Let’s say you’re starting a company with a few employees with a very low cash flow at the beginning. How do you get started? Are there loans available from the SBA or do banks lend based on your business plan or are you out of luck unless you get a venture capitalist?
If you’ve got a tax ID number and an address, it’s very very easy to get a small balance corporate credit card. You can develop a relationship with a bank from there, and get a line of credit.
Then it’s just a few stepping stones to selling $30 billion in junk bonds and buying Nabisco.
Businesses get a credit rating just like people. They just get it from a different place, most likely Dunn and Bradstreet.
Nearly all lenders who will give you a business card nowadays require you to be held personally liable for the line. It won’t be secured against any business assets or cash flow.
Even during the ‘good times’ (up to 2007) there were very few banks that would loan businesses of under $10 million revenue per year, or thereabouts, without a personal guarantee. Those that would were almost exclusively asset-backed loans, and not loans made on the earnings power of the business.
SBA loans are a notable exception.
Actually even better than the bank you do business with is Staples and Office Depot. They will extend you very small lines of credit and if you pay regularly up goes your rating. Also gasoline cards for your “fleet” (OK it consists of your own car, but they don’t have to know that :))
I urge anyone who has a small business to check those two stores out plus the gasoline cards. Even if you have to buy things you don’t need then sell them on eBay.
Those help your credit score very quickly. Then your bank, then as other posters noted Dunn & Bradstreet