened with debt and might not be able to handle any more.


During its routine public-records check, D&B may find a personal bankruptcy on the
record of a business owner, and record it on that business‟s credit profile. Doing so
disregards the corporate veil (which sees the corporation or LLC as its own entity,
separate from its owner). If a personal bankruptcy shows up on your business‟s D&B
report, you can e-mail or fax D&B‟s department of public filings, and request that any
personal bankruptcy information be removed from your business‟s profile.

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If your business has filed for bankruptcy, there is not much you can do to have D&B
remove it. This is public record, and does pertain to your business‟s creditworthiness. If
the ownership of the business has changed since the bankruptcy, you can show D&B
proof of the change, and have the old data removed from your business‟s profile.

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8 The Proof Is in the Pudding

The 5 Cs of Creditworthiness

1. Capacity

Capacity is an assessment of your ability to pay back a loan. Lenders and financial
institutions want to know how you will pay back the loan before they will approve it.
Your capacity is the biggest influence on a lender‟s or financial institution‟s decision to
extend a line of credit.

Capacity is calculated using a number of components, including the following:

           Credit payment history. This refers to the business‟s timeliness in repaying
            past bills and loans. (Lenders will refer to the business credit bureaus for this
           Cash flow. This is the difference between a business‟s income compared to its
            expenses over a specific period of time.
           Contingent sources of income. These are any additional sources of income that
            could be used to repay the loan, whether through the business‟s assets or
            personal assets. Contingent sources of income are usually assured by a
            personal guarantee when signing a loan.

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2. Collateral

Collateral refers to any assets that could be seized and sold by the lender if the business
defaults on the loan. Bonds, stocks and large machinery are examples of possible
collateral. Items such as computers or other typical office equipment are not usually
considered collateral. Therefore, a financial institution might request that the business
owners use personal assets such as houses or cars as collateral.

3. Capital

Capital is defined as an owner‟s personal investment in a business. Financial institutions
want to make sure that the owner has invested his or her own personal funds before the
lender will be willing to invest additional funds. There are no set criteria regarding dollar
amounts of personal capital invested, but most financial intuitions like to see that the
owner has invested at least 25 percent of his or her personal funds in the company.

4. Conditions

Conditions are determined by an overall evaluation of the situation and circumstances
surrounding the business applying for the loan. Factors such as demographics, the
national economic climate, and economic conditions specific to the business‟s industry
are taken into consideration. If the business is in a flourishing industry, and the economy
is thriving, a loan is more likely to be extended (and vice versa).

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5. Character

Lenders must be assured of a business owner‟s character. Reliability, dependability, and
positive credit history all support a character of creditworthiness.

Lenders might perform background checks on a business owner‟s personal credit history,
work experience, education, and similar details, so as to better establish the applicant‟s

Business Plans

Additionally, a lender may ask to see a company‟s business plan to assess how that
business intends to use its funding. If the business plans to invest the loan in a risky
venture, the loan will be less likely to be granted than if the business‟s intention is to
improve its equity or acquire assets. Most lenders will want to see a plan indicating that
the business will use the loan to decrease business expenses or increase its income.

Bank References

In order to assess a business‟s capacity to repay a loan, the lender may request a bank
reference. The bank reference evaluates a business‟s average balance and account history,
and can better assure that the business is financially capable of repaying the loan.

Having an active bank account for more than two years is a definite advantage, but is not
always a requirement.

Most lenders or vendors will want to see an average daily balance of at least $10,000 in
your account. Your average balance reflects your cash flow, and ultimately your
capability of managing a business loan.

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For example, if the loan for which you are applying requires a monthly payment of
$2,000, the lender will want to see a bank reference placing your account balance in the
$10,000-$40,000 daily-average range.

Having at least a $10,000 daily-average account balance will place you in a favorable
position with lenders. Having less than that in your bank account will not necessarily
disqualify you from acquiring a business loan, but it will make the process slower and
more complicated.

Some small-business owners who do not have at least $10,000 as a daily average in their
accounts will borrow the difference from close friends or family members, and will let
the funds sit in their accounts to raise their daily-balance average before applying for

Accounts with returned or bounced checks give a negative image of your business‟s
character. Vendors and lenders can obtain a reference from your bank over the phone, or
through a bank reference form. This form can be either rather simplistic or heavily
detailed, depending on how much information the expectant lender requires.

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9 Look before You Leap

As previously explained, your business credit profile is compiled using your payment
histories with various trade lines. Trade lines come in several different forms, but consist
mainly of net accounts and revolving accounts. Establishing net and revolving accounts
prepares your business to be accepted for business credit cards and business loans.

Usually, a business must first establish a history with net accounts, and then gradually
move its way up the trade-line hierarchy.

Common Obstacles to Strengthening Your Business Credit Structure

Companies that extend credit do not want to risk losing money. To better assure that their
loans will be repaid, lenders and vendors can provide several conditions and stipulations
prior to approving loans. These initial conditions or stipulations make it difficult to obtain
business credit without involving personal credit or personal liability. However, the more
credit you establish, the less these obstacles will stand in the way of reaching your
business credit goals.

Payment History

No vendor or lender wants to be the first company to extend credit to your business.
Many will insist that you have an established payment history with other vendors or
lenders. Vendors and lenders can access this payment history by ordering a company-
profile report from one of the major business credit bureaus, or by requesting this
information from the business applying for the loan.

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Difficulties arise when you are the owner of a newly formed business trying to establish
business credit. How will you build a payment history when lenders and vendors require
a prior credit history?

If you have a newly formed business without any payment history, lenders and vendors
might insist on using one—or several—of the following methods to determine your

Personal Credit Checks

Vendors and lenders will consider establishing a trade line with a business that does not
have a prior credit history if that business owner agrees to a personal credit check. By
looking into an owner‟s personal credit history, the lender or vendor can get better insight
into the character of the applicant.

While a personal credit check may allow a business to establish some trade lines it might
not have otherwise obtained, the owner‟s personal credit is damaged with each hard pull.

Personal Guarantees

If a business owner has a good personal credit score, but has yet to establish a good
business credit profile, a vendor or lender might offer credit with the condition that the
business owner will personally guarantee the credit.

A personal guarantee is an individual‟s unsecured promise to assume his or her
company‟s debt if the business is unable to repay the loan. An unsecured promise means
the loan is not secured by the business owner using a specific asset as collateral.
However, a personal guarantee allows vendors and lenders the right to recoup the
remaining amount owed by the guarantor business, using the personal assets of the person
who guaranteed the business loan. Without a personal guarantee, a lender can go no
further than the boundaries of the corporation or LLC that defaulted upon the loan.

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Personal guarantees should be avoided as often as possible, because they require a
business owner to forfeit the advantageous corporate veil between his or her personal
finances and the business‟s finances.

However, there are times when a business owner must choose between personally
guaranteeing the credit and not receiving the credit. So, while there are risks with
personal guarantees, these guarantees also allow you to get business loans that you may
not have been able to obtain otherwise.

The trick with a personal guarantee for business credit is to only take on a debt that you
can easily repay.

Finding Trade Lines to Report On-Time Payments to the Business Credit Bureaus

Some start-up trade lines are friendly toward newly formed businesses, and they will
extend a net or revolving account to a business without a personal-credit check or
personal guarantee. Finding these start-up trade accounts can be hard enough, but finding
trade lines that also report on-time payment histories to the business credit bureaus can be
nearly impossible if you don‟t have a business credit trade-line list.

This is why many business owners give up on establishing business credit.

There are some vendors that are willing to establish trade lines with new businesses, and
without a personal guarantee or personal credit check. However, these vendors know that
new businesses pose a higher credit risk than established businesses; therefore, they do
not advertise that they are willing to extend trade lines to new businesses. This makes it
extremely difficult for a new business owner to find start-up trade lines on his or her own.
Without the help of business credit experts, many business owners become frustrated and
give up on establishing business credit.

Without start-up trade lines, small businesses would not be able to establish business
credit profiles. Start-up trade lines are some of a new small-business owner‟s most

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valuable assets, and as such, they are the most closely held secrets of the business credit

Finding and establishing your first trade lines are the most difficult steps in building
business credit. Having an accurate trade-line list saves a small-business owner hundreds
of hours of personal research, and opens up opportunities known to very few others.

Many people buy business-credit-building programs at costs of more than $8,000, since
these programs include trade-line lists. Unfortunately, the trade-line lists included in
these programs have been circulated throughout the internet since 2003. Due to the
tightening economy, vendor requirements have changed drastically since the beginning of
2008. In the end, most customers who spend more than $8,000 for a business-credit-
building program find the trade line lists to be too out-of-date and inaccurate to be of any
help to their businesses.

We at the Business Funding Division know that new business owners will purchase credit
programs just for their start-up trade-line lists. We also know that information is only
beneficial when it is frequently updated and collected firsthand from the very source. We
take great pride in our start-up trade-line list, as we have made every effort to compile
information that is accurate and timely. We did not get this list from the internet—we
went directly to the sources to which we‟ll refer your business, and personally
interviewed each vendor that we‟ve listed.

Finally, be patient with the length of time your trade lines will take to provide reports.
Some trade lines report monthly, and others may report annually. An average trade line
can take up to six months to begin reporting your payment history.

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10 Net Accounts

A net account is a type of trade credit that requires payment in full by a specified number
of days after a product is delivered. Net accounts are also referred to as “invoice terms.”
The most common form of net account (known as the “net 30”) has a 30-day repayment
term. For example, if you have a net 30 account with Office Depot, and you purchase a
stapler on July 1, you will need to pay Office Depot for the full cost of that stapler by
July 31.

Advantages of Net Accounts

          Easier to obtain than other trade lines
          Potentially helpful for starting your business‟s credit profile
          Known for some payment flexibility
          Easy to manage
          The predecessors to revolving accounts (your next step in building business
          Lower-risk than other trade-line accounts
          Not prone to as many requirements or restrictions as revolving accounts,
           credit cards or loans

Disadvantages of Net Accounts

          Must be paid in full by the end of the repayment term, unlike revolving
           accounts, credit cards or loans
          Usually offer a shorter repayment period than their counterparts
          Less likely to report to the business credit bureaus

While they are great assets to a new business owner, most net accounts can also take
months to show up on a D&B business credit profile.

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11 Revolving Accounts

A revolving account is a form of “debt” account in that the amount due does not have to
be paid in full each month. A minimum payment is usually required, based on the
outstanding balance of the account. For example, if you have a revolving account at
Staples Office Supplies, and you buy $200 worth of staplers, a revolving account may
only require you to pay $75 toward that amount each month.

Advantages of Revolving Accounts

           Your next step up in the business credit structure
           Known for more payment flexibility than net accounts
           Not intended to be paid in full each month
           Likely to offer a larger line of credit than a net account

Disadvantages of Revolving Accounts

           Stricter with the application process (and have more approval requirements)
            than most net accounts
           Often subject to high interest rates

Revolving accounts are your next step up from net accounts. Once your business has six
to seven net-account trade-lines reporting to D&B, you are ready to apply for revolving

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The vendors most likely to extend a revolving account to your business are those with
which you‟ve already established net accounts.

Once you obtain a net account with a vendor, make sure to pay on time, every time, so
you will build a creditworthy reputation with that vendor. Once you have done this for
four to six consecutive months, you can approach your net-account trade line (preferably
in person) and request that your net account be promoted to a revolving account.

Retailers‟ credit cards are good examples of revolving accounts. Gas cards are also
common choices for businesses trying to establish revolving-account trade lines.

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12 Business Credit Cards

Business credit cards are a common tool used by business owners to raise capital and
build small-business credit.

Business credit bureaus usually sell their database information to credit card companies.
These companies will then examine business profiles and find those that fulfill their
credit requirements. The credit-card companies will then mail credit card offers to those
chosen businesses. Some of those offers are pre-approved; however, the amount of credit
and associated interest rate will not be determined until the business completes the credit
card application process. The majority of credit card companies allow you to apply

In order to determine approval status, credit limit, cash-advance terms and interest rates,
credit-card companies will examine the following details of a business.

1. Annual Income

Some credit card companies require a minimum annual income from the business. Some
insist on a minimum of $25,000, while others might require $100,000. Companies may
focus solely on a business‟s credit history, and may not require a minimum annual
income at all. It‟s beneficial to find out if a credit card company has a minimum-income
expectation—and, if so, whether or not your business‟s annual income can meet that
expectation—before you go through the application process.

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2. Business Credit History

A business credit-history profile, as reported by the business credit bureaus, is the most
influential factor in the credit card application process. If your business does not have a
credit history, or has a delinquent payment history, your business will most likely be
denied credit.

Much like an individual, one company may open several business credit cards.

Timing is very important when applying for business credit cards. The right timing can
prevent damage to your personal or business credit score, and can also enhance your
chances of approval. Refer to the timeline in Chapter 14 to learn more about this topic.

Every credit card issued has a limit on how much money can be borrowed. Your
business‟s annual income and credit profile determine the credit limit available on your

A good place to start when applying for a business card is the bank with which you
maintain your business account. As you are already a customer of the bank, the
application process is greatly simplified, and the processing time is shortened.

Another good reason to obtain a business credit card from your local bank is that it
increases the chances of that bank approving a business loan for you in the future.

Lending Criteria

Lenders determine your credit limit based on a variety of factors. The line of credit you
are offered will depend upon your business‟s credit rating and overall profile.

The biggest difference between applying for a business credit card and a formal line of
credit from a bank is that no business plan or financial statements are required for a card

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Advantages of Business Credit Cards

          The next step up in the business credit structure
          More flexible than net and revolving accounts in terms of your spending
          A good way to increase your available capital
          Advantageous for financing the growth of your business
          Helpful for preparing your business to obtain business-loan approval

Disadvantages of Business Credit Cards

          Higher-risk, since a greater credit limit requires more responsibility, and
           involves a greater risk of unmanageable debt and high interest rates
          Stricter with requirements application processes than the lower levels of
           business credit
          Subject to high interest rates on unpaid balances
          Often provided only to established businesses
          Possibly subject to minimum financial requirements
          Likely to require a personal credit check and/or personal guarantee

Some credit cards offer incentives or customer bonuses, such as extended warranties,
theft protection, and return guarantees on items purchased with the card.

How Much Credit Can You Get?

Before you try to obtain as much business credit as lenders will offer you, make sure that
you can maintain the amount of credit afforded to you. Consider your business credit
profile, your company‟s assets, your business‟s annual income, and other financial needs
when requesting credit from a lender.

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13 Applying for Business Loans

A business loan is a sum of money given directly to a business from a creditor or other
financial institution. Some of these lenders do not need any additional personal
guarantees, while the majority may require personal collateral from the small business‟s

It is common practice for a lender to consider the company‟s assets as well as the owner‟s
personal credit history when extending a line of credit to a small or new business. Most
small-business owners begin establishing their business credit history using personally-
guaranteed loans. Once they have developed reputations for paying back their loans in a
timely manner, they are more likely to secure business loans that rely solely on their
businesses‟ assets and not their personal assets. Obtaining this type of loan is the goal of
every business owner.

Many different types of business loans are available to suit a company‟s particular
business-capital needs.

Commercial Loans

Commercial loans are the most common type of business loan, and can be used for
general growth purposes such as marketing, inventory, or new-product development.
Commercial loans are available as “single-purpose” loans, which can be used to fund the
purchase of a specific item (such as a new copier).

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Business Lines of Credit

A business line of credit, or business loan, is similar to a revolving loan in that it has a
fixed cap on how much credit a person will be allowed. With a business loan, however,
once a portion of the debt is repaid, the repaid amount is available to be borrowed again.
For example, if you have a $60,000 line of credit and you spend $20,000 of it, your line
of credit is reduced to $40,000. Once you pay back the $20,000 (and the interest that has
been added to it), your line of credit will once again be $60,000.

A business loan requires a fixed period of time for repayment (normally two years). If the
business has a good payment history, the fixed time period can often be renewed, and the
credit limit can be increased.

Overdraft Protection

Overdraft protection is like an “extension” of your business‟s checking account. If you
write a check for a greater amount than you have available in your bank account, the
bank will dip into your overdraft protection instead of bouncing the check.

Your total credit limit with overdraft protection is generally less than it would be through
a business line of credit, and will usually range from $1,000 to $10,000. Overdraft
protection is not secured by any physical property.

                                                        The Fast Track to Business Funding | 72
Types of Business Loans and Financing

        Secured Working-Capital Loans: Secure loans are guaranteed with personal
         assets (also known as collateral).
        Unsecured Working-Capital Loans: Unsecured loans are not guaranteed
         with collateral and are usually warranted based off of the applicant‟s credit
         worthiness. Unsecured loans are the type of financing to which small business
         owners aspire.
        Commercial Real-Estate Loans: These loans for commercial real estate can
         have fixed or variable terms.
        Accounts-Receivable Factoring: This practice acts like collateral for short-
         term working-capital loans. Accounts-receivable factoring service is fast and
         easy to obtain.
        Start-Up Loans: Start-up loans are specifically meant for entrepreneurs who
         need capital to start a new business venture.
        Franchise Start-Up Loans: These loans help entrepreneurs to purchase
         franchises from existing businesses.
        Business Acquisitions: This is loaned capital used to buy an existing
        Lines of Credit: These business credit lines of up to $200,000 are based on
         creditworthiness. No collateral is required.
        Professional Loans: These loans are extended to individuals such as lawyers,
         doctors or CPAs.
        Equipment-Financing Loans: Equipment-financing loans help businesses to
         purchase work-related equipment. In return, the leased equipment is used as
         collateral for the loan.
        Equipment-Sale Lease-Backs: This agreement allows business owners to
         sell the equipment they own, receive cash from the sale, and then lease the
         same equipment.
        Equipment Leasing: This is the simplest form of equipment credit, and
         comes with tax benefits.

                                                   The Fast Track to Business Funding | 73
          Construction Financing: These loans are specifically for commercial or
           home construction.
          Residential Equity Lines: This secured credit is based on the equity of your
          Residential Mortgage Lending: Residential home loans are based on
           current-market interest rates.
          Multi-Family Real Estate Loans: These loans are granted for investment in
           real estate.
          Business-Only Loans: These are loans obtained by a business, without any
           personal guarantees or personal collateral, provided that the business can
           support the amount.

SBA Loans

Small businesses are a staple of the U.S. economy, but they face more challenges than
their larger corporate counterparts. To help small businesses stay afloat in this economy,
the government established The Small Business Administration (SBA).

The SBA is known chiefly for the small-business loan programs it has established. The
SBA seeks to offer loans to businesses that might otherwise not have qualified for loans
from traditional lenders or financial institutions.

The SBA does not actually grant the loans they offer to you. Rather, they connect you to
a participating bank or lender and function as a sort of co-signer. They guarantee a certain
amount of your loan against default.

SBA loans are designed with the small business owner‟s interest in mind. SBA loans
usually have longer repayment periods, which lower overall monthly payments. They
also have looser affordability calculations, allowing some small businesses to borrow
more money than they could have from a traditional lender.

                                                      The Fast Track to Business Funding | 74
One of the most appealing aspects of SBA loans is that they will support a commercial
mortgage for a small business‟s office building. SBA loans have similar rates and
payments to traditional loans from banks, but do not require the borrower to refinance
every five years like most bank loans.

The SBA offers three basic types of loans:

       1. 504 Fixed-Asset Financing Program
              Grants through certified non-profit development companies throughout the
              Provides funding for purchasing construction or land
              Financed 50 percent by the lender; the certified development company
               provides an additional 40 percent of the projected cost, and the applicant
               finances the remaining 10 percent of the cost
              The Certified Development Company‟s investment is a 100-percent SBA-
               guaranteed debenture
       2. Loan Guarantee Program [7(a)]
              Designed to help small business owners start or expand their businesses
              Capital is available to small businesses through banks and other lenders
       3. Micro-Loan Program
              Good for those who need a small loan
              Up to $35,000
              Financed through nonprofit, micro-loan intermediaries that lend to small
               businesses considered too risky in the traditional credit market

       For more information on SBA loans, or to get started on the loan application
process, visit the SBA‟s Web site.

                                                     The Fast Track to Business Funding | 75
14 Connect the Dots

Timing Is Everything

Knowing when to apply for business credit is just as important as knowing where to

The Small Business Administration reports that 92 percent of all small-business loan
applicants are denied. All small-business loans will require a personal credit check.
Continually being turned down for small business loans will not only sink your
business‟s opportunities for growth, but it will also significantly damage your personal
credit score. One of the main differences between the business credit strategy of the 92
percent of small-business owners that are denied business loans and the eight percent that
receive funding is timing.

As with creating any structure, business credit should be built from the bottom up.
Similarly, the right timing is essential for building a sturdy structure. For example, all
builders know that when laying concrete for the foundation of a home, it is fundamental
to let the concrete dry and properly set before continuing to build upon it. Building too
soon could cause the whole structure to collapse. The same principle applies to building
business credit. In order to protect your personal credit and construct solid credit for your
business, you must not only know where and to whom your business should apply for
credit, but also when your business should apply.

Business owners have their loan applications approved—and advance to the business
credit pyramid‟s higher tiers—when they know exactly what to establish within their
business credit structures.

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The Business Credit Blueprint: Credit-Level Schedule

The process of building business credit can be split up into four levels, each with its own
stage or time frame.

Business Credit Level One: Net Accounts

When you first begin to establish business credit, you will have to find vendors who do
not require a business credit-history check. While finding such lenders will probably be
the most difficult task of establishing business credit, this stage of business credit offers
an opportunity that will soon expire once you begin to establish business credit.

Apply to as many level-one vendors as you desire. Most level-one vendors do not pull
your business credit profile from the business credit bureaus‟ databases. Even if vendors
do pull from the bureaus‟ databases, your corporation or LLC will probably not have a
score yet. Therefore, your business cannot be docked score points due to third-party

Since this is the only stage when numerous inquiries will not negatively affect your
business credit score, it is recommended that you apply for credit from as many level-one
vendors as possible. Just remember, once your corporation has moved past level one, you
should be conscientious of to whom you apply and how often you apply.

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Business Credit Level One: Start-Up Net Accounts

Net-account providers                                 Staples
                                                      Office Depot
                                                      Quill
                                                      Reliable
                                                      Accurate Office Supply
                                                      C & H Distributors
                                                      Hosting RX
                                                      Interstate Batteries

Timing                                          There will be a wait of two to six months
                                                before net accounts start reporting to

Other vendors: Once two or three net                  Crutchfield
accounts are reporting to D&B, reapply for            Xerox
the accounts that were initially declined. In         Radio Shack
addition to this, apply for accounts with             Gemplers
these vendors:                                        FedEx/Kinkos

Requirements before moving on to the            Once you have six to seven net accounts
next step                                       reporting to your D&B credit profile, you
                                                are ready to move on to the next level of
                                                the business credit process: revolving

                                                       The Fast Track to Business Funding | 78
Business Credit Level Two: Revolving Accounts
When to apply                                   Anywhere between 3 and 12 months after
                                                you‟ve established net accounts.

Gas-card providers: First try applying for             Sunoco
these business gas cards (If your business is          BP
not in need of gas, then move on to the step
for revolving accounts).

Timing                                          If you receive business gas cards, wait for 60
                                                days and then apply for retail revolving-
                                                account cards.

Revolving-account providers                     Start by applying to the lenders or vendors
                                                with whom you‟ve established net accounts.
                                                If you have a good payment history, they‟ll
                                                more than likely be happy to extend a
                                                revolving account to you.

                                                The following vendors offer revolving

                                                       Home Depot
                                                       Staples
                                                       Office Max
                                                       Lowes
                                                       Office Depot

Timing                                          Wait for 60 days, and then try applying for
                                                retail credit cards from the vendors that have
                                                extended a revolving account to you. The
                                                better your payment history, the more likely
                                                these vendors will be to approve you for a
                                                retail credit card.

                                                        The Fast Track to Business Funding | 79
Business Credit Level Three: Business Credit Cards

When to apply                                 Anywhere between 3 and 12 months after
                                              establishing revolving accounts

Retail credit cards (apply for these first)          Sam‟s Discover Card
                                                     Home Depot MasterCard

Timing                                        Once you receive a retail credit card, wait
                                              60 days before applying for a business
                                              credit card.

Business credit card providers                       Citi Trio
                                                     Key Bank
                                                     Bank of America
                                                     Wells Fargo Small Business

Timing                                        After receiving a business credit card from
                                              one of the above, wait 60 days, and then
                                              apply with some of the major business
                                              credit card providers below.

                                                      The Fast Track to Business Funding | 80
Major business credit card providers                Advanta
                                                    Chase
                                                    American Express
                                                    Discover Office

Timing                                        Wait 60 days, and then apply for business
                                              loans and other forms of business credit.

Business Credit Level Four: Business Loans

Finally, apply for some of these types of           Local-bank loans
loans. Do not overlook opportunities for            Small Business Administration loans
trade credit within your field of business.         Credit-union loans

                                                     The Fast Track to Business Funding | 81

I wish I could say that The Fast Track to Business Funding was a pouring out of my infinite
wisdom and long studies, but that would be far from the truth. This book was written because my
students asked for it. You cannot ride a roller coaster without the downs. During my setbacks
many years ago I vowed that I would help others to avoid the dips and heartache that being broke
emotionally and financially will bring.

Thank you to Mellissa Zelig and your editors for the extensive research and fact-checking hours
that you put into this book and for giving up your summer to make this all come to fruition.

Many thanks to the Business Development Division and Ivy
Capital for your constant support and eagerness to help the many business professionals in
need of your much needed services. Thank you also for your example of continually giving back
to the community and the kids.

I would personally like to thank Chris Zelig, Steve Lyman, John Harrison, Kyle Kirschbaum and
Anthony Dibello for not only showing the business world the perfect model of integrity and
honesty but for demanding that those around you act the same. It is contagious. You are all such
perfect examples of how the American business marketplace should operate.

A huge heart felt thank you to Marc and Kelly Accetta for not only being my friends and mentors
but for actively taking a role in my life and showing me what is possible when someone applies
themselves and rids their life of distraction. Life is much more enjoyable with you two in it.

To Kari and Lisha Schneider and Wes and Sarah Melcher, you've outdone yourselves over and
over again and I am privileged to be on your Christmas card list. If only the whole world knew of
the message which you possess and the pure hearts which you constantly pour over the masses.
Thank you for your mentorship and examples of hard work.

Above all I owe tremendous thanks to my parents, Tom and Vivian. My Dad is the poster dad of
hard work paying off. Going from mowing lawns to being a doctor, having major setbacks and
getting it all back again. Everything he does, from jogging his daily miles in the morning to the

                                                          The Fast Track to Business Funding | 82
way he has trained his dogs, he tackles with wreck-less abandon and with love in his heart.
You're the best Dad.

My mother, who gave me the gift of life continues to do so with every person she meets. Her
smile and laughter are unmistakable and contagious. It is because of her young spirit and love for
life that she still acts and looks 30. Don‟t change a thing Mom.
To my sisters Brooke and Megan, you both are beautiful and deserving of all the blessing you hav
e received in your lives. Take it easy on your husbands, you found the best ones. To my nephews
Parker and Cole, I expect big things from you two.

I am who I am today because of the nurturing and mentorship of many whom I did and did not
mention. What I have learned over the years is that some advice goes in one ear and out the
other. Sometimes however, you hear or read something and it is up to you to make sure that it is
simply not ignored. My friend Byron Schrag says, "Opportunity doesn't knock, it whispers." My
hope is that this book yells in your ear so loud that you start paying attention, taking massive
action and start building your legacy today.

                                                           The Fast Track to Business Funding | 83

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