PDF Summary:Unbreakable Laws of Business Credit, by Corey P. Smith

Building a business requires more than just a good product or service—it necessitates establishing a strong financial foundation. In Unbreakable Laws of Business Credit, Corey P. Smith provides a step-by-step guide to help entrepreneurs understand the importance of developing business credit and creating a robust credit history to position their company for growth.

Smith covers the fundamentals of business credit, from navigating different business structures to leveraging existing corporations to expedite credit-building. Learn how to carefully manage your business's credit profile with agencies like Dun & Bradstreet, and master strategies for obtaining credit from diverse lenders and suppliers. This guide offers an in-depth roadmap for entrepreneurs seeking financial stability and independence.

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Selecting vendors that report to the major credit reporting agencies, namely Dun & Bradstreet, Experian, and Equifax.

Smith recommends that business proprietors select vendor accounts that report payment histories to the major credit bureaus, which include Dun & Bradstreet, Experian, and Equifax. Building a robust and comprehensive business credit profile is crucial. He provides a list of suppliers known for their consistent credit reporting practices and suggests focusing on those that offer payment terms which permit bill settlement up to thirty days afterward, thus allowing businesses to acquire merchandise and establish a payment history without immediate expenses. Building a robust credit history that instills trust in prospective lenders during their evaluation requires the submission of your credit reports to all three primary credit bureaus.

Prompt payment improves the credit reputation of the company.

Maintaining a regular schedule of prompt payments to suppliers is essential for establishing a favorable Paydex score, akin to an individual's credit rating in the commercial realm. Smith emphasizes the significance of keeping a Paydex score above 80, which is commonly seen as a sign of strong credit health and significantly improves the likelihood of securing larger credit limits and more favorable loan conditions. He underscores the importance of timely financial settlements to create a history of outstanding payment habits, demonstrating the company's dedication to fiscal dependability.

Other Perspectives

• While establishing a robust financial base is important, it's not the only factor in securing financing; investors also consider market potential, business model viability, and the management team's experience.
• Some business structures that are advantageous for building credit may also come with increased regulatory complexity and administrative overhead, which could be a disadvantage for small businesses.
• The alignment of a business entity with an individual's situation is important, but it may also limit the ability to pivot or scale the business in the future if the chosen structure is too rigid.
• Utilizing aged corporations to build credit quickly can be seen as an attempt to shortcut the organic growth and credit-building process, which may not be viewed favorably by all creditors or investors.
• The process of securing an EIN, while crucial, is a bureaucratic step that does not in itself contribute to the financial success of the business.
• Registering the business and opening a commercial bank account, while necessary for separation of finances, does not directly contribute to revenue generation or business growth.
• Keeping personal and business finances separate is important, but for very small businesses or sole proprietorships, this separation can sometimes create unnecessary complexity.
• Establishing a formal business communication framework may not be as crucial for businesses that operate effectively in a digital or remote environment.
• Relying on vendors that report to major credit bureaus is helpful for building credit, but it may limit the business's options to work with potentially more beneficial vendors that do not report to these bureaus.
• A high Paydex score is beneficial, but it is not the only metric lenders consider; debt-to-income ratio, business performance, and cash flow are also critical factors.

Leveraging existing corporate structures to accelerate the establishment of creditworthiness.

Smith unveils a strategic approach to accelerate the development of credit by leveraging existing corporate frameworks. This approach, while requiring meticulous research and strategic preparation, can significantly reduce the time required to obtain considerable financial support for a company.

Reactivating inactive businesses may result in the restoration of an established business credit history.

Conducting a thorough analysis of the business's credit background and current standing.

Smith outlines a method for identifying and acquiring inactive businesses to leverage their established credit histories. However, he emphasizes the importance of conducting a comprehensive review of the company's financial past, balance sheets, and current liabilities prior to finalizing the acquisition. He advises tapping into state-provided resources and meticulously scrutinizing credit evaluations from Dun & Bradstreet to uncover any hidden issues that could negatively impact a new business owner's credit objectives.

It is crucial to keep up-to-date information on the corporation's registered agent, location, and ownership details.

It's vital to update the key details once you have selected and established a suitable business structure. Smith underscores the importance for entrepreneurs starting new ventures to promptly refresh details about the registered agent, business location, and proprietorship to ensure that all correspondence and legal papers are accurately documented in the company's financial records. This stage cements the transition of ownership and guarantees a clear connection between the company's credit history and the incoming owner.

A new business owner must ensure the company's existing credit is enhanced seamlessly.

A business must ensure it remains active and up-to-date in its dealings with credit reporting entities, including Dun & Bradstreet and other similar bodies.

Once a dormant corporation has been reactivated, it is crucial to accurately document any changes with all relevant bodies responsible for monitoring business credit, such as Dun & Bradstreet among others. Smith details the process for renewing a business's records with D&B, including the modification of the business's name, address, telephone details, and particulars about the owner and number of employees. He also emphasizes the need to carefully manage the narrative about the change in ownership, suggesting that it should be portrayed as a continuous guardianship to avoid triggering a reevaluation of the established credit foundation.

Leveraging the well-established credit history of an experienced company to strategically obtain financial backing.

Smith advises adopting a cautious approach and adhering to a structured plan when attempting to obtain credit leveraging the existing credit history of the company. He recommends starting credit relationships with banks that rely on assessments from companies approved by Citibank, and to space out the submission of applications to avoid raising any red flags. After you've shown that you can manage credit responsibly, you may then think about seeking out lenders who rely on Experian data, including those providing accounts similar to what prominent financial institutions such as GE Money offer. The gradual approach guarantees that the business's financial reputation and creditworthiness develop in sync with the unique business methods of the new proprietor, thus preserving the established credit history's integrity.

Other Perspectives

• Leveraging existing corporate structures may not always be the fastest way to establish creditworthiness, as it can involve complex legal and financial due diligence.
• Reactivating inactive businesses could carry hidden liabilities or reputational risks that may outweigh the benefits of an established credit history.
• A thorough analysis of a business's credit background is resource-intensive and may not always reveal all potential issues, especially if there are undisclosed or contingent liabilities.
• Keeping up-to-date information is important, but it may not be sufficient to maintain or enhance creditworthiness if the business does not have strong financial performance or if the industry is facing downturns.
• Ensuring a company's existing credit is enhanced seamlessly may be challenging in practice due to changes in market conditions, lending standards, or regulatory environments.
• Remaining active and up-to-date with credit reporting entities is a good practice, but it may not significantly impact the credit rating if the underlying financials of the business are not strong.
• Leveraging the credit history of an experienced company can be a strategic move, but it may also lead to over-leveraging and financial instability if not managed with prudence and a clear understanding of the associated risks.

The importance of Dun & Bradstreet in evaluating a firm's financial trustworthiness.

Smith firmly places Dun & Bradstreet at the pinnacle of the business credit sector. Understanding how Dun & Bradstreet operates, recognizing its significance, and mastering the strategies for successful engagement are essential for improving and maximizing a company's credit status.

Dun & Bradstreet stands as the leading authority on commercial credit reporting.

Dun & Bradstreet maintains the world's largest repository of commercial information, with details on over two hundred million businesses.

Smith emphasizes that Dun & Bradstreet is at the forefront of supplying comprehensive commercial credit information, boasting an unmatched aggregation of business data worldwide. Dun & Bradstreet upholds a comprehensive system for recording data, which includes details on over 200 million businesses spanning different industries and regions. The assessment of a company's creditworthiness, which is crucial for loan and financing decisions, is predominantly based on the use of a critical resource known as Dun & Bradstreet by lenders.

To initiate their credit profiles, businesses are required to obtain a DUNS number from Dun & Bradstreet.

Smith emphasizes the importance for companies to obtain a distinct nine-digit number, which is provided by the entity referred to as Dun & Bradstreet. This unique identifier for each business functions akin to how a Social Security number identifies an individual within the extensive databases of Dun & Bradstreet. Securing a DUNS number is crucial for establishing a credit profile that enables businesses to gain recognition from potential creditors and credit issuers. This acts as an essential link that aligns your enterprise with the wider financial world, thus unlocking access to significant financing opportunities.

A Paydex score is an essential measure for evaluating a company's financial trustworthiness.

Achieving a Paydex score of at least 80 signifies a strong financial health.

Smith underscores the significance of a distinctive credit scoring system known as the Paydex score, developed by a leading firm in the field of business analytics. The Paydex score, ranging from 0 to 100, reflects a business's reliability and timeliness in settling bills, with scores above 79 typically regarded as a strong indicator of monetary reliability. This score plays a crucial role in the evaluation of creditworthiness by lenders, affecting both their decision to extend credit and the favorability of the interest rates they propose.

To obtain a Paydex score, it is essential for companies to have at least five trade references reported to Dun & Bradstreet.

Smith explains that to create a Paydex score, it's necessary to have at least five trade references on file with Dun & Bradstreet. This means that a business must secure credit with at least five vendors or creditors who report payment history to D&B. This standard ensures that the assessment of a company's financial behavior is based on a comprehensive and reliable set of information, providing lenders with a full view of the firm's financial activities. A Paydex score cannot be established without a substantial track record of financial transactions being reported, thereby restricting the range of accessible credit opportunities.

It is crucial for a business to thoughtfully interact with Dun & Bradstreet to build and fortify its financial reputation.

Provide Dun & Bradstreet with precise information regarding your company, including its size, length of time in business, and financial history.

Smith underscores the importance of diligent monitoring of your company's credit status as documented by a well-known agency that reports on business credit. By providing comprehensive and accurate details about your company, including its scale, duration of operation, fiscal data, and the nature of its commercial activities, you contribute to establishing a clear and complete picture of your business's creditworthiness for potential financiers. Submitting inaccurate or partial information may lead to misunderstandings and could risk the chance to secure favorable financial terms.

Consistently updating and examining the business's credit profile with Dun & Bradstreet.

Smith recommends consistently refreshing and rectifying any old or inaccurate details in your Dun & Bradstreet credit report. By proactively managing your company's financial and operational status, you can ensure that the credit profiles of your business remain current and reflect accurate information, thus preventing the negative impact of outdated or erroneous data. Utilizing platforms like Dun & Bradstreet's electronic update feature is essential for meticulous monitoring of your business information, which enhances the robust and accurate fiscal standing needed to advance your company's growth objectives.

Other Perspectives

• Dun & Bradstreet is not the only source for credit reporting, and other agencies may also provide valuable insights into a company's creditworthiness.
• A DUNS number is important, but it is not the only identifier used globally, and in some regions, local business identification numbers are more relevant.
• The Paydex score is just one measure of financial health, and relying solely on it may not provide a comprehensive view of a company's financial stability.
• Small businesses or new companies may find it challenging to obtain the required five trade references, which could limit their ability to establish a Paydex score.
• Providing detailed information to Dun & Bradstreet is important, but there are concerns about data privacy and how this information is used or shared.
• Regularly updating information with Dun & Bradstreet is good practice, but it can be resource-intensive for smaller businesses that may not have the capacity to do so frequently.