Friday, September 7, 2012

Setting up a Business and Building Business Credit





I know it’s been a little while since my last post.

Took this year off from competing in shows so I could focus on some personal financial goals of mine…
 My business- Bademous Enterprises, LLC

On Aug 27, 2012 I formed Bademous Enterprises, Limited Liability Company (LLC)


 


As of right now, I am still working my 9-5 and even though I don’t “dis-like” my job, I have realized a 9-5 isn’t for me.

I was born to be an entrepreneur!

This post is about starting your own business and building your business entity to stand on its own! 

I have been doing a lot of research and reading a lot of books about how you can build business credit and now feel a little confident about how to set my business up the RIGHT way.

My future long-term goal is to be able to get “Unsecured Business Loans and/or Lines of Credit” with NO personal guarantee (PG).

The “secret” with building business credit is to “operate” everything in the business name.

When you operate your business under YOUR OWN SS# *aka* Sole Proprietorship, you are telling banks that you are willing to personally guarantee your business loans.

This means… if your businesses fail “YOU” fail, because everything is reported on your “Personal Credit Report”

When you get business credit cards in your social security number, it’s reported on your personal credit report.

When you get business loans, they ask for “YOUR” social security number.

This means the growth of your business; it’s based on “YOUR” personal credit history and report.

So, that ALSO means if you have bad credit…. Well, you get the picture!!

The goal is to build everything around the business name so it can have its own identity.

Just like your personal credit, you have to “strategically” build it up to meet the criteria of the business world.

You can’t just form an LLC or Corp then walk into a bank and ask for a loan.

This is pretty much where I am now….. Building my business identity!

My goal is to not have to be “personally liable” for anything.

Everywhere I’ve read states this process can take up to 6 months to 2 years. Banks supposedly wont’ lend to any business if it doesn’t have a financial statement of at least 2 years.

That’s why I’m setting up the business now, so when I need the money, it’ll be available to me.

I’ve also come across a lot of “Business Credit Builder” companies that seem to charge a hefty penny to help build your business credit for you.

I chose to do some more in depth research and found that you can pretty much do the same stuff by yourself… with a little more effort ,of course!

A really great site that I found A LOT of very valuable information for FREE was  gboogie.net/

All of his youtube vids helped me!!!







1st thing 1st ….. Obviously, you need a business name

In short…. (You can Google the long process)

You go to IRS.gov to search your business name. After you have the name, it’s time to form a company. Your company should be a LLC, LP, LLP, S-Corp or C- Corp. Whatever you do, DON’T make it a sole proprietorship!

You pay the fees, get the business registered, obtain licenses for the business if you need them, then you have to obtain a Tax ID #- which is your EIN #.

Your EIN# is the business SS#... this is what you will use from now on for everything that has to do with your business.

All this can be done by you online, with an attorney or businesses that specialize in start-ups.

I actually went through a company call NCH- Nevada Corporate Headquarters. http://www.nchinc.com/aboutus.htm

They were cheaper than an attorney and they were there to answer all my questions while setting up my entity. I could have done it online by myself, but I really wanted to understand the process.

Cost… $399: NCH Fee + $125: State fee = $524 … Which is considered my start-up fee, which is also considered a business write off J

After you set your business up, it’s time to make it look like an actual business….. It’s time to flood the market!!!

I made up an email address Bademousenterprises@gmail.com

I made up a free website Bademousenterprisesllc.webs.com

Purchased business cards from www.vistaprint.com



I then opened 2 business checking accounts… one at PNC and one at Wells Fargo in the EXACT business name… remember everything MUST match… the goal is to separate the business from yourself.

I then opened up a $500 CD  got a secured business loan backed by the CD for that amount. I then took out a loan for that amount and repeated the process at the other bank.

Now I have loans in my business name. These secured loans will mostly be reported by Equifax Business.

The next thing I did was got a business land line through ATT. This will list your business in the 411 directory.

This can take up to 3-4 weeks, but I have found out that if you call back a few days after you place your order, ATT can give you the designated phone # before they come out to set your line up.

You MUST make sure everything matches… the business name, the business address (I use my personal residence address as my business address also)

When you go to fill out applications and apply for credit for your business, most places will ask for a business phone number. You don’t want to use your personal cell phone number

This is important because Lenders what to make sure you are operating as a “Real Business”The next thing I did was start listing my business with all the search engines. This will help expose your business to the world for lenders, consumers and other businesses to see.

Some are:

· www.Locallytyped.com

· www.listmybusiness.com

· www.yext.com

· www.supermedia.com

· www.localeze.com.

· www.epressupdateusa.com

· www.infousa.com

After listing the business name, I started registering my company at every business site I could think of. Especially, the places I plan on doing business with in the future.

Such places are:

· Uline.com

· Grainger.com

· Rapid Forms.com

· Quill.com

· Seton.com

· Fed ex

· Reliable

· Home depot

· Office depot

· Staples

· Best Buy

· Wal-mart

· Target

· Ups

· Amazon

· Radio Shack

· Sams Club

You get the picture…. In addition to registering the business with these companies, I also requested a catalog to be mailed out.

This is all still part of the process of getting the company’s name out into the business world.

Now it’s time to get trade lines that report to Dun & Bradstreet.

For very helpful info and to find out which companies report to who, go to http://mademanscott.wordpress.com/category/business-start-up/

1st let’s talk a little bit about the TOP 3 Business Credit bureaus ….

Dun and Bradstreet, Equifax business and Experian business
Dun & Bradstreet is the largest business credit bureau in America. This also means they hold the most clout with the creditors. Dun & Bradstreet (also called DNB, DUNS) set the standard for business credit scoring. It is the one credit profile you, as a business owner, must protect. Having a solid DUNS profile is critical to the success of your business.

After getting the business TAX ID #, you will want to get a free DUNS #. You get this by going to the website www.dnb.com and applying for it. This number is used to identify your business.

The second is Business Equifax, which is also one of the three primary consumer credit reporting agencies. It provides business credit evaluations for over 22,000,000 small businesses and corporations.

The third one is Business Experian, which is similar to Equifax business.

After I did the background foot work for my business (listing the business everywhere) I started opening trade lines (NET 30 accounts) at different companies. Most companies that have net accounts will report to D&B.

Net 10, Net 15, Net 30 and Net 60 are forms of trade credit which specify that the net amount (the total outstanding on the invoice) is expected to be payment received in full 10, 15, 30 or 60 days after the goods are shipped by the seller.

Some companies are:

· Uline.com

· Grainger.net

· Nebs.com

· Seton.com

· Reliable.com


They say it’s best to have at least 5 or 6 lines reporting to build credit faster.

The whole point of doing all this is to get a PAYDEX score of 80.

You are probably familiar with the FICO scoring system used in personal credit. Your FICO (Fair Isaacs) score ranges from 450 – 850. In business credit, a different scoring system is used called your PAYDEX score. Your PAYDEX score ranges from 0 – 100. An 80 PAYDEX score is equivalent to a 750 FICO score used in personal credit.

This is pretty much where I am so far with my business...

After the trade lines start reporting, my goal is to start applying for revolving credit lines such as: Home depot, Lowes, Amazon, Office depot, Pep Boys, Staples places like that. Most revolving accounts report to Experian Business.

The goal is to get companies reporting to all three credit bureaus.

Then ultimately start applying for lines of credits with the bigger banks. That’s why they say it’s a process that can take up to 6months – 2 years!

The niche for my company is real estate. I want to buy, sell and rent.

However, real estate is considered “High Risk” so most lenders are wary about offering finance to this type of business.

Bademous Enterprises, LLC is a privately owned, New Jersey based management company that provides business services.

These “business services” can include anything from a messaging service (bringing checks or cash to the bank), cleaning, repairing, answering phones, to showing rentals.

My goal is to build my management company up and use the “management company” to buy my real estate (Hint: with no personal guarantee)

So when I go into the banks, my business will look more favorable then going in as a “real estate investor”

A really good article to read about business classification is called

“Know How to Classify Your Business”
http://www.dandb.com/credit-resources/risk-management/know-how-to-classify-your-business/

Earlier I stated that banks want to see a financial statement of about 2 years.

So my plan is to buy properties in my name, but use my company for everything else.

Which means Bademous Enterprises, LLC will be listed on leases; repair forms; rental payments will be made out to the company name and processed through the business checking accounts, anything that has to do with the “business side of Real Estate” will be done in the company name. This will show financial history and help build the business.

For further understanding, listen to this podcast:
http://www.realestateguide2success.com/podcast-investment-property-business-structure

This may all sound very long and tedious, but I believe in the long run it will be worth it.

Good luck with your business and Stay tuned…