Business Credit Sent His Son to College

I had a wonderful opportunity to help a business owner last week, and the story is worth talking about. He has been in business for three years and has grown rapidly....maybe too rapidly. He had leased four vehicles from one of the major car manufacturers and was financing them in his personal name. However, the payments were being made through the business. When the transaction was initiated, his business had not structured a credit profile through any of the business reporting agencies such as D&B or Experian. In the meantime, his personal credit score had fallen below 600, and he was having trouble affording college expenses for his son.

My initial recommendation was for him to make an appointment for us with the manager of the branch where he banked. He had become a good depositor with his bank and they were willing to help.

The bank agreed that if we could develop a favorable business credit score (Paydex with D&B or Intellescore with Experian), they would buy out the leases and refinance the trucks in the name of the business. The truck payments would now be reported to the business credit agency (in this case, Experian). The process will take a couple of months, but all future payments to business creditors will easily give him a very favorable credit score at D & B and Experian.

Now don't get excited...the business owner will still be responsible for the payments through a "letter of guarantee". However, his personal credit will now show $88,000 less and his personal credit rating (FICO score) will rise significantly. More importantly, as long as his business continues to make purchases and make the payments on time, his business credit profile will grow to a higher rating.

Of course, there are many more considerations in developing business credit, but this business is now free to grow and will not be limited by the owner's personal credit. By the way, this business owner now has room on his personal credit for almost $100,000 to use for his son's college education, which is why he approached me in the beginning.

If your business growth is blocked by personal credit limits and your business can afford to service debt, you have many more options available than you may think.

27 Aug 2008 00:24:52

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