Business Credit

I currently have an LLC set up. Although, all my financing in the past has been in my personal name. I'd like to get to the point where I have enough business credit to finance rehabs.

In any case, I'm getting prequalified business credit card letters. However, I don't currently have a business tax id number. If I apply for a business credit card and use my social security number will this appear on my personal credit, or will it stay seperate as business credit? I suppose I should probably just apply for a Tax ID Number. However, I'm not sure how that would affect my taxes at the end of the year.

Any other input on developing business credit would be appreciated too.

Thanks.

Edited: 06/26/2010 at 05:24AM

Michael Shadow

Multi-family Investor · Bellefonte, Pennsylvania

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Icon_minipost Jun 25 '08, 09:24 PM

Deuce,

Get your IRS Tax ID first, you can get that online almost immediately. Then look for a business credit card company. They will want your tax id and your ssn. My business cc doesn't show up on my personal credit report.

If your going to be purchasing properties with your LLC you will still have to personally guarantee the loan but it will not show up on your personal credit report.

If you have really good credit you may also be able to set up a business line of credit with a local bank as long as you sign a personal guarantee.

Your bank is going to want your tax ID as well as your " Article of incorporation" and your " Operating Agreement" for you LLC before they will loan money to you.

-Michael

Edited: 06/26/2010 at 05:24AM

Keith Schulz

Residential Real Estate Agent · Verona, Wisconsin

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Icon_minipost Jun 25 '08, 09:32 PM

Thanks for the info.

I do have very good personal credit, and I have no problem garaunteeing the loan personally as well. I'm just trying to keep my personal credit score high by not puting more loans and credit lines under my personal credit.

Edited: 06/26/2010 at 05:24AM

Michael Shadow

Multi-family Investor · Bellefonte, Pennsylvania

1042 posts
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Icon_minipost Jun 25 '08, 09:34 PM

Getting your business set up is a great way to keep your personal credit score pristine while building an excellent track record for you business. Personal guarantees do not show up on your credit report so your numbers will stay high.

Edited: 06/26/2010 at 05:24AM

Jason Trepins

Real Estate Investor · Wyoming, Michigan

195 posts
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Icon_minipost Jun 25 '08, 09:40 PM

get your tax ID number definitely

Wells Fargo is one of my favorite places for BLOC
american express is good too

there are a ton of others, just google

Edited: 06/26/2010 at 05:24AM

Account Closed

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Icon_minipost Jul 05 '08, 12:41 AM

July 5, 2008

FYI, a person can have multiple businesses (LLC) and apply for stated income business lines of credit that do not appear on your personal credit.

This is a great strategy used by investors in buying multiple properties.

Regards,

Edited: 06/26/2010 at 05:27AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Icon_minipost Jul 05 '08, 12:50 AM

I have a question on these. What does a person do if the bank calls in the loan on these? Are business lines of credit typically collateralized?

Edited: 06/26/2010 at 05:27AM

Fred S

Contractor · New Jersey

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Icon_minipost Jul 05 '08, 05:57 PM

Another question, I've recently applied for two business cc's -both of which required my ss# and both of which looked into my credit history. None asked for my tax id, however. Am I doing something wrong? I have excellent credit and would prefer my score not be brought down by applying for cc's. Can I obtain business cc's without them looking into my credit/how do I not have them show up on my credit report? (My LLC is three years old).

Edited: 06/26/2010 at 05:27AM

Richard Warren

Real Estate Investor · Las Vegas, Nevada

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Icon_minipost Jul 05 '08, 09:20 PM

Originally posted by "FSJR9"

Another question, I've recently applied for two business cc's -both of which required my ss# and both of which looked into my credit history.

What you applied for were personal cards that show your business name. They will do nothing to help you build business credit. They will appear on your personal credit report and you are personally liable. Many banks do this, be careful about what you apply for.

You may wish to apply for cards in the name of your LLC with places like Home Depot, Lowes, Office Depot, etc. They will issue cards with low limits without checking your personal credit. If you supply a personal guarantee they will give you higher limits.

Edited: 06/26/2010 at 05:27AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Jul 05 '08, 09:53 PM

Richard, If you give Home Depot a personal guarantee, I assume they will check your credit. Will that account also show up on your personal credit?

Edited: 06/26/2010 at 05:27AM

Jon Holdman, Flying Phoenix LLC

Richard Warren

Real Estate Investor · Las Vegas, Nevada

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Icon_minipost Jul 05 '08, 10:04 PM

Originally posted by "Wheatie"

Richard, If you give Home Depot a personal guarantee, I assume they will check your credit. Will that account also show up on your personal credit?

If you give a personal guarantee they will check your personal credit. I do not know if it will show up on your personal credit profile or not. I started building business credit for my LLC by applying for an Office Depot account without a PG. My LLC was over two years old and they gave me a whopping $250 credit line, but it was a start. After 6 months I applied for Home Depot and Lowe's and received $500 on each unsecured. Every few months my line is increased as I use the cards and pay off the balances. It takes patience, but I now have credit established and I could apply for loans with much less difficulty because I have a history. My LLC now has two mortgages that I haven't had to guarantee. It takes time, but it is worth it.

Edited: 06/26/2010 at 05:27AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Jul 05 '08, 10:15 PM

Thanks Richard. Not really enough to fund an entire rehab, but might help a bit.

Edited: 06/26/2010 at 05:27AM

Jon Holdman, Flying Phoenix LLC

Jim Sharp

Real Estate Investor · Colorado Springs, Colorado

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Icon_minipost Jul 06 '08, 07:36 PM

American Express has been by far the best for me. When my LLC was months old, I was able to get a $11k credit card for it. I thought they were just making them personal accounts with my name on them. However, I've now nearly $50k limits in business credit cards with Amex and none show on my personal credit.

I've since opened a line of credit with Wells Fargo. That was much more of a pain.

Friends of mine have had luck with smaller banks... it takes time but some of the transactions they've been able to pull off some assumes. ie. I had a friend get unsecured funds for the complete amount of a $200k home while it was deedless as the foreclosure process finished up. I couldn't imagine being able to do that at a Wells Fargo.

Edited: 06/26/2010 at 05:28AM

Account Closed

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Icon_minipost Jul 08 '08, 09:25 PM

July 9, 2008

You can separate your personal and business credit by filing the necessary paperwork with credit reporting agencies. You can track your business credit with your EIN instead of your SS.

Unsecured business lines of credit are available. An established business account with American Express is a good way to start. Some of their guidelines are a net worth of 50k unless it has increased lately.

Store credit is not a cash line of credit. There are lenders who want to establish a business relationship and offer a business account with a line of credit on stated income. If you have a partner, you can use the equity business partnership to obtain a line of credit for each partner. Have the finance paperwork such as an operating statement form or rent roll within the lender's guidelines. Remember, it's all about the numbers! If the numbers work then so will the lenders.

Regards,

Edited: 06/26/2010 at 05:29AM

Jack Ryan

· California

34 posts

Icon_minipost Jul 09 '08, 03:04 AM

The FEIN is very easy to get, and probably the first thing you want to do. I just sold my company had two disputed accounts (one of them FEDEX claims). With an FEIN they essentially have no recourse, if you use your personal SSN they can possibly argue successfully in court that you have pass-through liability.

Edited: 06/26/2010 at 05:29AM

S Man

· Atlanta, GA

20 posts
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Icon_minipost Jul 09 '08, 07:34 AM

I agree, you'll want to get separate credit for your company to establish its credit history. I have had a non-REI corporation for years (not an LLC but pondering it currently) with separate bank account, EIN, retirement account, etc. When a biz credit card offer came in I verified it wasn't based on my SSN as I also did not want that line of credit to impact my personal credit score.

You may want to discuss the implications of this with your accountant. For example, sometimes they suggest you draw a salary from your LLC/company to improve the legitimacy of the entity.

Edited: 06/26/2010 at 05:29AM

Ryan Steele

Real Estate Investor · Chicago, Illinois

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Icon_minipost Jul 11 '08, 10:21 AM

There are a few things that I have done in the past to build credit in the company name. Yes UBLOC (Unsecured Business Lines of Credit) as well as just BLOC (remove the unsecured part).

One thing is to deposit money into a business bank account. Then borrow money from that bank like a signature loan via the business. Use tha money to open an account at a different back, then get a loan and repeat this again.

Pay the loan amounts each month asking the bank to report the loans. Finally pay the loans off after like 6 months.

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As to Business Credit cards, check out the site at http://www.CreditCards.com/business.php

Edited: 06/26/2010 at 05:30AM