How to Get Business Credit, with Ty Crandall

Need capital in your business, fast? Today, we’re talking about another way to get a capital infusion through business credit.  

The problem is that most business owners who want financing don’t get as much as they could, because they haven’t worked on the qualification process.

That’s where CreditSuite can help. Ty Crandall has become a recognized authority in business credit building, business credit scoring, and business credit repair. So if you want to improve your fundability, build business credit, or get loans and credit lines… tune in now!

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Access to cash is critical for a business owner. While you don’t want to rely solely on credit for your business cash flow, you don’t want to be stuck in a spot where you need it and don’t have it.

Breaking into the Business Credit World

Ty Crandall’s first company was a mortgage company that he quickly grew into a 7-figure company. And he rode that wave right up until the subprime mortgage crash, when things started to go south. While he thought he had access to plenty of capital, it turns out that wasn’t the case. After a few late payments, as he figured out how to navigate a failing business, the unexpected happened. 

His credit card companies actually shrunk his credit limit down to what he owed, so that he could not spend anymore, which effectively tanked his credit score. Then they pulled the money out of his personal bank accounts, depleting his cash stores. 

When something like this happens, other areas of your life can snowball—checks can bounce, and you can’t use credit to get out of the hole. 

Ty worked overtime to get out of this hole, but he couldn’t find quality credit information anywhere. During this period, he learned about business credit, and realized that the information was nearly impossible to access. So he decided to compile information about business credit himself, and begin teaching people how to use it and why. 

Credit Reporting

Many people don’t understand the scope of credit reporting, because it happens in the background. Ty shares that a lesser known practice of consumer credit reporting is transparency from company to company. So if you have a late payment on one credit card, and not the others, the other companies will still know because it’s in your report. Since all the companies have access to this information, your other credit providers can choose to lower your limits on that reporting alone. 

That’s what happened to Ty when his credit imploded. 

Business Credit vs. Consumer Credit

Business credit is a “hidden gem,” even though it has been around longer than consumer credit reporting. If you’re a business owner, having business credit can help keep your business separate from your personal credit, so that you can have more privacy and safety… and avoid negative outcomes in uncertain financial times. 

[11:20] “The main scores that are used are just based on how you paid in the past. That’s it! It’s just a mathematical interpretation of how you, on average, pay your bills. And I love that! How easy is credit, if we’re scored just based on: Do we pay on time? Do we pay late? Do we pay early? How late do we pay?”

Consumer credit has many factors built into the score, and can take years of diligent monitoring to get to the top. But with business credit, you can build your score in as little as one month by getting a single account that stays in good standing with Experian or Equifax, or accounts that report to DNB. 

The Right Time to Build Business Credit

Business credit takes time to establish—not nearly the time it takes to establish personal credit, however you still need a few months. So how do you know when it’s good timing to establish business credit? 

The best course of action, according to Ty, is not to wait. As soon as you establish a business, it’s a good time to start building your business credit. Otherwise, you risk negative outcomes to your personal credit.

[13:00] “Business credit really is created to help your business fund itself. The biggest mistake… I see business owners make, is they try to fund a startup using consumer credit cards. And they make two essential mistakes that a lot of established entrepreneurs know. They think thighs will happen way faster than they end up doing, and they also think things will cost way less than they end up costing.”

The reality is, starting a business will take more time and money than you think it will. And consumer credit cards were not designed to fund businesses. Credit limits are relatively low, because the average person doesn’t spend $50,000 a month on a credit card. 

By using a consumer credit card, a few things will happen: your credit usage will be out of balance, and your credit score will take a hit. Then, you won’t be able to secure as much business funding through other means as you could have, because your personal credit score is low. 

Business Credit Cards vs. Consumer Credit Cards

Business credit cards, on the other hand, were specifically designed to handle large monthly expenses. The limits on business cards per SBA are ten to a hundred times higher than what you see in the consumer market. And those limits can increase within 30-60 days of opening an account. 

Businesses just have a higher spending threshold than people do. When you’re building business credit, you want the early start by having the right kind of credit, because you have more access to more money, and your business can actually start funding itself on credit, while earning rewards and points, without relying on others. 

[15:34] “There’s two ways you can get money into a business. There’s debt or equity.”

Leveraging Debt

Walmart, one of the biggest retailers in the US, leverages their business debt for success. 80% of what they sell is bought using business credit. That’s one of the secrets businesses master that consumers often don’t—the power of leveraging other people’s money (OPM). Walmart uses OPM to buy a product like Bounty paper towels with credit, and then use the money from the sales to pay that credit back. They have more money in business credit than all shareholder value combined. And that’s a large part of their success. Even Apple, who is sitting on billions of dollars of cash, leverages debt to strengthen their business.

Building Business Credit Separate from Personal Credit

It’s important to recognize that the steps are the same, whether you’re a “big fish” or small. Those who apply business credit for success are all doing the same thing. 

1. Create Separation

When you’re starting out, you must draw a clear line between personal and business credit. To be a legitimate business, you have to treat your business like it is already legitimate. That means creating an entity structure that separates you from the business, and identifying what industry you’re in. 

If you don’t know what industry you’re in, specifically, you can run into legal and tax issues. The IRS and Credit Bureau use industry codes to identify typical business expenses for industries that are the basis for audits. To find out your industry code, visit NAICS. 

Other steps to separate yourself from your business are to set up a business address, different from your own. Rather than a PO box, Ty recommends getting a virtual address if you don’t have a separate office location. Websites, a separate phone number, a new email address—these are all additional pieces that will improve your application for business credit AND make your business more credible. As a bonus, you add a layer of security to your business, so no one is reaching you from home. 

More than 80% of all applications denials for business credit occur because the lender believes the application is fraudulent. PO Boxes, lack of congruency, and even too much “personal” info can make an application seem like a fraud. 

2. Get Your Credit In Line

Once you have your business details in order, and before you seek credit approval, you’ll want to get a DUNS number. This is just one of the ways to build and track business credit, which you can get here. The application is quick, and will help you get your business credit reporting started. 

Once you have access to credit, it’s important to use it in a way that boosts your credit score so that you can get access to more funding when you want or need it. It’s not that you need tons of credit, but building your score gives you room to grow. You wouldn’t seek funding on a personal residence or a car without a solid credit profile, and this is the same concept. You shouldn’t wait until you need more credit to work on your score. 

3. Find Companies that Report to Business Credit Reporting Agencies

Finally, you’ll want to get approved for business credit. The most important detail is to get credit with a company that reports to a business credit reporting agency. Unlike consumer credit, business credit doesn’t report to DNB or other agencies by default. You have to seek companies that DO, so that you can get the benefit of a business credit score. 

If you have good personal credit, you can take the simple path of applying for high credit limits that report to the right agencies, right out of the gate. The other option is to seek vendor credit, which doesn’t rely on personal credit to access. You can start with nothing and get access to credit. 

This path is slower, and you’ll want to purchase from companies that offer credit and report that credit. For example, you could go to Uline, set up an account, and make an order. When you check out, select the option resembling “invoice me.” If your items ship and you get approved for credit, congratulations. You won’t receive a card in the mail, and you’ll have to call the company to check their credit line, but you’ll have your first business credit account.

Then, you’ll want to pay that off after the item ships. If you pay too early, it doesn’t get reported because it is treated as a cash transaction. If you pay if off too late, it adversely affects your score. Even a single day after receiving the bill can change your business credit score. 

Finding the “Sweet Spot”

For this method, a sweet spot when starting out is about five accounts—one or two reporting to DNB and three reporting to Experian/Equifax—so that you can begin building your score and qualify for more credit down the road.

As you begin to apply to larger retailers for business credit, there might be some trial and error. They have different requirements—some will want to see six accounts, or ten accounts, before they’ll lend to you. 14 accounts will open up even greater opportunities—Visas, MasterCards, and auto financing become available.

4. Start Immediately

Once you get started, it’s important to keep the ball rolling. This is because Equifax and Experian also have negative reports, which indicates businesses that are “close to failing.” If they are aware of you, but you have no credit to speak of, this can show up as a failing report because all they see is a lack of credit.

Even if you establish a single account and maintain it, you’ll be in a better position than you would by waiting too long. 

Business Credit Gives You Opportunities

Having business credit gives you more opportunities. The more built out your score is, the more favorable terms and the more money is available to you. The goal isn’t to bite off more than you can chew; the goal is to have a score that will allow you to get what you want when you want it. 

Our take?

Have credit, build credit, have open lines, but don’t rely on them as your only source of capital. Having cash in a whole life policy is more guaranteed, but having credit available in addition boosts your financial agility and gives you more options.

Ty Crandall’s Offer

Ty’s mission is to help as many people build business credit as possible. You can get his complete guide to building business credit here, for free. His company also offers free consultations and a funding assessment for business owners, so that you can get started with confidence. Schedule a consultation with Ty’s team here, or call directly at (877)-600-2487.

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