When you start an EBiz as an LLC (Limited Liability Company) or a Corporation, you might think that your business can get credit on its own, without using personal information like your Social Security number, for example.
Well, it’s true that a Corporation is supposed to be an independent “entity”. Almost like creating an actual person. So why wouldn’t that “person” be able to apply for credit cards on its own merit, or get credit from wholesale suppliers, without involving YOUR personal information, banking history, credit references, and so forth?
Think of it this way. If a teenager who’s just turned 18 applies for a credit card, that teenager has no previous history with credit. No record to show whether they pay on time. No past history to show income, reliability, and all those things that banks want to see before they extend credit. So what happens when a teenager applies for a credit card, or a car loan, etc? It’s Mom and Dad to the rescue, of course. The bank wants Junior to have a co-signer to guarantee the loan.
Your Corporation is that teenager, and YOU are Mom & Dad. The new business has no past record of credit, so the bank basically wants a co-signer, so to speak. The bank needs someone with a good credit history to personally guarantee that the money charged to the credit card will be paid back. Wholesalers want someone with a good credit history to personally guarantee that the credit they give you for buying bulk products will be made good.
I hear from a lot of people who get upset about banks and vendors (like wholesalers) asking for their personal banking info and Social Security number when they apply for business credit. Don’t get upset about it. It’s going to happen, and if you want that credit, you’re going to need to supply that info.
Your business is still young, after all, and doesn’t have the credit and trade references it needs to get credit on its own. In fact, it could be many years before your business does have the ability to get credit on its own, if it ever does at all.
Even if a bank offers you a credit card with your business name on it, they are still going to hit you up for your personal guarantee to back that card up.
During this tough economic period, they’re even more strict in these areas, making it tougher for us to get credit of any kind. That’s a good deal for them, huh? They played a big part in getting us into this financial mess, and now they’re making it tougher for us to get out of it.
Well, that’s the banking business. Never expect any favors from them no matter what they tell you, and always expect to have to give up your personal info and guarantee for any kind of business credit.
We all wish it was different, but you need to hear it like it really is.
This article has been provided by Chris Malta's blog. Find more great information about your online business on Chris's site. HERE.