Last week, Better Qualified’s own Bob Morales was featured in REI Diamonds’ interview. Bob spoke about business credit profiles and how to obtain business credit in an LLC.
Here are some of the highlights from the interview. For full interview, please listen above.
Dan Breslin: “Bob, What is the benefit of having business credit?”
Bob Morales: “The true benefit is, if you already have an LLC established it gives you the opportunity for that company to become self sufficient if done correctly. Your personal credit at some point will reach limits from your debt to income ratio. The beauty of business credit is that will not have this come into play at all. It’s based off of you establishing credit and building it the right way so you can own commercial properties solely through your Tax ID number, not your social security number.”
DB: “Do I need to have strong personal credit in order to make moves with my business credit, Bob?”
BM: “Not Necessarily, I mean it definitely helps. It’s always going to be a benefit because if you run into a situation where you needed something short term- Because there’s going to be certain things that come into the criteria for how much you’re going to be able to borrow. It’s going to tie into the length of time that you’re in business, the number of accounts that you have outstanding, the dollar amount of credit that your showing available. So, the more things you have non personally guaranteed solely under your business credit, the stronger your business credit profile is. Personal credit is actually the reverse. On the personal side, your debt to income is going to limit you. On the business credit side, the more credit that you have available and the more credit that you are current on, the more credit they will allow to you.”
DB: “What would be like the maximum credit limit that you’ve seen someone build up to using your program?”
BM: “I’ve seen, short term us be able to turn around and get individuals credit of up to $400,000-$500,000 within 5 to 6 months.” “I’ve seen us finding individuals who’ve had difficulty getting loans, using our program the correct way – and because they’ve already had the groundwork laid for their business credit profile – we’ve gotten them upwards of $700,000 to $800,000 in a very short period of time, less than 3 months…”
“The foundation has to be built correctly, it’s kind of like a recipe. You can take all the ingredients and just throw them in the bowl, it’s not going to work out. But if you add the eggs and the flour and everything at the right time, it’s going to build a foundation correctly. The flour is going to rise the right way. Now it’s the same premise, you have to establish 3 levels of credit and a lot of people want to jump the gun, they want to go from vendor credit right to cash credit, or you know, they just want to go at store level. It’s something that has to be built properly and as long as those steps are followed, the ability to build credit is just your ability to make payments. As long as you continue to stay in good standing with these loans, there’s no limit.”
DB: “So what’s the specific difference between personal and business credit?”
BM: “Personal Credit side is always going to be tied into a debt to income ratio. I don’t care how much money you make, at some point you’re going to be limited… and if you’re not limited you can still go out and get credit but you’re going to have to put down larger down payments, you’re going to get hit with higher interest rates. On the business credit side, like I said, it’s establishing a payment history, it’s making sure you have the correct number of experiences, it’s… it’s going to come down to your tradelines. So if you’re walking in and your debt to income ratio is at, you know, 13%… you pretty much write your own ticket. You know, as long as you have solid credit score. A credit score isn’t a magic wand, it has to be used the right way. On the business credit side, there’s over half a million companies that issue credit. Only 6,000 of them actually report to the business credit bureau so you have to leverage it to the right types of lenders and that’s the important thing.”
Listen to the entire interview in the link above.
If you are interested in building business credit with your business, fill out the form below and Bob will reach out to you.