Stanford University reported recently that nine out of ten new businesses fail during their first two years of operation, due
to under capitalization and 95% of business failures are due to insufficient cash flow and lack of business credit.

Clearly, establishing credit for a business can make or break a business and often is a key to business success.

Below are three tips that many business owners don’t know about business credit that can cripple their ability to do business:

1. A business can have spotless, pristine, really good credit but if creditors don’t report it to Dun & Bradstreet, then the
business may as well have no credit

2. If personal and business credit are co-mingled, then the corporate veil will be pierced and the business owner will be
held liable for all debts, and they could lose their personal assets, and

3. A bad mark against a business, credit-wise, cannot be dismissed, counteracted or overturned. The only thing a business
owner can do in that instance is to start another corporation

Establishing business credit should be started before the company needs it because lending institutions do not want to
lend money to a business in need of cash flow. Many businesses start out using the owner’s or officer’s personal credit to gain
approvals under the business name, but as the business grows, it should start to establish its own credit history and credit
profile in order to take on business credit of its own. This is possible with a Corporation or Limited Liability Company (LLC)
using the corporate tax identification number.

Distinguishing the difference between you and your business is a very important step when you have a corporation.

There are two reasons business owners should try not to use their own personal guarantee for business credit. First, the
individual signer is liable if the business cannot make the payments and second, the credit obtained for the business can
affect the person’s personal credit score.

Another very common mistake is thinking a great credit score will qualify the corporation for a loan. A great corporate
credit score is only one of many items a bank will look at to make a loan. For instance, if a corporation is two months old
and has just achieved a great business credit score, the score alone would not qualify a company for a loan. In the early
stages of business credit, realistic expectations are to purchase tangible items on credit, obtain leases, and open
credit lines with companies that provide products and services for the client’s business.

The analogy is similar to personal credit. Just because a person has a personal credit score of 720 does not necessarily
qualify them to purchase an $850,000 home. They must have the financial capacity to repay the loan. If a corporation has a 75-
80 corporate credit score that does not demonstrate the corporation’s financial capacity to repay a large loan.

Bank financing, loans, equipment leasing, and large ticket items require, in most cases, that the corporation produce financials to evidence the corporation’s ability to repay the loan.

It typically takes between 3-4 years to build corporate credit, but with Nevada Corporate Planner’s Corporate Credit Builder Program the time can be compressed to only 3-6 months. The goal is to establish a credit score of 75 or better. A business credit score of 80 is like having a personal credit score of 700, i.e., excellent credit. A credit score is built by having lines of credit, credit accounts and trade references that report to the business credit bureaus.

For most businesses, it’s very difficult to find a business willing to grant credit without a personal guarantee and without any previous credit history. Most businesses need additional trade references that will grant credit and report to the credit agencies.

Another benefit of the Corporate Credit Builder Program is it is helpful to have someone walk through the steps of building
your business credit profile with the business credit reporting agencies in the United States.

Call NCP at 1-888-627-7007 for a no cost or obligation business evaluation for business credit.


Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc., and author of WHAT IS THE CORRECT ENTITY TO

PROTECT YOUR BUSINESS AND YOUR ASSETS? He is considered an expert on Nevada corporations and taxation by prominent
professionals including tax attorney/CPA Sandy Botkin, author of LOWER YOUR TAXES-BIG TIME, and Dr. Arnold Goldstein, J.D., LL.M., Ph.D., author of 100 books on finance and law.

NCP is a member of the Better Business Bureau in Nevada, Las Vegas Chamber of Commerce and a key referral source for the
Nevada Development Authority.

Office Address: 7469 W. Lake Mead Blvd. Ste. 200, Las Vegas, NV 89128

Mailing Address: P.O. Box 28909, Las Vegas, NV 89126

Telephone: (888) 627-7007 * Local: (702) 367-7373

* Fax: (702) 220-6444

E-Mail: scott@nvinc.com
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