Usually, commercial lender don’t give out credit without a personal guarantee, because of the risks it poses to the lender who has to be sure that the loan will be repaid or else, has an avenue to recoup his funds. However, it’s not impossible, if your company can generate substantial revenue and possess other qualities that reduce risk. To accomplish this, a lot of work must have been done over the years to establish creditworthiness of your business.
STEPS ON BUILDING CREDITWORTHINESS
Get a business credit card
The first step in establishing your business credit reputation is to get a credit card on the business name, possibly a low limit card. Although multiple cards abound from which one can pick from, ensure that you pick the credit card with the best issuer terms and conditions, fees. Ensure to get a secured business credit card that reports to the credit bureau alongside the business credit reporting agency Dun and Bradstreet. The reason for picking D&B is because they are the most likely ones; your bank will meet to establish your creditworthiness.
Also, make sure to repay the debts on the credit card on time, to get a positive rating from their report.
Apply for a third-party loan
Apply for a third party, guarantor loan where the third party acts as the guarantor. This means that they trust your creditworthiness and can stand in to pay some percentage of the loan if you fail to keep to the agreement. This loan is accessible from banks that service a distressed area. Municipalities and Small Business Administration also offer these loans to small businesses that are contributing to their environment. This underpins that no matter how small your business is, you should have a corporate social responsibility.
Strive to repay and build credit trust
On receipt of the loan, it is wise to save some part of the guarantor loan , around 20- 30 percent to form a buffer. This is to avoid missing the first repayment schedule irrespective of any eventualities, although this may look weird since the IRS will tax this saved amount because it sees it as accumulated earnings. However, this move is in the right direction in building your company’s credit score. Thereafter you can work hard to pay off the rest of the loan to establish corporate credit over the next 3-5 years.
Diversify your credit lines
One job done right may not be able to convince the commercial lenders that you are creditworthy enough to handle an unguaranteed loan, hence diversifying your credit line to get at least 10 positive trade references and build strong business credit ratings. After satisfying all above conditions, you are good to go and should be able to get an unguaranteed loan. More details here: http://smallbusiness.chron.com/corporate-credit-personal-guarantees-1851.html
APPLY FOR UNGUARANTEED CORPORATE CREDIT
To get unguaranteed corporate credit, you will have to apply to the SBA approved lenders in your locality and this should be done in person with the commercial loan department manager. Prepare a documentation to prove good business and personal credit, fill out the application and return to him/her for approval.
Building company credit trust that will afford you corporate credit without guarantors will take a bit of time, 3-5 years of conscious planning and execution but it’s worth it. To accomplish this, you will have to avoid temptations of overspending on your credit cards and paying off the huge debts on your liabilities list faster because they affect your credit score hugely.