DUNs numbers and business credit

[PLD 14]

This is continued from a thread on Hurricane Relief work.

I've just started reseaching business credit this summer, so here's what I know so far. Please feel free to add/correct as you wish.

A DUNs number is free. Fill out a few forms, they call to verify some info. One such item is that you are listed in the book under the filed name. I was not at the time, but I forget how I got around that.

For $499 D&B will call 5 of your creditors and start/build a credit file for you. From what I understand the agents are comission driven and the fee is highly negotiable (rumors of $199 are common). Unless your file gets started, you file will be empty. Not bad credit, but rather no credit. In the personal world they call this a thin file. Just like when most of us started out trying to get your first loan.

If you obtain credit from creditors that report to D&B, your fill will build itself (for free) just like personal credit. Unlike personal credit, many (most?) creditors do not report to D&B. It may pay to ask before you take a line of credit if they report to D&B.

If you are not incorporated, you are "in business" and not "a business". A such you will never begin the process of establishing business credit.

If you wish to establish business credit, your incorp name, business license, phone book listing (reportedly a must), DUNS file, creditors ALL need to have IDENTICAL records (name addy phone) for your credit file to fill out properly.

Get a dedicated business line (paid at business rates) in your business name and also a permanent dedicated fax number. The phone line is neccessary for identity continuity and the fax apparetly indicates a greater level of seriousness and permanence. Anyone know how efax is viewed in this light?

How long your business checking account has been established plays into your credit score. If you are using a personal account, open a business account now to start the clock. Never close that account even if you go dormant for a few years or change names later.

$10,000-$39,000 minimum balance is neccessary to earn a score of a "low 5" for your banking history. A low 5 is the entry point to being an acceptible risk for a business loan. At least one site recommends borrowing $10,000 (if neccessary) and keeping it in your biz checking as a floor.

Non-personally secured loans are very difficult to obtain. Incorporation, 2yrs in business, and a good biz credit score are the minimum to be considered.

Business loans have exceedingly high denial rates, and each denial hurts your credit badly. Speak with a loan officer on an informal basis about requirements for acceptance before making a formal application.

Secured loans are not reported to D&B as anything but a loan. If you have 10k to spend on equipment, you may be wise to speak with your banker and see if they will extend a business loan secured by cash on deposit rather than paying cash. If they are a reporting entity, you will now have a business loan and hopefully a good payment record on file.

Many "business" credit cards are not. They are a personally secured card with your company name on them. Amex is a big seller of these (I have one). They report personally and have no effect on your business credit score.

From what I hear, "Visa business" is very hard to get with a high denial rate. This may not be the best place to start trying to build business credit.

All that said, I have a few questions for the group:

I have three businesses that are all operated as sole proprietorships. One is an internet business, the other PW, the third real estate/rental property. For my own records, I keep all three seperate (records, bank accts, etc) so I can track business metrics. But, for the purposes of establishing myself as a larger, older, more credit worthy entity should I merge all three and incorporate as one larger entity? It would cause havoc with the business metrics, but it would more than double my average monthly balance and keep them much more stable across seasonal fluctuations. Would 3 corps and a holding company be better?

Any thoughts/comments/criticism welcome.

[acidburn 14]

Phillip,

I have done something similar. I own a total of 3 businesses, 2 of them with my brother. So, after talking with attorney and accountant of course, we incorporated one main company (the holding company), then made all of the businesses LLC's with the holding corp. as the parent company. This allows us to transfer money to one company (via profits), but keep seperate records, expenses, and LIABILITIES.... liability being the big reason for this, we didn't want one company liable for another company's problems, should any arise. (FWIW....the companies are pw, of course, mobile electronics, and a driving school).

But of course, I suggest discussing this with your attorney/accountant. What works for one situation/person may not be suitable/satisfactory for another.

[newlook 265]

We started out as New Look Power Wash when we were just playing in water :). Since then we have added painting, landscaping design and concrete work as a list of our services that we provide. We have since incorporated the company and also added our new company name to New Look Partnerships, Inc.

We still have our business license for New Look Power Wash but for the most part run our financials through one business account. By doing this has increase our revenue from a reporting standpoint.