Build Business Credit

Legal Credit Account Separation

The business credit industry has been structured on clients with the goal to separate their business life from their personal life. For some, this was done for tax reasons, for others it was about asset protection, and in many cases for both. This separation was achieved by incorporating the business, giving it a separate legal entity.

To achieve true legal separation, a credit history must be built on that entity, step by step.

Like most people around the world today, you are probably feeling the credit crunch. Suddenly, having your business credit separate from your personal credit makes it more difficult to get a loan or a mortgage. This is because personal credit standards have changed dramatically.

The Downfall of Sub Prime Lending

Much of the economic gloom is totally the fault of the credit industry, who eagerly provided loans and mortgages unwisely, to those whom really could not afford them. As individuals, we are all attracted to a bit of greed from time to time and revelled in the opportunity to invest in the meteoroic rise of the property market.

The economy, largely driving by these rising real estate prices, was artificially inflated. When the bubble popped we are left no solid financial backing for our credit facility.

In 2006, housing price data for every state, county, metro area and city with a population of at least 65,000 was at its peak. Since then, housing prices have decreased in many markets, fueled by a crisis in the subprime loan market and dwindling credit. This is affecting all the market, even more financially affluent borrowers.

Building Credit Alternatives

What this means to you is that you have to start NOW looking for alternatives to building credit: business credit and personal credit.

Foreclosures are happening in every neighbourhood and credit card limits are being suddenly slashed. There is no secret formula to credit, but it appears that building credit in the business credit industry is a bit easier right now than in the personal credit industry.

The reason for this is that the credit of business entities is evaluated using a system of rules completely different from the FICO score system used in the personal credit industry. Factors such as debt to income ratio and inquires have no effect whatsoever.

Business credit is the largest lending source in the world. You can effectively use other people's money interest free. For instance, if you own a retail business a retail vendors generally gets 30 days to pay on invoice of goods delivered.

For those who have already built a separate business credit history are going to be ahead of curve when things get really tight. If you haven't, I strongly urge to do so very quickly. As business owners, you will not be able to grow your business and maintain their personal life using your personal credit.

Get ahead of the curve and avoid the 'credit crunch' by ensuring NOW that you have true separation of your business and your personal life.

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