Building Business Credit

Anderson Advisors focuses on unsecured lines of credit and loans not backed by personal credit.

How would an aspiring entrepreneur, obtain an unsecured line of credit through our company?

I wish I could say that it’s as easy as just signing up to be a client of ours. Unfortunately, it’s not quite that easy. There’s a process and the process takes time. It’s a bit like a 5-step process. A lot of people come to us and want to immediately jump into step 5: “I need a bunch of money to start my business and I don’t want to personally guarantee it.” The challenge is that you can’t get to step 5 unless you’ve completed steps 1-4. Steps 1-4 are really what we specialize in.

Essentially at the beginning, we’re going to make sure the business is in what we call bank compliance. We make sure that the business will meet all bank underwriting criteria because the last thing we want to do is send them to the bank to get a loan and not meet the bank underwriting criteria. We know what the banks are looking for so we’ll get the business in compliance, making sure the owners have their licenses and all the things that go with a typical, traditional business. Once that’s in place, we’ll set up the file with the business credit bureaus. There are three main business credit bureaus that we deal with: Dun & Bradstreet, Corporate Experian, and Business Equifax. There are other business credit bureaus, but they come naturally in time by going through the program and dealing with the three main bureaus. Once the business credit bureaus are in place, we teach you how to understand your business credit reports, because they’re totally different than personal credit reports. We teach you what to look for, what to watch for, how to review your scores and ratings, and how to accurately monitor your credit profile.

Once that’s in place we start setting the business up with vendors (trade accounts is what we call them) – let’s use Staples for an example. Your business may get a line of credit for $250 from Staples. Staples will invoice you and, depending on the type of credit that they extend to you, they’ll either give it to you on net terms or revolving terms. Essentially you walk into Staples, buy $80 of products, and can walk out with it and they’ll bill you later for it. The reason that this is important is because Staples will then report your payment history to the business credit bureaus. That is what builds history and that history is what generates scores and ratings. Setting up trade credit to build your scores and your ratings is what really builds the history behind the credit file and that’s what we want to have when we go to the bank. That way when you go to the bank to apply for a loan or a line of credit or whatever it happens to be, not only do you meet bank underwriting criteria, but the bank underwriters are going to see scores, ratings, and history, which means you’ve handled credit responsibly in the past. You will be a safer risk to the bank than you would be otherwise because you have proven that you can handle credit responsibly.

Many businesses purport to deliver unsecured lines of credit. Anderson Advisors is one of the few that guaranteed an unsecured line of credit. What’s the difference?

I can’t speak for many other credit companies, so I can’t really say what they do right or wrong. However, what we like to do is present the reality: what can be done, what can’t be done, and the time frame. Some of these other companies that I’ve seen have a lot of marketing hype that, from my point of view, just simply can’t deliver on. They’re making promises that are totally unrealistic. The problem is when you bring in a client based on unrealistic terms and unrealistic expectations, it’s going to be hard to keep that client happy because the reality of the situation is going to be lower than the expectations they initially thought they were paying for. It’s hard to run a business selling pie-in-the-sky services and pie-in-the-sky promises. One thing we’ve found is that it’s easier to be upfront and honest; we tell people that, as much as we’d like to get them $300,000 to start their company, without a personal guarantee it’s probably not going to happen. Or we give them more of a realistic picture of how much they can get and the timeframe they can get it in. Our clients appreciate the honesty, they know what their expectations are and they are refreshed to hear someone give them a realistic and honest answer.

When it comes to building business credit there are two things that make or break the company: (1) customer service, and (2) the technology used to deliver the service. We survey our clients every other month and our coaches are paid based on the client’s satisfaction. Customer service really shouldn’t be a competitive advantage but, given the type of industry that we’re in, it is a competitive advantage because a lot of companies are not really strong on the customer service side of things.

The other thing is technology. We have a member’s login portal that they can use to track their success, where they are in the process, what’s been done, what they still need to do, and how they communicate with their coach. That has really helped keep clients on track and it’s a visual aid to show them where they are at any given time. They can log in and see what percent of the program they’ve completed, what their next step is, what they’ve done, and what’s coming up in the future. Those two things, customer service, and technology are really what set us apart from other credit-building services.

A typical question I hear is “What percentage of your clients obtain loans?”

That’s a difficult question because not all of our clients need or want loans. Keep in mind that our value to business owners isn’t being a money finder; our value is helping them build and establish business credit. Many clients will come to us knowing that they need business credit, knowing that they need to be prepared for when they do need a loan. For example, government contracting or grants: both of those are required to have a business credit history. On the flip side, we certainly have clients that want a loan immediately that we need to spend a little more time with and manage expectations and see what we can do to help them.

Toby Mathis did a webinar you can find on our website that follows the same process that one of our coaches would take one of our clients through for the business credit building process. It goes through the first steps of building business credit from start to finish. It gives people a really good, solid overview of what it takes to build business credit, the things that need to be done, and the time lines that someone can expect. It gives them a good perspective of why you should build business credit. A lot of business owners are familiar with personal credit, but they don’t know business credit. They think that when they need a loan they can just walk over to their bank and apply for a loan. They don’t realize the difference that having good business credit can make for them, not only the approval amount, but the approval rate, and the terms and the effects that good credit has for the business in the long-term. The webinar will give them a good overview from start to finish of what can be done, time frames as well, and why you should build business credit.

So why should I build business credit?

Any potential business that wants to go into business eventually is going to come up with the need for financing. The better business credit you have, the better chance you will have of obtaining favorable financing. The nice thing about it is not only having the financing, but also avoiding co-mingling your personal credit and your business credit. There are a lot of businesses that start their business using personal credit cards to fund their startup and their launch or their expansion. When that credit is used for business purposes, it shows up on their personal credit and lowers their scores in their file. Now there is no separation of business credit and personal credit. You want to be able to build business credit separate from the personal credit. This way business credit literally becomes an asset to the company; if you ever sold that company, that business credit goes with it, and increases the value of the company.

No matter what type of financing you are after all businesses need business credit. Whether you want a small start up loan for $10,000 or you’re looking for a million dollar expansion loan from venture capitalists, any type of a lender is in the business of analyzing risk, and as a lender they want to make safe risks or make loans to safe risks. The best thing that you can do to market yourself as a safe risk is show that you know how to handle business credit responsibly. The only way to do that is to have past business credit history. That’s the nice thing about it: no matter what type of loan you’re after, you can use business credit.

Over the years we have found our clients will obtain an average of $50,000 to $150,000 in business credit* after completion of the entire program. Anderson Business Services is so confident that we offer a $50,000 guarantee in business credit for your entity or you will receive a free year of additional service. We won’t stop until we get you there!