Corporate Credit - help me set this guy strait - Posted by Steve C (TX)

Posted by Laure on April 01, 1999 at 07:38:23:

I just got my first loan on a brand new Corporation. I signed personally. But my banker told me when I get some net worth in the company, I won’t have to sign personally anymore.

Laure :slight_smile:

Corporate Credit - help me set this guy strait - Posted by Steve C (TX)

Posted by Steve C (TX) on April 01, 1999 at 24:35:37:

I have found a VERY successful RE investor who will mentor me in the rehab arena. His partner (the money man) insists that my corporate bank account will have to be in the millions of dollars before any lender will not require me to sign personally for loans form traditional or non-traditional lenders. I was under the impression that if my corporation (a very new one) has good credit I should not have to personally sign for notes. Can anyone please provide details to confirm or dispute his remarks?

Thank you,

Re: Corporate Credit - help me set this guy strait - Posted by Garth

Posted by Garth on April 01, 1999 at 06:27:54:

If your corporation is as new as you say, how has it established good credit? ie- does it have a lack of credit?
If your company is a small concern and you are the principle, a lender will likely want you to sign. Even though your are 2 entities, they understand you have complete interest in its success and likely the business’s success depends on you staying on. This is why they will want your guarantee. One way around this would be some good maybe liquid collateral which you could personally hypothecate to the business loan.

Sometimes guarantee…yes, sometimes…no(long) - Posted by raelynn mitchell

Posted by raelynn mitchell on April 01, 1999 at 08:37:26:

If your corporation does not have established credit track record, yes, you will initially be required to guarantee personally.

However, on some loans, such as corporate line of credit under certain dollar amounts, after you have had one open that is personally guaranteed, you can go back and apply for an additional line of credit without the guarantee. Now you have two credit lines, one with and one without guarantee. Only after establishing the second one without the guarantee, go back and close out the first one without the guarantee if you wish.

Wells Fargo Bank has an LOC that will ONLY require guarantee and not financial statements and corporate tax returns if the LOC amount is $50,000 or less. I am told Bank of America has a similar program.

Yes, initially a guarantee is required. I have also been told (but have not personally tried this) that you can sometimes negotiate a limited personal guarantee. The way it was explained to me is, you guarantee the payments for a period of time…one year, for instance. And then after the year is up the guarantee is removed.

It also helps to have numerous accounts with other creditors in order to strengthen the corporate credit report.

Keep this in mind: Credit is built to a BUSINESS. That means a corporation should look, walk, talk, and smell like a business. This means a business phone line WITH A 411 listing. This means a business license.

It also means a corporate/business bank account. Prior to applying for credit you should have these things, as most business credit applications will ask for these things. They don’t all ask for all of the above, just some, but it is best to have them beforehand.

Prior to having any of these, it is important to do the corporate “paperwork” that is needed in the beginning, which includes deciding who is president, secretary,
treasurer, director, etc. It is also important to decide who will be signer on the corporate bank account, which should be opened prior to applying for credit. These are all reference points for potential creditors to “check you out” at the corporate level. There are several good books that explain the process of setting up shop in detail, up to and including the paperwork that should be done in establishing the corporation once it has been filed. Corporate resolutions are needed for almost everything, which can be found in a book/software called The Corporate Secretary. I found this at Office Depot and Office Max; costs about $20 for the book or the software. Has just about every resolution (permission slip) out there, and after a while you can figure out what to put into one if you need one slightly different from the ones they have created. (Another book I liked is Incorporating in Nevada, by Cort Christie. It also has resolutions in it, both as samples and as fill-in-the-blank forms for your use.) But keep in mind that I’m not a lawyer or CPA.

Step 1.
obtain a mailing address OTHER than your residence (mailbox etc. type okay 4 now but some banks and creditors will ask for additional physical address. Give it and have the mail go to mailbox.).

Step 2.
obtain a business listing in 411 information (address not required, only city of same as mailing address) (hint: this can be a remote forwarded number, which can
ring to an answering service or someone’s house, but the line must be a BUSINESS line to be listed in 411 that is answered in the company name, such as XYZ Incorporated)

Step 3.
after obtaining corporate tax ID/EIN (a step of incorporating) and filing officers list (part of inc’ing also), call Dun & Bradstreet 800-333-0505 and tell them you want to be listed. They will ask 5-6 questions:

Name of company, phone number, address of business
year started, president of corporation,
number of employees

  • they will try to sell you their “investigative service” listing, which entitles them to dig into your business’ affairs. Not needed, just get the listing. If you have to pay for it, you got the wrong one.

Step 4
apply for:
Target Stores Commercial Acct
Office Depot
Office Max
Sam’s Club
Home Depot
Home Base
JC Penneys Commercial

You won’t get them all. Since you have no credit, they will probably ask 4 a personal guarantee. Give it when necessary (only one corporate officer required - pick the one with the best credit); you just want the accounts. Use them one time, pay the bill on time, and they will report your company’s credit history to D & B.

  • Office Depot, Ofc Max, Staples = same bank. Don’t apply 2 all 3 in same week.

You want 5 accounts reporting 2 D & B, after which D & B will rate your company. It now has credit history. (Here’s the catch: they don’t ALL report to Dun & Bradstreet.)

Then go for Mastercard, Visa, and American Express, all of which will probably want personal info on at least one officer. Not all MC/Visa’s are created equal. Some just want to look at the officer’s credit, others want that officer to guarantee the account. Shop around.

This may take awhile, but Home Depot and Home Base are accounts you will probably need anyway if you ever end up doing rehabs.

After obtaining the cards mentioned in the above steps, if you now apply for a corporate line of credit, it will be much easier to get than if you start out with no previous accounts and apply for a creditline first.