Building Business Credit for Your Real Estate Business
Articles,  Blog

Building Business Credit for Your Real Estate Business

– Hi, Clint Coons here with
Anderson Business Advisors, and in this segment I’m going
to discuss building credit for your limited liability
company or corporation. You know, I run into people
a lot at my workshops that come up to me and they say, Clint, I’ve signed up
with this credit company that’s going to help me create
a business credit profile for my LLC or my corporation, and then I’m going to
be able to go out there and buy real estate and I won’t need to sign
personally on any of those loans. And so do you think it’s a
good idea that I paid them three, five, $10,000 to do this? Now, you can probably imagine
what my answer might be. Hell no, I don’t think it’s a great idea. Why don’t I think it’s a great idea? It’s plain and simple. I’ve had my business set up for 19 years, and I’ve been, you know, I’ve found a lot of
success in my business. I’ve never yet been able
to buy a piece of property where they don’t pull my
personal credit profile, even if it’s a residential mortgage that I don’t have to sign personally. Yes, if you’re going to go out there and you’re going to obtain
a non-recourse mortgage, granted, in those situations, you don’t have to sign personally, so it’s not an issue. It has nothing to do with
your business credit profile. But the idea that you’re going to create this credit history for a company, and I have a credit history
of 19 years for my business, never had a loss, always been profitable. That still has never helped me
obtain a residential mortgage and not have to sign personally on it. So the point is, is that if you think you’re
going to build this up and you’re going to be
able to buy real estate, it’s not going to happen. It just won’t occur for you. So this concept that
people sell individuals about building business
credit for their LLC, and I’m probably going to get
some hate comments on this, people that sell it, that they say Clint doesn’t
know what he’s talking about, but I challenge you to show
me where that ever happens, ’cause I’ve never seen it and none of my clients have
never been able to do it. So don’t buy it with that in mind or don’t invest into building
business credit for your LLC or your corporation with the idea in mind that you’re going to be able to
take down a $200,000 property and not sign personally. It’s not going to hit your credit profile. As I stated, the only
time that’s going to occur is if you’re getting
non-recourse financing, but then again, they’re still going to run your credit to see if you’re credit-worthy even though they’re not going
to make you sign personally. And B, a lot of times
with those types of loans, in order to qualify, you have to show you’re
an experienced investor, and I have those types
of loans in my portfolio, and they want to know, you know, how many properties I own, how long I’ve been investing for, so they know they’re not
starting out with someone that has relatively no
experience or low experience and then their potential loan
is going to be in jeopardy two years down the road ’cause you’ve mismanaged your properties. So when it comes to it, when should you actually consider
building business credit? Well, for trade lines, and this is where I think it
could be beneficial to you. So if you have a company and you want to generate trade lines where you don’t have to sign personally, then it makes a lot of
sense to start looking at building up a credit
profile for that business. So let’s say you had a corporation. This is where I think it would be, make most beneficial sense
for anybody into real estate. Building up a credit line with, you know, Home Depot, Lowes, paint
companies, other suppliers, is a great thing to do, because then again, it doesn’t require you to give
a personal guarantee on that. It goes right to your corporation. They’re not going to look at your credit. You can maybe go out there
and find some loans from, small loans from institutions that’ll actually give you
a business line of credit that they may not require
your personal credit on. Again, those are harder to obtain. You better have a good
working relationship with the bank in order
to get one of those. But they’re also going to, again, look at your business credit profile. So what does it take to set
up a business credit profile and build it? It doesn’t require a lot. I mean, yes, you can hire
someone to help you along through that process, and if you’re one of
those, you’re like me, you’d rather have somebody
else do it for you, great, go ahead and do that. If you want to do it yourself, it starts off with getting
a DUNS number, right, for your business. So once you have your DUNS, which is Dun & Bradstreet number, associated with your business, then you want to start
taking out credit cards in the name of that business. You want to open up some accounts
in the name of that business to start reporting back
to that credit number so you begin building your
overall credit profile for your company. When you’re doing that, though, keep in mind that your business can not be set up in a
state that offers anonymity. That is, you’re going to
have to be on that company. So if you have this corporation set up, don’t use Nevada, Delaware, or Wyoming. Typically if you’re, live in, say, Florida or Texas or Oregon, set it up there and your name will be associated with it, because what they’ll
do is they’ll look back to the Secretary of State’s website to see if the person
who’s applying for this is actually listed as an officer or director of that company. Once you’ve done that and
you’ve started that process, then it’s going to give you the
ability then to go out there and maybe get some larger lines, not have to sign personally
and get your name off there, so now you’ll have access to suppliers, and that could really benefit you. But again, this concept of, I’m going to be able to buy
real estate all over the country and never have to sign personally. They’re just going to look
at my company credit profile. It’s not going to work. It’s never happened for me. It’s never happened for my clients. The only time it sets up that
way is if they’re using loans that are structured in a way where that was never going
to be required anyway and it doesn’t matter if
you have a DUNS number or a business credit profile, you still would’ve got that loan. One last thing I’d like to
hit on that is that, you know, when it comes to your business, something I tell people a lot is if you have an entity set up here, what you should do, let’s say this is my corp, and it doesn’t have to be a corporation. This could be a limited liability company. I’m just going to use a corp. If I had this corp here, you should get some credit cards in the name of your corporation. I would get an Amex in the
name of my corporation. I would get a Visa. A couple companies that I know, there’s Wells Fargo, B of A, Chase, these three companies, if you get a, you know, these are business cards, by the way. You get a business card in
the name of this company. Now when you apply for the business card, you’re going to have to give
’em your personal credit and you’re going to sign a
personal guarantee for these cards, so that is something you’re
not going to get away from, but by taking out the cards
in the name of your business, these companies then that
you’ve taken out these cards under the name of the business, they report back to the business and not to your personal credit. Now this is important. You know, in running my business here, all of the filing fees for our clients in setting up their LLCs and corporations, we run on a card that
I opened up with Chase a number of years ago, and it is my personal credit they use in order to determine the
credit limit on that card. And so when I needed to extend it from, I think it was from $75,000 to $125,000, they actually re-ran my credit. And so, you know, I do take that hit when
they run the credit. But each and every month, let’s assume that the balance, we run $95,000 in filing
fees for our clients. That does not show up
on my personal credit. So when I go in and I apply for a loan, they don’t see that there’s
this Chase card out there in the name of my business that is, I’m a personal guarantee on, because Chase reports back
to the business credit, not to Clint’s credit. So if you’re starting out your business or maybe you’ve been
in business for a while and you’re using your
personal cards, you know, to pay for things that are
business-related, stop, because that’s only hurting
your personal credit. Get out there and get some
business cards established in the name of your corporation or your limited liability company and start running those
charges on those cards, not on your personal cards. They all come with the same
bells and whistles, you know, the points and all that that you can use, but it’ll save your personal credit. So that’s something that I’ve found. I haven’t, these are the cards, actually, that I carry. I don’t carry the Wells Fargo, but I have a B of A Visa,
I have a Chase Visa, and I have an American Express, and it’s really helped
me on the personal side with my personal financing on doing my own personal
real estate deals. My name’s Clint Coons with
Anderson Business Advisors. This is what we talked about
was building business credit for your business. (mid-tempo piano music)


  • randombytes

    Haven't finished watching the video but one thing to note is that a DUNS number isnt required to build business credit. Opening a business credit card may not always mean it will show up on DUNS, but may show up on experian and other business credit reports. Want to make sure that they do report to all business credit reports (some dont and if you go with an average bank, 7/10 they will report to your personal credit) so make sure to get credit that goes under the business name, reports to business credit reports, and if possible doesnt report to a personal credit report (due to a personal guarantee). If possible, find a bank that offers secured credit lines where you up front money as collateral in exchange for a line of credit (rather if its just a simple line of credit or a credit card) for the business. Most wont even bother touching or reviewing you personally and likely will report accordingly. If someone doesnt have a DUNS and someone reports to D&B about the business (rather if its a positive or negative report), they will generate a DUNS number automatically for you that you can easily obtain from D&B. With that in mind, do not fall into buying D&B products if someone does decide to get one themselves. You can obtain the number for free without paying a dime and dont need any other products or services from them.

    EDIT: Finished watching and yea you do want to be careful because some banks will still report to your personal as well as business credit. A good example is capital one. Their business card (excluding commercial where they have a higher requirement) reports to both personal and business credit agencies. With wells fargo, I was told a few years ago that they report to both personal and business as well (even their secure card – how ironic). I have heard that some cards with chase and wf that they do pull personal report, but only report if one defaults but they do report to business credit reports.

    You can use states like delaware, nevada, etc. I am not familiar with how nevada stores info, but if youre a corporation incorporated in delaware, you do have to report report directors and key officers to delaware, thus being public record and can be obtained by paying a fee to delaware to include a report showing the key officers and directors (which can be certified as well). With an LLC, no annual report needed so members arent shown in public record. Many creditors may want to see a operating agreement with an LLC that shows/list the members, so if you have a operating agreement that can help you as well (and if you dont, i would usually suggest getting one drafted and signed before attempting to get a loan so youre not bound by state laws by default).

    If you are using personal credit cards for business expense, that needs to stop now. Not only are you messing up by using it for business expenses, but youre co mangling in which case your business limited liability status is technically just thrown out the window if you are sued, get judgement and the creditor makes the alter ego claim in court allowing the judge to pierce the corporate veil.

    Keep in mind too that building business credit history is just one factor to having business credit. You need to have a positive income as well to prove to creditors that your business have the money to pay the debt back, otherwise they will want a PG or may just denied the loan application. The length you been in business, income, credit history, as well as the type of business you have can affect how you obtain business credit.

  • Paul Ross

    Research how to build your Business Credit before spending any money.
    Sign up with all 3 Business Credit Reporting Agencies. D&B, Experian, Equifax. They are all free. You don't need to sign up for D&Bs service to get their number.
    Set up a Web Site with your personal email address associated with your site.
    Get a landline or a VOIT phone set up and list phone number with 411.
    set up your utilities for your business.
    those are the basic items to start your Business Credit Profile.
    Then research Net 30s for your business supplies. Uline is one that will grant you a Net30 aka a timed payment plan.
    Wells Fargo has a Secured Business Credit Card and will boast your credit up fast. Never leave a balance over $10.00
    Most Brands will require you to have a good credit score just to get approved.
    Before signing up with those Credit Building businesses research what they offer free. The more Brands you have reporting that your a good risk the higher your Credit Score will climb

  • The Bag Talk Podcast

    Great content,you have to have pg, collateral and cash flow to get real estate financing thru your business , banks are not thrilled lending to a business without exeperience and PG

  • Jimmy H Investing

    Great video.. when should i quit deed a rental into a LLC? And why wouldnt you want anonymity? I thought thats why we set up LLC for?

  • Carl Childers

    I stumbled upon this channel a few days ago…Clint…you are the master at explaining things so clearly.

    I am 100% these people for my next business venture setup…and then ongoing…

    Thanks a ton for sharing this info…even if it is a brilliant advert for your company!

    So good…

  • Jeff Witt

    Great videos! You partner mentioned that you are a proponent of ROBS transactions during Tax Tuesday. Would you consider doing a video on ROBS and how it relates to real estate investing?

  • FunFoods

    I'd love to see a video about opening bank accounts for LLC's. Specifically opening a bank account for an LLC in a state that I do not live in. If I have a LLC in PA for a rental I own there but live in MD can I open a bank account in MD? Do I need to register my PA LLC as a foreign entity to do that? Or can I just open a bank account solely in PA since I don't conduct business in my home state of MD?

  • Lorenzo Cash

    Hey Clint your videos are very informative. I just need some clarity on why I shouldn't have a Delaware LLC if I'm trying to build the credit up for that business. I'm going to do business in the DC metropolitan area so I need to know what to do. Thanks!

  • The Business Credit Desk

    Video was great up to 6:30. If you put your SS# and personally guarantee a credit card, even if it is in the business name, it WILL report to your personal credit and NOT to a business bureau. You are correct in that building business credit to purchase non-PG real estate is a unicorn. Doesn't exist unless the deal was set up that way. Now, I would say that in some situations you could absolutely REQUEST a deal be done that way and use the strength of your business credit to persuade everyone to join you. So, it can happen. But deals are not sitting out there waiting on your great business credit to close that way. Going back to the business credit cards, you should NOT expect that you will get approved for any TRUE business credit card (that pulls business credit bureau to approve and reports payment history to business credit report) unless you already have a good number of open tradelines from lower-tier creditors.

Leave a Reply

Your email address will not be published. Required fields are marked *