Start business credit

4 Replies

@Account Closed

Banks loans are going to require a personal guarantor. Even with non-recourse agency loans (fannie/freddie), they are going to check your personal credit and your business credit is not part of it because you are normally forming a new LLC for each rental purchase. I am not sure how you would start building credit outside of opening credit lines in the business' name but you are most likely going to need to personally sign for them so it really comes back to the fact that your personal credit is more important than business credit.

Establishing business credit is a lengthy process.  For the first couple of years, you will need to personally guarantee to credit lines as mentioned by @Charles Carillo above.  However, after you have an established business credit score, you no longer need to have the personal guarantee and a whole new world opens up to you.  I'm in the process of doing it myself because I want to have credit lines that don't impact my credit based on credit utilization and hard inquiries.  I think your personal credit is the most important to focus on, but having business credit is also a really good alternative in creative financing (e.g., not using hard money lenders and instead using introductory periods to get into properties.)  Good question! 

After I formed an LLC, I began receiving credit card applications for the LLC. They typically offer no fee for the first year and then a fee thereafter. But you can apply and get the card, and then start using it for business purchases (be sure to pay it off). You can also open corporate/business accounts at places like Home Depot. It will take time, but this will help build your business credit. However, to actually be able to take a business loan from a bank will also require a good relationship with the bank (a portfolio lender). However, I do know there are lenders, similar to hard money lenders, that will extend business lines of credit. I usually find them at my local REIAs. Good luck.