Meet Ty Crandall, a business credit expert and definitely the guy you want on your team. Ty has written two successful books, including The Perfect Credit, has advised countless businesses on getting the financing they need and currently runs the largest business credit coaching company in the US, the Credit Suite. Tune in to our today’s podcast and learn the process of getting your business financed.
Getting Your Business Financed… Without Personal Backing
If the world of corporate financing seems a little confusing to you, trust me, you’re not alone. Luckily for all of us, we have people like Ty who’ve spent their lives helping businesses get the money they need to successfully start up and grow.
However, before we get into the juicy part, I’d like make it clear what business credit actually is.
Many people consider business credit to be an equivalent of a consumer loan, just for your business and not personal spending. And they’re right.
What most of them fail to understand is that business credit needs not be backed up by your personal belongings or tied to your consumer history in any way: “You [might] need a personal guarantee for a loan because you don’t have the business credit. When you turn 18 you have a social with no credit. And you’d go through steps to build that social credit and, once the consumer credit is established, you use it to buy all the things that you wanna buy.”
“It’s the same thing” – Ty continues. – “A personal guarantee is required when your business can’t stand on its own. So the key is – even as a startup – you have to be conscious of your decisions, same as you were with your consumer credit, to actually build your credit profile and score.”
For a Small Business, the Application Itself Is Everything
The biggest misconception in the world of small-medium businesses is that they can’t get business credit. Too small. Too unreliable. What kind of a bank would finance a small startup?
According to Ty, this line of thought couldn’t be further from the truth: “Even as a startup, you can start taking the steps to build a credit profile that’s the same type that the big guys use to be able to attain credit. And it really happens with setting up your business credibly. When you have a scenario that you just described – when you’re just getting going – then what’s on that business application becomes the most crucial thing.”
Since the banks won’t have your business and credit history to evaluate your startup, the application you submit will be pretty much the only thing they’re going to be looking at, so you have to make every line count.
“Your business name, for example, doesn’t want to reflect that you’re in a high risk industry” – Ty explains further. “You wanna make sure that you choose an LLC or a corporation. You could choose a sole proprietorship or a partnership, but the problem with those entities is you are the business. You’ll always be personally liable for what happens with the business.”
Additional details in a credit application that might make all the difference include having a professional company email (not a @yahoo.com one!), having a recently updated website (“let’s be real, nowadays, if you don’t have a website, you’re probably not even in business”, setting up your licenses and having a real company address (not the same as your home address!).
Regarding that last bit, lenders have the means to check whether you’re using a home address/phone number in your business credit application, and it surely doesn’t look good if they find a match.
“Because, especially when it comes to credit, nobody’s gonna manually check your application. This is just an automated system that goes through a series of checks, and one of those checks is ‘do you have a home address, do you have a commercial address’. If the check comes in that you have a commercial, then – to the computer – you look more credible, and that takes you one step closer to an automated approval for a high-revolving account.” – Ty goes deeper into the application approval process.
If you’d like to hear more thoughts on getting credit for your business without risking your personal wealth, tune in to our podcast at the top of the page!