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I've been teaching business credit tactics to my friends and students that need start up supplies and money for a few years, and it can really help to grow your business if used wisely. Some of you may have seen the scam courses on TV at 3am on business credit, offering to teach you how to get a million dollars in unsecured non personal guarantor credit, well let me save you $100 and give you the crash course (and no you aren't going to get a million dollars). Now be careful here, the credit is not in your name, it is in the name of your business, but that doesn't mean that you can just decide not to pay it back, retail giants may make hundreds of millions, but they deserve what they are owed as much as you do, so pay your debts!. The reason I show people this is that start ups need supplies and cash, two things they often don't have. Add to that a great credit score, which most new entrepreneurs do not have either. I started my first business with a 450 credit score, I couldn't get a bank loan to save my life :) Hey I was 18, and I had fallen into the trap of activating all those high interest credit cards that started rolling into the mailbox on my 18th birthday. I did it the hard way, I never knew about business credit until I had an 800 credit score with a 6 figure business a few years later, and they were throwing credit cards at me, of course when I didn't need them anymore. These days, forming a company has never been easier, it can be done online for a couple hundred dollars in a week or two, or you can pick up the paperwork from your local state office and submit it yourself with about $100 which varies by state by a few dollars. Business credit, for those of you that don't know, is credit given in the name of your business (makes sense right), and it often times can be non-personal guarantor, meaning that you do not give your social security number for approval, you give your employer identification number also known as the tax id which is your businesses social security number. Now, I strongly suggest that every one of you is a registered company regardless if you are full or part time. You are missing out on piles of money and paying super high taxes if you are not treating your business as a business. Even if this is a hobby for you, you can be taking advantage of huge tax breaks and write offs. I've read hundreds of business and marketing books over the last 14 years, before I was even in business, just dreaming about it as a teenager. Out of hundreds of authors that preach the gospel of business Robert Kiyosaki is hands down the best read about why you should be a business regardless if you feel you are a business or not. I won't tell you how much I should pay in taxes each year, it actually makes me nauseous to think of giving that much money away to people who don't deserve it, however when I learned how to
hide under a corporate umbrella thanks to my money manager, I started paying less than 3% of what I would otherwise be paying and it's completely legal. Just registering as a legal business allows you to deduct hundreds of expenses including your utilities, car, gifts to others, eating out expenses, travel....and I am getting way off track here, and should save "Business Benefits" for another time and article. Anyway, if you are already an "Inc" or "LLC" (not a sole proprietor), you're already there, if not, call your secretary of state office first thing Tuesday morning and find out where to pick up your articles of organization paperwork. Now find the "business credit" sections of the large retailers of Staples, Target, Home Depot, Best Buy, and many others. I listed these four because they are the easiest to get, and the applications are simple. I did this with a student last month, he had been an LLC for about two months, had a low 400 credit score (not that it mattered) and hadn't made a dime yet, nor did he have a DUNS number which I will get to in a minute. Within three weeks he had $7000 of business credit through those four companies. I do this all the time with people, but this is the most recent case so I felt it was worth mentioning. He was able to buy some much needed supplies and a new laptop, as well as finding a great plasma TV deal with Best Buy and selling it brand new in the box through the bargain news for a $170 profit two days later!. Not that I suggest this tactic, but it was a way for him to buy expensive store merchandise on credit and sell it for start up and expense cash. Now the interest rates are high on store cards, but you can write off the interest on your taxes, as well as the things that you buy with the business credit. Just keep all of your receipts and turn them into your tax professional at the end of the year(I STRONGLY suggest that you find a business tax attorney, not someone at H&R block, no offense to any H&R agents, but most of them will unknowingly screw you out of thousands of dollars in deductions and worse than that get you audited). Not knowing this key step is what costs businesses money that they need not be paying, mostly thanks to trying to do their own taxes (Big mistake) or using a cheap service with agents that only had to go to a 4 week course part time to get the job. As I mentioned earlier, there is also the option of establishing a DUNS number through DnB.com, which is the largest business credit profile company. I recommend doing this because it is helpful as your business matures, but it is not necessary as some like to claim for attaining business credit. Retailers like Staples will give you a $1000 limit simply because a run of your tax id shows nothing negative. They also report to D&B as well as other credit watchdogs about your balances every month. Pay your bill on time every month and you will be getting tons of credit offers in the mail each month because just like with personal credit, the credit card companies scan these databases for businesses that pay their bills but do not pay the entire balance. You must be disciplined, just because you will receive offers does not mean you should accept them. I see no reason why $2000 to $8,000 in credit will not help get your business on the right
track. Even if you no longer need the credit, keep at least a 30% balance on your cards, again, you can write off the interest, and if you do decide to grow larger (or your business decides for you) you will be well served to have an established credit profile that can allow you access to tens of thousands of dollars.
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