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Business Credit by Thomas A. Rothstein
To be or not to be?
Like many of you, 2008 was a really bad year for my business. It’s not that 2009 was much better, but at least the cries of the “sky is falling” ceased about the middle of the year.
In the early days of trying to get my business up and running I made the enormous mistake of signing as the personal guarantor on all of my commercial credit applications. Now if 2008 would’ve never happened then there would be no need to write an article about business credit, but it did happen and my personal credit took a big hit due to a lack of revenue.
I wish the little voice of caution would have whispered in my ear while I was co-signing all of those credit applications, but in the excitement of my new start up I dove head first into guarantor hell.
During a recent conversation with my brother about my little credit crunch he mentioned to me that I should have applied for business credit that way my personal credit would have been protected. What! What is Business credit?
What was a foreign concept to me has actually been around for many years, but like all awesome opportunities by the time I found out about it, it’s now saturated. Business credit was offered to many major corporations for years and much latter to small business owners with Limited Liability Corporations or Incorporated status.
As I started my research into how to get business credit I was very disappointed to discover all of the broker type companies making offers to get my company business credit for a fee. Some of these companies made calms of being able to get me $100,000.00 worth of business credit for a fee of $2995. The funny part about the broker fee is that they ask for it up front, instead of taking it out on the back end.
Paying some guy $2995 to get $100k in return did not pass my smell test, and had scam written all over it.
All of the information needed to get business credit is available online for free so please do not pay a broker. The only major challenge in getting business credit is very few creditors are still allowing you to apply of a line of credit without signing as a personal guarantor.
Sure you can still can get a gas card or maybe shipping supplies from a U-Line Net 30 account, but other than Net 30’s, the credit pond has dried up. Citibank and HSBC were the main issuers of business credit, but in 2009 both companies cancelled 2/3 of their business credit accounts. This move shocked card holders of major retailer and banks such as Best Buy, Office Depot, and Bank of America when the cards were suddenly canceled.
Even Key Bank and Lowes are now requiring a personal guarantor which was the final indicator that real business credit is now a thing of the past. Net 30’s do not qualify as authentic business credit, and take it from me you are definitely better off simply paying cash for many of your smaller purchases.
Many of the broker sites who promise a $100k of business credit will only burden your business down with $100K of Net 30 accounts. For those of you unfamiliar with Net 30 accounts, it basically means that whatever you purchase has to be paid in full in less than 30 days. Net 30 accounts are often canceled if you’re late paying the bill in full so save yourself the hassle and simply pay cash.
Business credit as it exists during the Clinton Administration collapsed towards the end of Bush Administration, and is now in our rear view mirror. Please don’t believe the hype of brokers promising that they can get you all of this wonderful credit for only a small free. The next time you encounter one of these guys I would like you to ask him the same question I did when faced with one of their high pressured sales pitches.
“If you are so sure you can get me $100k in credit why not simply take your $2995 up front fee out of the $100k?” Write me back and let me know his response.
Thomas A. Rothstein –
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