Business Line of Credit?
17. Oct, 2009 
35 Comments
Every month I get a bazillion (yes, that is a real number) of emails from real estate investors asking how they can obtain a business line of credit. So, today here’s my 6 easy steps to a million dollar business line of credit.
A business line of credit is tricky if you’re a real estate investor. The first problem is that you can’t actually say that you’re a real estate investor when you apply. Banks hate real estate investors. They think we’re all evil flippers. Darn you, evil flippers for ruining it for us.
I remember last year when I still had my mortgage company an account rep from a local bank came in with all these flyers about getting a business line of credit. I was really excited thinking this may be a great solution for my real estate investor clients. But then I read the fine print.
*No applications will be accepted from strip clubs or real estate investors.
Wow. Now we’re lumped in there with the poor guy that wants to buy a new stripper pole. And if you need a new stripper pole, that’s a purchase you shouldn’t delay.
The second problem is that you really must have a seasoned company that has documented cash flow. It’s not as easy as the scammers say it is. You can’t just form an LLC online and then start applying (and getting) business lines of credit all over the place. Like anything, it’s a process.
And even though you won’t walk into a bank and walk out with a million dollar line to buy a big package of properties, there is a way you can build up to that. Here’s the process in a nutshell:
Form a Corporation.
I have LLC’s some guys favor C corps and still others like S corps. Check with your accountant to see which is best for you. There are some companies out there that will sell you seasoned “shelf-corporations” for several thousand dollars. That’s fine if you want to go that way but it won’t get you big lines off the bat because they aren’t cash-flowing corporations. I personally think they’re a rip.
Get a Tax ID
Also known as an Employer Identification Number of EIN you can get this online for free from the IRS website.
Get a DUNS number from Dun & Bradstreet
D&B is to business credit like FICO is to personal credit. They rate your company and your vendors report to them. Get signed up at http://www.dnb.com
Your goal is to build your “Paydex” number. Your goal should be a Paydex of 80.
Get a Few 30-Day Business Credit Accounts
The easiest way to start building your business credit is with 30-day accounts. Places like FedEx, Office Depot, Home Depot and Kinko’s will give you a business credit account. It’s a like a charge account. Charge something each month and pay it off each month.
Get a Business Credit Card
Once you have a few months of this under your belt, apply for a business credit card such as Discover or American Express.
Get a Small Line of Credit
Then after a year or so when your Paydex is close to 80, and your business has some positive, cash-flowing financials that you can show the banker, you have a good shot at an unsecured line of credit of $25,000 – $50,000.
Get a Big Line of Credit
Behave responsibly with that and the bank will continue to increase your line.
And there you have it – my 6 easy steps to a million dollar business line of credit. Is this as easy as it sounds? Kinda. Is it guaranteed? No. Nothing in life really is. But if you show that you have cash flow in your corporation, you’re head and shoulders above the rest. Cash flow is key.
The next questions is always “is there a course that will walk me through all this?” The answer is yes. There are a bazillion. And I’ve got most of them. In my opinion, the best one is Business Credit Infusion by Dustin Matthews and Mark Bravo. I like this one because they break it down into really, simple actionable steps and they don’t blow smoke up your… well, let’s just say they don’t make any false promises. And they have an online component with videos that walk you through each step and a database of business line of credit providers that’s updated regularly.
So, get out there and start building your business credit. And for God’s sake if there’s a strip club owner that needs a new pole, help him out. It’s the least you can do.
I may have a solution for someone who does NOT want to wait the timeline that it takes to build a business crediT file…and not pay up front for the seasoned corporation
Save it Bucky, or is it James Meister we all know you don’t know what the hell your doing. how many poor fools have you screwed by putting their names on mortgage and then letting it go into forecloser. How long before you lose the home your in now, and what poor fool will be going to have to file bankrupt because of your heartless soul. people watch out for this one he is a real tool and he will rob you blind given the chance.
What is the solution?
Hey Bucky… what’s the deal?
Are you blowin’ smoke, or do you just like to ‘tease’?
(Or were you trying to “use” this website to self-promote a product without Susan’s permission…?)
If you really have a useful suggestion/solution, then tell us what it is, please.
Floyd
tease hell he cant even get his partner to make it with him let alone anyone else. watch out for this one
Bucky,
I agree with Floyd. If you have what may be an easier
solution, let us know. There are enough scammers and
would be gurus out there peddling nonsense and half
information!
Bob
Do what I instructed in the post. That’s the way to get business lines of credit. Bucky isn’t doing anything different, I promise you.
Susan, I agree with you. I have a LLC and did the actual same steps you outline. I have no idea what Bucky is referring to however I know if they follow your instruction its a win-win situation. Have a marvelous day.
Do the “30-Day Business Credit Accounts” require a personal guarantee?
Can you recommend more current ones other than the ones you listed last year?
Thanks,
Tony
Tony – typically all of this will require a personal guarantee. And more current what? These steps are timeless and work last year, today and next year.
Thanks Susan,
For your consistent SOUND advice! The “others” sell sizzle, but you can’t beat SOLID, SOUND advice!
PLEASE continue to be the good person you are, by giving quality advice!
Much love,
Barry
i am a mortgage broker i have a client looking for a 500k line of credit he has been flipping for almost 2 years exellent credit strong income 1m worth of assests
he can provide documention for everything
and i still cant find a place for him
Chris – if he can’t get a LOC with his own bank, it’s not there. Refer your client to this article.
susan, I,ve been scared to death of starting my first deal in any kind of; RealEstate deals because of getting in trouble by doing something wrong, but I,am going to stop being scared, and follow your instructions an try & to do my first assignment deal in the next 30 days and soon as I get financial stable I,am going to purchase all of your courses.Lonnie.B
If you contact D&B they are going to want to charge you $229 to get set up as a business with your profile. I have a DUNS Number (free) but I didn’t have a complete profile. By setting up the “profile” I should start getting solicitations for lines of credit or cc’s from companies. I will keep you posted!
I am currently following these steps (for about 12 months) and quickly got business credit accounts at Lowes, Home Depot, Office Depot, and Office Max. Home Depot even gave us $100 for opening the account
My question is that D&B calls regularly saying that our account is not complete unless we pay $300-$500 to complete our profile. Is this legit or bs?
Scott P.: Woo hoo! Congrats! The fee is for a D-U-N-S Number. You can establish a D & B file without it. Some vendors will pay for it when you set up an account with them for reporting purposes.
We hold our investment properties in a holding company LLC and manage them with our management company LLC so when getting a DUNS number do we do it for the management company or the holding company?
Thanks!
Josh: Where’s the cash flow? If it’s the management company, that’s the one I would set up.
I currently have 4 LLC’s with Duns numbers for each with paydex scores of 80 and have used the Tom Kish program to attain credit cards etc. At this time I am having trouble attaining new credit cards and/or loc’s as well as watching my other lines diminish on a regular basis. Since my cash flow is down, any suggestions other than paying down existing debt
Susan you are simply the best. keep being so awesome and thanks for all your help. You will be rewarde 1000 fold.
God bless.
Susan with the 30 day business credit account, is that something you apply for online or go into one of the stores and ask for the account?
Thanks for the info., Susan. I have had a business credit card since 2004 and have two presently, but under my own name (no corporation formed). Can I use those accounts to my advantage when a I get a DUNS no. and IRS tax i.d. and seek to establish bus. credit as a corporation?
Yes, I am interested in finding out also, if you have to pay D&B to set up a profile with them? Is that really correct and if so, is there any way around it? Just trying to save money.
Do you have to follow the same steps that you are talking about above, if you go to portfolio lenders.
Ie, do you have to build up your credit rating with first business credit and then bank credit, so that you have a Paydex score of 80 when you approach the portfolio lenders?
Annika: No, but if you have it and you are going to them ONLY for a business line of credit, it helps.
Thanks Susan! I want to invest in some multi-family properties here is Los Angeles, but have no money to put in myself. I am working as a realtor, and would also simultaneously like to establish business credit. How do you think I should go about it?
Susan,
In your 6-step process, once reaching the Paydex 80 score…and having reportable cash-flowing financials to present to a banker… is the cash-flowing financials your are referring to mean your business lines of credit and so forth, which would be demonstrating your business’s trustworthiness..?
Vernita: Cash flow is profits. Your lines aren’t revenue so they won’t factor in as cash flow but will demonstrate trustworthiness as you say.
Susan, I search the D&B website and lo and behold I have a DUNS #, but can’t find my paydex score – how do I access that information? Do I need to pay the $229 for the “Duns File Creator”?
Great info – thanks for sharing!
You’ll need to signup to check it here: https://iupdate.dnb.com/iUpdate/mainlaunchpage.htm
Hi Susan – I went to the dnb update page and got as far as I could and someone from D&B called me right away after I started the process. They still claim that they won’t report anything to any company or bank until I complete the $229 registration process. Is that true, or is there a way around that? thanks!
Not sure what this means: report anything to any company or bank. If you have a file your vendors report to D&B resulting in a Paydex score.
Susan i want to set up a corportationb to get business credit. so tell me if the banks are not loaning money to real estate investors then what do i tell the banks that i am real estate management company or what
You could say that or a contractor if a rehabber. Whatever your business does they just won’t lend to real estate investors.