Corporate credit building scams
Guarantee of obtaining corporate credit
Warning! You have probably heard many different companies make claims about how they can ensure that your business or corporation gets credit. They might say things like “With our credit building program, we guarantee you’ll get up to $ 20,000 or $ 50,000” and so on.
The key wording is “up to”, because you really don’t know if you will get the full amount of funds required for your business. What they know you are not the common business creditors’ loan criteria. They know the most likely creditors who will say yes based on your business credit profile and personal credit score.
These can be valuable services, as they can help decrease the time it takes to finance your business and help you find the creditors who are most likely to approve your credit application. However, what is not in the sales copy is the fact that most of the credit building is based on credit from retail providers, such as local office supply stores or home goods stores. to create a Dun & Bradstreet credit profile.
To get “real money” lines of credit, you will need a good personal credit score of at least 620 but preferably 680 or better. Don’t worry, bad credit doesn’t stop you from building credit in your business – the process may take longer.
Credit card or guaranteed lines of credit
These services may even offer a credit card just for being your customer, but it is usually just credit for your services and / or products. There have even been companies that offer programs in which they claim that you can receive up to $ 100,000.00 in cash credit for a fee of $ 5,000. Sounds too easy? Keep in mind that if it were that easy, most small businesses would find it easy to raise the necessary funds.
If you personally have $ 5,000 that you can use to build corporate credit, you’d be better off going to a bank like Wells Fargo and getting a secured business credit card that can become insecure with a good payment history. Just remember “Buyer attention”. If it sounds too good to be true, it probably is.
Buying Old Businesses / Aging Your Business
There is a popular belief that you can quickly obtain a large amount of credit by purchasing a Shelf-Corporation. Well, in some cases you can. After all, most business credit applications will ask for a personal guarantee if the business is less than 2 years old. To do this, you really have to research the so-called shelf corporations.
The first thing to investigate is if a negative history is attached to the business and if the tax identification number is as old as the business. It is also important to ensure that all company documentation is up to date and the company must have a bank account that is no less than 6 months older than the company, unless the company has been in business for a long time and the bank account is between 1 and 2 years old. Basically this should be a real company that has been doing real business, not just documents that someone filed in hopes of selling it as an old corporation at a later date.
Do your homework, because there are many companies that say they have legacy corporations or shelf corporations that they can sell to you. Always ask lots of questions and make sure the corporation you are buying is a real business. Not just documents filed with the state.
The business credit industry is not regulated by the government in the same way as personal credit, so you’ll have to do your homework when you speak to a credit building service and ask a ton of questions.
Just because a company has been in business for a long time does not mean that it is not overcharging for its services or that you are receiving the type of service that is advertised. If the program seems too easy or too good to be true, chances are you are wasting your money. Keep this in mind. It takes years to build a good business credit history, not months.