Hi, I've been doing some research and was wondering if anyone out there has used business credit to purchase new properties and then refinance to pay the card off after the seasoning period? It seems like a great idea I was wondering if anyone has actually been successful while doing this?
What accounts receivable do you have and how long have you been in 'business'?
@Jeff B. I don't have any business credit cards. Although I would love to hear anyone's opinion on using business credit for down payments.
To purchase real estate with business credit, you need to form a "funding entity". Because lenders decide which industries are the most "lendable" and real estate companies are still out-of-favor since the downturn of 2008, real estate funding vehicles should be Corporations or LLCs in favorable industries. Your goal is to get unsecured business lines of credit.
Start-ups face the problem of a business with no age. Lenders look for a minimum of 2yrs in business when approving unsecured lines of credit. Fortunately, many business owners were doing business out of their "garages" as sole proprietors long before incorporating or forming their llc. When forming your business credit profile, it is important to register with SAM and notify the IRS of your sole proprietor experience. Dun and Bradstreet obtains information from these federal agencies and will update your business credit profile to reflect this sole proprietor experience. Also, be sure to list your business on the web and include your total business experience in your profiles.
Take these steps:
1) Establish a strong internet presence for your company by listing it on at least 15 sites-- Facebook, LinkedIn, Twitter, Scoop It, Bing, Manta, 411, Google+, Google Places, etc.
2) In addition to your business checking account, open an expense and savings account in the same bank. If you have 700+ personal credit, the bank will offer you a business credit care and line of credit ($7,500 - $10,000 each). These will be your initial business tradelines
3) Make regular deposits for 90 days to establish a favorable bank rating (use credit line to make deposits).
4) Add higher level trade references to Dun and Bradstreet to provide depth to your Paydex Score (net 30s are usually lower amounts; you'll need higher approvals from your trade references-- 2k to 4k).
5) Upload your company financials to Dun and Bradstreet to complete your file and create a strong credit profile.
6) After 90 days apply for large ($25,000 - $40,000) unsecured lines of credit.
@Stanley Whigham - Have you used this method to establish business credit? I've heard of this method being used for down payments. If you have experience setting up business credit in this fashion I'd like to meet up with you and ask you about the details.
@Stanley Whigham Thank you for all the information. I'll look more into it and follow all the steps you gave me.
@Stanley Whigham - Great advice.
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