This year more then ever small businesses are expected to be hit by not only the failing economy but the credit crunch. That is businesses who don’t know the keys to build business credit even in a troubled economy.

Step 1
You as the business owner need to take steps to move your company in a legitimate direction. File the appropriate paperwork with you state to make sure you have a fedeal tax id, also known as an EIN. This will allow you to begin to generating a credit file

Step 2
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You will be seeking a “bad credit commercial loan,” and you should be aware that these loans are a little more expensive than normal commercial loans. But when this is what you need, it’s what you need.

First, look for lenders who specialize in, or at least deal with a lot of, bad credit commercial loans. They will understand what you’re asking for and be more likely to loan you money than lenders who don’t issue a lot of bad credit business loans.

You will likely have to borrow a minimum amount of money. This may seem strange on a bad credit loan, but lenders want to make sure they lend enough to get a substantial profit back on the interest. In most cases, the lower limit is $5,000. The upper limit, of course, will be determined by your lender and will vary based on your situation.

You may have to have the loan payment paid automatically by credit card monthly. This is not a problem if you have a credit card with a sufficient available balance and you can make the monthly payment. It could be a problem if your credit card cannot absorb the payments and you do not pay off the payment on your credit card each month. Consider how you will repay before you apply for a loan.

You may also have a very short time to repay the loan. Often, for a loan of $5,000, the lender will expect complete repayment in one year. If this is going to be too difficult for you, you should not apply for the loan. Once you take out a bad credit loan, if you default on that, your credit will be well and truly ruined.

Watch for additional charges, as well, such as fees of various kinds. Understand exactly what you’re going to be paying on your loan. Expect high interest rates because of your credit situation, and understand exactly what you’re getting. Shop around and compare loans from two or three lenders to get the best terms.

In a perfect world, you would be able to get a commercial loan without all these inconveniences just by proving that you’ve overcome your prior difficulties. You wouldn’t need a bad credit business loan. Unfortunately, in this world, you will have to apply for a bad credit commercial loan under certain circumstances. The good news is that once you’ve repaid this loan, you will be in a much better position the next time you need access to business capital.

The House of Representatives today approved a bill, the Credit Cardholders’ Bill of Rights Act (H.R. 5244), 312-112 to stop credit-card companies from continuing to exercise harmful and anti-free-market practices that severely inhibit small-business owners ability to grow their business, hamstringing the U.S. economy. NSBA strongly urges the Senate to take-up companion legislation and send the message to America’s small businesses that Wall Street isn’t the only street in America that matters in Washington, D.C. Credit cards are critical to small businesses. Many small businesses lack the assets necessary for traditional bank loans and turn to credit cards as a vital source of capital. In a nationwide NSBA survey, 44 percent of small-business owners identified credit cards as a source of financing they had used in the previous 12 months — more than any other source of financing, including business earnings. Despite small-business owners’ increasing reliance — in 1993, only 16 percent relied on credit cards — nearly two-thirds reported in August that the terms of their credit cards are worsening.

“Imagine if I, as a small-business owner, was allowed to routinely change my terms of engagement with my clients at any time for any reason — it’s just unthinkable,” stated Larry Nannis, NSBA vice chair for advocacy and small-business owner from Needham, Massachusetts. “Yet, credit-card companies do this every day. All we are asking for is basic fairness — that credit-card companies be held to the same standards as any other business.” H.R. 5244 will codify the most significant regulatory changes recently proposed by the Federal Reserve Board (Fed). It is crucial that these proposed changes be codified to ensure their enactment and applicability in the future. The idea that Congress need not delve into this issue because the Fed already has is shortsighted.

The Fed easily could weaken their proposed rule before enacting it or in the future. As the Administration calls for a $700 billion financial bailout plan for some of the largest U.S. corporations, there are countless small-business owners struggling with an inability to garner financing, skyrocketing energy costs, and business loans out-valuing their home equity. Yet, small business is still charged with creating jobs — having created 93.5 percent of all net new jobs since 1989 — and driving the U.S. economy out of the current slump.

“The overwhelming majority of small-business owners are feeling the credit crunch, and this bill offers a tangible way to ease their pain,” stated Todd O. McCracken, NSBA president. “I certainly hope all the talk we’ve heard during this election cycle about the importance of small business isn’t just lip service.” For too long has the small business owner been pushed around by creditors and lenders, and finally here’s some relief. There’s no better time than now to start building your business credit and keep your business prosperous.

It’s not your fault, the cards are stacked against you.

In fact, many lenders and loan officers would rather you make these mistakes when building credit for your business, because it puts them at an advantage over you.

Here’s some common mistakes that owners of small companies make when attempting to build corporate credit.

Getting Misled With Applications

Applying for loan or financing applications that aren’t really corporate credit applications at all. It’s deceiving, but many so-called corporate credit cards, are nothing more than a personal card account disguised as a corporate credit card. You can always tell by looking at the application to see if it asks for your company’s Tax ID number or not. If it doesn’t ask for it, then it’s definitely a personal credit account that you get to have your company’s name printed on it as well.

Taking On Company Debt Personally

Supplying a “Personal Guarantee” for a credit line or loan for business. The purpose for building corporate credit is so that your company’s ability to pay and credit-worthiness is evaluated separately from your personal credit. This is vital to making sure that your personal finances do not become tangled with your business finances.

Going Too Fast

Applying for too many new accounts and lines of credit for your business within too short a period of time. It’s generally frowned upon to apply for many new credit accounts all within a short time frame to one another because it looks like you are in financial distress to lenders. It’s always best to spread your applications out over a larger amount of time when possible.

Even if you’ve made these mistakes, don’t be frustrated. Building and establishing credit for a business can be a challenge and rewarding all at the same time. Keep track of your progress as you go, and you’ll be on your way to success.

It won’t be long after you’ve filed your business license paperwork and opened a business bank account, that the loan applications will come pouring in offering you a chance at a business credit card.

This is where things can get tricky, because not all business card applications are actually for a true “business credit” card. Here are the top 3 things to avoid when evaluating business credit card applications.

Avoid Personal Guarantee’s

When you look at the application, take a look at the bottom area where it asks for business information and details. If there is a section that is marked as “required” that asks for your personal social security number, then the application you have is for a personal credit card with a business name added to it; not a true business credit card.

Watch For Outrageous Rates

Many credit applications look great at first glance, but when you look into the fine print, you’ll find that they charge interest rates that are at times 4 times the prime rate. These are a sure way to get caught in the credit trap of being stuck with high-interest debt that will drain the capital right out of your small business.

Never Pay For An Application Fee

Reputable companies that extend credit and loans to small businesses know that they will make their profit from you being a loyal customer and by the interest rates that they charge for the loans. Any company that tries to tack on an application or processing fee in order to open an account for your business is just trying to take advantage of you, and you should move on to businesses that will treat you better.

Getting a business credit card can open many doors financially for your small business. Knowing how to avoid these mistakes before hand can be the difference between having business credit success and falling victim to the companies that try to take advantage of small business owners.