I talk with Ty Crandall, CEO of Credit Suite, about how to use debt to fund your eCommerce business
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Charles: In this episode of the Business of eCommerce, I talk with Ty Crandall about using business lines of credit to grow eCommerce business. This is the Business of eCommerce, episode 13.
Welcome to the business of eCommerce, the podcast that helps eCommerce retailers start, launch, and grow their business. I’m your host, Charles Palleschi. I’m here today with Ty Crandall. Ty is a business credit expert. With over 16 years of financial experience, Ty’s recognized as an authority in business credit building, business credit scoring, business credit repair.
So, Ty, I wanted to bring you on the show today to talk to you a little bit about using lines of credit in eCommerce. How you doing today?
Ty Crandall: Yeah. Good man. I’m excited to be here. Thanks for having me on.
Charles: Yeah, great to have you. Wanted to kinda jump right in and see kind of … Talk about some ways on first, what is business credit, and second, how we can kinda use it to help grow and finance a growing eCommerce business.
Ty Crandall: Sure, absolutely. There’s a couple things. When I talk about getting financing, or I refer to it as capital, basically any kind of money you can get as a business. There’s a couple different avenues you really wanna focus on. You know, one is the business credit, the corporate credit side, which really has to do with credit cards. Visa cards, Master cards, American Express, Dell, Apple, etc.
A lot of these credit cards don’t require manual reviews, or manual underwriting, it’s just one of those, ‘if you meet the requirements,’ you get automated approvals for 20, 30, 40, 50 thousand dollar plus individual credit cards and lines.
Then I look at the other side of it as the business financing. Every thing that’s left. These are loans and these are credit lines that are through alternative lenders and SPA, etc. There’s a couple different avenues you can go. The problem is that loans, and lines, and those, a lot of people know the difficulties, especially eCommerce of getting approved with a lot of those because a lot of the industries that we’re in with eCommerce, even where I am, financial services, is considered to be high risk.
We face more scrutiny, we have more difficulty accessing capital, etc. the first thing to know, is being a business credit, you don’t have that scrutiny. There’s not industry restrictions. You’re not going to not be able to get approved because you’re an eCommerce business. It’s the same as we’re not getting approved because we’re in financial services.
Anybody can get this, even if you’re just starting the business, even if you’re just gonna be starting the business after you listen to the show tomorrow. You still can get involved and access capital, you don’t have to provide tax returns and bank statements so it’s no doc. You don’t collateral that’s required for SPA loans.
You don’t need to have good credit that’s required for a lot of term loans, etc., that’s out there. With business credit, as long as you have a business, you can start obtaining credit pretty quickly and then you can use a lot of that credit to fuel and fund the business and get quite a bit of it within even the matter of a few months.
Charles: Okay, so when you say business credit, you’re talking about specifically not assigning your particular social to it, to put it under the businesses name and to make it a business …
Ty Crandall: Yeah. Charles, you hit the nail on the head. You’re familiar with consumer credit, right. You have a social security number, you give somebody your social, they pull your credit. What a lot of people don’t realize is that businesses are exactly the same way, but we all as businesses have credit profiles that are linked to our EIN number.
There are three reporting agencies, Dunn and Bradstreet, Equifax, and Experian, which we’re familiar with, the Equifax and the Experian on the consumer side. They handle commercial credit reports, business credit reports. These commercial credit reports are linked to our business EIN numbers here in the United States and our business can build credit, really the same as you can as a consumer.
You use your credit profile to get credit cards, to get loans, to get auto loans, to get mortgages. Business credit’s exactly the same thing, but it does it for businesses. People build a business credit profile score, use it to get credit cards, loans, real estate, even auto vehicle financing. But, a lot of it doesn’t require a personal guarantee or a personal credit check, cuz when you do it properly, you’re separating the two. Your business has a credit profile. You have a credit profile.
Ultimately what you’re doing is you’re giving your business the ability to use its credit profile to fund itself, so it no longer needs your guarantee and your money to fund the business. You’re building your credit profile with a business, can basically fund itself.
Charles: Okay, so now, when you say do it properly, what’s the definition of doing it properly and not doing it right? Cuz you hear of things where it’s tied into your personal social, that sort of thing, vers completely, it’s the businesses line of credit. What’s considered right and wrong in how to do that.
Ty Crandall: Well, I think that one of the biggest mistakes we see people make is that, when you see a credit application with the social security field, you are conditioned to provide your social security number. Credit insurers kind of depend on that. They like that. They like the novices, the newbies, the companies that are smaller that don’t have CFO and financial savvy people working within them. They like the fact that we’re conditioned just to give the social because it’s asked for.
But, the reality is, you’re not required by law, at all, to provide a social security number when it’s asked for. What a lot of people don’t know, is that, if you go to apply for a staples commercial credit card, they’re gonna ask you for your social. What a lot of people don’t know, is if you left the social security blank, if you never provided it, then what happens is, they’re going to then make the decision based on your business credit quality. They’re gonna take your EIN, they’re gonna pull your business credit profile.
If your business credit profile’s strong enough to get approved, then you get approved for the exact same credit card, the limits are typically higher, because it’s a commercial credit card, and you didn’t provide a social, you didn’t provide a personal guarantee, so now you’re not personally liable. The credit report’s on your business credit report, not your consumer credit report. The lending decision, the decision to issue credit, isn’t based on the quality of your current consumer credit. They don’t even have your social to pull the consumer credit. They’re making decisions solely based on your commercial credit quality instead.
Charles: That’s a good way to think about it, right? Because let’s say you’re the CEO of a publicly traded company and you’re applying for that line of credit, you’re probably not putting your personal social on that application. You’re using the EIN, it’s all linked to that, to the business.
Ty Crandall: Yeah, and we know this. We know that Micheal Dell is not providing his social and signing for a hundred million dollar credit line that Dell is getting. We know that big companies don’t do this, but we think it’s because they’re big companies. The reality is, if you pulled Dell’s credit report, you’re gonna see over a hundred trade lines.
If you pull Apple’s, you see 138 on just Experian alone. What happens is, these companies are getting these large amounts of capital, not because they’re big companies, but because when you look at their credit report, they have hundreds of trade lines that are paid as agreed. They have good scores that reflect that they pay their bills. The credit bureaus are recommending they be lent millions of dollars.
What a lot of people don’t know, is even a start up can take the same steps and have the same result that the big companies have because they all started the same place that even start ups start. They started with getting initial accounts that report on the business credit reports, getting more and more. The more they get, the more access to capital they have, etc.
Charles: Okay, so getting that first account though. Is there some sort of trick to that where it’s like a 16 year old getting their first credit card where you have to get the small one and kinda stair step your way up. Is it like that or what do you kinda do to get started?
Ty Crandall: Well, it’s a great questions cuz what It comes down to is this. First of all, consumer credit, you can build without even knowing you’re doing it. Like, if you go to Staples, or Walmart, or Amazon, or get a Visa card, it all reports on your consumer credit reports. But, in the business world, it’s completely the opposite. 97% of credit that’s out there, doesn’t report on the credit reports.
You have to be very intentional when you build business credit. You have to go in knowing that there is a formula to do this, knowing you’re getting credit with credit insurers that do report to business, not consumer. A perfect example of that is Capital One. Capital One is the stark credit card, and it’s a business credit card, but the problem with that is, that it reports on consumer and business credit reports. If you don’t know that, then you get the credit card, it shows on your personal credit report, then as you use the credit card, it hurts your consumer credit score.
In the business world, instead of going to secure credit cards, like you mentioned, that we’re used to when you’re young, and you’re doing it on the consumer side, we use what are called vendor accounts. Vendor accounts are not secured, what they are, is they give you terms like net 30. So instead of it being revolving where you spend a thousand, you have a minimum payment of 25 bucks til you pay the thousand back, with vendor accounts if you spend a thousand on a net 30 account, you have 30 days, IE the net 30 to pay that whole thousand dollars back. It’s not revolving. It’s better than secured, but not as good as revolving, and it gives you a period of time, like 15, net 30, net 60 days to pay back that amount that you used.
Some examples are U-line and Quill, a perfect example. Quill sells over million type of products, really very familiar with office supplies and with marketing fliers and with things like this. U-line sells shipping supplies.
These companies, if you went to their website, you put $50 worth of stuff in your shopping cart, you go to check out, they give you a clear option of invoice me or something similar. If you choose invoice me, you notice, you could complete the order without ever giving em your social. They don’t even ask for your EIN. They’re not asking for a credit card. Then all of a sudden you get an email that says they shipped your item.
They just extended you credit and they report that credit to DMB and Experian. Now, you’re getting real credit you can use for your business. You’re easing your cash flow needs and you just got your first business credit accounts that then report to Dunn and Bradstreet, Equifax, Experian. That populates the credit profile and score with you and now we’re on exactly the same course as consumer credit. The more credit we get, the more credit we’re recommended for. The higher our limits get. The more sources will then approve us for more credit.
Charles: Is that the same … I know I’ve see when you work with new manufacturers before, you’re opening vending lines of credit with them also. Is that the same thing and do they also report to the credit bureau so that kind of extends?
Ty Crandall: That’s a great point. A lot of vendors will extend you credit. What a lot of people don’t know is that a lot of times, they’re using your credit profiles to make the lending decision. There’s all kind of credit profiles and credit scores. There’s credit scores for suppliers. There’s scores that predict your likeliness of defaulting that, or based on your past performance, etc., etc.
What happens is suppliers and … We’ll use suppliers an example. Suppliers are using your business credit report to determine if you should get approved, how much to give you and the terms they give you. It’s all based on the business credit report that they’re pulling. They’re pulling business credit reports to make those lending decisions, or credit issuing decisions in a lot of cases. But, 97% of trade vendors don’t report.
It’s very likely that the vendors you’re working with will extend you credit, but don’t report the credit and that’s why it’s a great idea to ask them. Do you report this credit to a reporting agency, which one?
Charles: Okay, so that’s something you can ask a vendor and say, you know …
Ty Crandall: Sure.
Charles: Okay. I’ve also seen before where …
Ty Crandall: But in all fairness …
Charles: Oh, go on.
Ty Crandall: It’s a good idea to ask more … If you’re dealing with a company like Quill or U-line, or a big company, I always recommend call, ask em, hang up, call back ask somebody else, hang up, because their front line people don’t know a lot of things. You might ask somebody at Quill, do you report to reporting agencies, they say yes. Then you say which one, they say DNB. You call back and you ask the same question, they’ll say no, they don’t report.
I’ve kind of found the call a few times to see if the answer’s the same. If it’s not, kind of keep calling or talk to a supervisor. Try to talk to somebody that has the answers because usually underwriting divisions in these companies know those answers. Front line reps, they don’t know and unfortunately, in a lot of cases, they have a tendency to guess versus just tell you they don’t know or guide you to where to get the real answer.
You can definitely ask.
Charles: Okay. I’ve definitely seen this situation before where you sign up with a new vendor, also, and instead of even looking at the agencies, they basically just ask you for other vendors to extend you lines of credit.
Ty Crandall: Sure.
Charles: That’s one of the … Is that a case where they’re not looking at the agencies, but they’re trying to figure out through your other lines of credit that you’re reputable?
Ty Crandall: There’s no way of knowing without asking them, if they look at your business credit reports. But, I can tell you, for example, we had an account with Experian where it’s $7.95 for us to pull a commercial credit report. You better believe if I’m going to give you a credit line for hundreds or thousands of dollar, I’m gonna spend my $7.95 to know everything I need to know about your company.
You can ask em’ if they’re pulling the credit reports or not. It’s a good idea to.But, you bring up a good point. Having trade references also helps. A lot of the cell phone companies, Spring and T-mobile for example, they will give you credit, but it doesn’t report to the business reporting agency. They’ll extend you credit based on your business credit profile and score, without even providing your personal information. But, they don’t report it. They still have a benefit because they can still classify it as trade references and as trade references, that’s what a lot of these credit insurers want to have.
If you have business credit reports, you just use the people you have credit with as the trade references. Again, it’s just logical. If somebody is gonna extend you money, they’re going to look at the information they have to know if you’re a risk or not. Business credit reports are so cheap, so easy to access, and they don’t need your permission to get it. In most cases, suppliers, credit issuers, lenders, they’re all looking up these commercial credit reports to make those kind of decisions.
Charles: Oh, so they don’t have to ask us before they actually pull the report. It’s not like a personal thing where you have to authorize.
Ty Crandall: What we’re used to, we’re used to credit being governed because there’s the law called the fair credit reporting act in the United States. The fair credit reporting act came about in the 70s where the credit bureaus were doing, just, crazy things. They were literally paying their employees bonuses based on the more dirt they could get about you. Whether it was lies … Literally, if you were gonna get divorced, they would sell that divorce. They would sell that data to anybody that wanted it.
Regulators came in when it started to get computerized and they came out with this law called the fair credit reporting act. The fair credit reporting act has a lot of restrictions, but one of the restrictions is, that somebody can’t pull your consumer credit report without what’s called permissible purpose. IE your permission.
In the business world, there is no fair credit reporting act. There is no regulation that governs the reporting of commercial accounts. These credit issuers can do whatever they wanna do, they don’t need you EIN or social to pull your credit report. They only need your name and address. Nor do they need your permission.
What’s scary about that, is that anybody can do the same thing. If you go to Dunn and Bradstreet to get a credit report, the very first question they ask you is, do you want your credit report on your company or somebody else’s company? When you sign up with their program to get your credit reports, they give you access to other company’s credit reports as well. Anybody can get it, prospects, clients, competitors, anybody that wants your business information can easily access it without needing your permission to get it.
Charles: So you said earlier that the number of trade references Apple has, that Dell has, that’s because you basically can just look at that and you actually know that information.
Ty Crandall: Absolutely. During the election I did credit reports on all the candidates, you know? We reviewed Donald Trump’s credit report. We reviewed Hillary Clinton’s credit report, companies credit report. It’s very easily accessible, and again, $7.95 is all it costs to be able to go in and get those, because it’s public information. It’s available to anybody that wants it. The commercial credit quality of a business is publicly accessible data, whereas your consumer credit report is privileged and that’s something that somebody can not get legally without your permission.
Charles: Gotcha, okay. That’s good to know. Once you get those trade lines of credit, and you wanna start growing from there, is the goal to grow the dollar value or the length of time and go from that net 30 to net 60? Where do you kind of go from there? What’s kind of the next step?
Ty Crandall: Well, you really start a couple steps back. The first step you wanna start is understand that when you’re applying for credit, that there’s an automated system that’s making a decision. We all know this. You go and you apply for a Chase credit card, one of two outcomes. You either get approved, it tells you the limit, or you get that dreaded message that you’ll hear by mail in seven to ten days and that’s never a good notice. That’s always why they turned you down.
Now, what you might not know is, again, the fair credit reporting act is the one that requires the credit insurer to send you that notice by mail that you were denied, and which bureau you’re pulling. So, very important to know because a lot of people don’t even know they’re business credit’s being assessed because when they’re denied, there’s no law that requires you be served a notice to tell you that you were denied and that they even looked at your business credit reports.
The first thing to know is that, when it comes to credit, these are all automated systems. In order to get approvals, you need to understand how these systems works. What they’re doing is looking at a series of a checklist to see if you’re legitimate, credibly. Visually reputable.
For things like, do you have a business website, a professional website? Are you using a professional email address? You don’t wanna use yahoo and google type email addresses. You wanna use your name at your company dot com. You wanna use a business phone number or a voice over IP. You don’t wanna ever use a home phone or a mobile phone.
You wanna use a business address or virtual address, home address as last resort. You never wanna use a PO box or a UPS address. You wanna get a fax number. You wanna get a toll free number and most importantly, all of your business data needs to be the same. Yahoo, and bing, and google have to have the same phone number and address as what you’re putting on your secretary estate records and your application. If it’s different, then that alone can be denied. We just saw a denial the other day from Amazon because the phone number wasn’t exactly the same on the application as what they found online with an online search.
Once you have all this perception of a credible business, right, cuz a credible business … HP has a fax number, right? Even though we don’t really send faxes anymore, that’s not a field you’d ever wanna leave blank because it just makes you look unestablished.
Charles: Is somebody actually checking this? Like when you say professional website, is someone actually going to the website and visually looking at it?
Ty Crandall: Think of it like this. It’s not the visual looking at. On loans, yes. Absolutely without a doubt. On credit, not so much. But, if you left the field blank, indicating you don’t have a website … I mean, now-a-days, if you don’t have a website, it’s almost impossible to look legitimate and credible. That’s not my opinion, that’s just from credit insure lenders, the way they look at it.
The worst problem with credit, revolving, automated approvals, is leaving that field blank, leaving the fax number field blank. If you leave a fax number field blank, are you gonna get denied because of that? No. But it’s a strike against you. And when you get enough strikes, then they’re like, “Well, this person has no credit, they’ve all kind of red flags here indicating they’re not even a legitimate business.” That’s gonna prevent you from getting approved, especially as you initially start to get these approvals. Set up that business credit bowl.
The second thing is go and see if the reporting agencies have something on you now. Again, something we’re not used to, is in the business world, if Experian and Equifax know you exist. If they know your business name, address, and your SIC code, they automatically populate a credit report for you and give you a failing business credit score and put you at the highest risk score you can get of something that’s referred to, whether or not basically gonna file bankruptcy.
Just being in business and not having a credit profile, they will literally score you as if you are near verge of bankruptcy. Do a free search.
We have a place in our website, creditsuite.com/reports where they can do and Experian, Equifax, and DMB search. You type in your business name, the state that you’re in. Either something pops up or it doesn’t. If it doesn’t pop up, you’re good. You’re starting from scratch. If it does, it probably makes sense for you to get your credit reports cuz they have something reported about you that you maybe wanna see.
You wanna see if you’re score’s a failing score. You wanna see if they have accounts now, that you didn’t know they had, etc., etc. In this step, you wanna get your Dunns number from Dunn and Bradstreet, which you can go to creditsuite.com/dunns to get that without spending thousands of dollars as well.
Charles: We’ll make that also in the show notes so people have that.
Ty Crandall: Yeah, that’ll help. That way everybody kinda has a free access to get to where they need to be. Set up the business credibly, step one.
Step two. Do a free search, get your Dunns number. Then you move on to getting the U-line, the Quill, the Granger. These are all vendors that will offer you business credit without a personal guarantee and credit check. They won’t even ask for your social as long as you set up the business credibly. Got your phone number listed, with 411. Got your EIN, your entity, the basic business set up.
Charles: These are all general business needs, like office supplies, that sort of thing. Purchase something from them.
Ty Crandall: Yeah. Quill, office supplies. U-line shipping supplies. Granger’s more of an outdoor supplies kind of company. We use Granger to buy flashlights. We buy batteries. We buy first aid kids. It’s all stuff that we need for the office, but if you work outdoors, Granger’s heaven. They’ve got everything there.
If you work indoors, you might struggle at Granger to find things you need, but look at flashlights. Look at first aid kits. Look at batteries. These are things everybody needs and these guys are unique cuz they’ll give you credit when you have none. They’ll give it to you as a start up, but they all report it to the business reporting agencies and don’t require a social to get it.
When you have a handful of these kinds of accounts, about five of these kinds of accounts, then what happens is those accounts will then report to the business credit reporting agencies once you’ve used the account and paid the bill. Business credit scores are completely based on how you pay your bill, so you need to make sure you pay as soon as you possibly can.
When I order something from U-line and Quill, when they email me, notify me that my item has shipped, I immediately go online and I pay that bill before they even send me a bill, I pay it. Now, Office Depot and Staples won’t let me do that. When they notify me, they ship an item, they still won’t let me pay until they populate a bill. But, I check daily and as soon as they let me pay, I pay, well before I ever get the bill because whether I pay the bill a week early, or on time, really, literally determines whether my score’s an 80 or 90, for example.
You gotta get those handful of accounts. Once you have a handful of accounts, then you start to move on to revolving credit, so you move from the net 30, to net 50, to the next state.
Charles: When you say 80 or 90, just to make sure I understand, is it out of 100, what is kind of the range that we’re looking at?
Ty Crandall: There’s a lot of different business credit scores. It’s very common for you to pull a commercial credit report with Experian and see five credit scores. But, the main scores in the business world range from zero to 100 with 100 being the best score you can get.
Ty Crandall: If they know you exist and you have no credit, you’re immediately given about a 27 to a 29 score, you mess up, you pay your bills late, you pay … You could be well below that. For example, with Dunn and Bradstreet. An 80 score, literally, literally means, that you paid your bills as agreed. That’s exactly what it equates to in a score. They call it paying promptly, paying on time. But if you paid 90, then what that means is you paid during the early discount period. You paid before you even had to pay the actual bill.
If you had a 100, then you could expect payment to come early. That’s exactly what that score means. Your score literally translates to how you pay your bill. For example, if I look … And I keep this on my board … If you have a 50 score, then it literally means you pay 90 days on average. That’s what it translates to. You wanna pay the bill as early as possible because how early you pay will translate to what your actual score is.
Charles: Gotcha. Okay.
Ty Crandall: Once you’ve done this, once you’ve got these kind of vendors, then you move from the net 15, net 30, net 60 to revolving. Boom, that’s the next step. You get the Dell, the Apple, the Amazon, the Staples, the Office depot, the Lowes, most major retailers offer this kind of credit without a personal guarantee.
Charles: Revolving is more of, what I’m thinking, in like a credit card, that sort of … Yep. Gotcha.
Ty Crandall: Yeah. Exactly. You spend 1000, you get a bill for a minimum payment of 25 bucks. You can pay it off for as long as you need to pay it off. These are the kind of credit cards we’re all used to and that’s the kind of stuff you can get to in about 60 days once those first rounds of accounts start to actually report. You want to get those initial vendor accounts, and then set up credit monitoring. You can actually go to creditsuite.com/monitoring and on that link you can get for 24 bucks a month, Experian and Dunn and Bradstreet credit reports through our nav integrations. The cheapest that reports are available, even through Nav themself.
Then you can monitor them. You see these accounts reporting, you know you have five or more, then you can move on to the store credit, the Staples, the Office Depot, etc. When you get to about eight accounts, then you can move on to fleet accounts. These are Sunoco, and these are Exxon, this is fuel and gas, or gas and auto vehicle repair maintenance, etc. Then when you have about 14 accounts reported, that’s when you get to Amex, Visa, Master cards, etc. As you’ve gone through this process, your limits will get higher, and higher, and higher, and higher. So, whereas at about six months, it’s very common to see 30 to $50,000 individual limits on each one of these cards you’re getting.
Charles: Okay. So kinda now, once you got beyond that, when do you start getting to the actual business loans and that sort of thing? Is that kind of the next step, or where do you kind of go from there?
Ty Crandall: Well, you have to … Keep in mind that revolving credit, the 30, the 40, the $50,000 individual credit cards, these are based on automated approvals. The minute you click over to loans, the minute you click over to credit lines, now what happens is now you’re adding in a manual review. At this point, your business credit is important. It will help determine if you get approved or not. The rates and terms you’ll pay, the amount you’ll get approved for. But, it becomes, not only …
Now it’s not the only factor that’s looked at. Now they’re looking at sales. They’re looking at revenue. Sometimes they look at collateral. Sometimes they wanna see personal credit. It just depends. If you have collateral, you can still get a lot of money without a personal guarantee. For example, you can still get account receivable financing, it’s out there and you can still use your 401k or stocks as leverage to get financing without a personal guarantee. When you don’t have collateral, a security, in a lot of cases it becomes more common that you have a personal guarantee and a personal credit check, unless your business credit is ridiculously well established.
When you get to a point of 20, 30, 40 plus trades, your credit report shows our revenue data. Your credit report shows your employees. Then you start to get away from the personal guarantee. It’s really practical, that even when you built the business credit, you can walk in and get a $50,000 Amex credit card, but to get a $50,000 loan, you’re probably still gonna have consumer credit. You’re probably still gonna have personal guarantees involved until you really build a seven, eight figure business where you can start getting away from that.
Charles: Okay, so that’ll be some time before you start getting to that level of credit, basically.
Ty Crandall: Sure, and what I say is … This is where so many people are deceived, because, we talk to people, we say, what do you need?
“Well, I need a $50,000 loan to get the business off the ground.”
“Okay, well what are you gonna spend the 50 grand for?”
“Well, I need $15,000 in office supplies, I need $10,000 in furniture, I need $10,000 in computers.”
“So you don’t need a $50,000 loan, what you need, is you need $20,000 at Dell, you need $30,000 at Staples, you need $20,000 at Costco. Now you have the office supplies, now you have the furniture, and now you have the computers. Now, how much do you need?”
“Well, I need ten.”
That’s the conversations we have a lot. As people come in and say, “I need 50 loan for this,” but when we really look at it, they don’t need that. What they need is they need 20 grand at Dell, and 20 grand at Apple, and 30 grand at Best Buy and 40 grand at Staples, and when we get em’ this, it’s well more than they could ever need. Then they need 10 grand for pay roll.
It’s pay roll that they really need their line of credit and the loan from.
That’s my best advice, that the one thing you need to know about any kind of lending, is it’s really hard to get one chunk of money that’s a higher amount of money from one source. The more you ask for, the more they scrutinize ya. You’re better off to get smaller amounts through different sources because it’s so much easier to get approved, especially when it comes to credit where it’s automated approvals. You’re just getting these, boom, immediate without having to go through this manual process.
Without supplying revenue, and collateral, and credit checks, etc. what do you need? How much money do you need? What do you need the money for? If you think about that, then what you’re gonna realize is that you’re Amazon, your Walmart, your Dell, your Apple … You can get most of what you need from these guys and it’s much easier to get that kind of credit automated, then your left with a much smaller amount that you actually need a credit line or loan for. Then it’s much easier to get that line and credit line and loan through even Square or a PayPal, or a source like that, that easily can lend you the money.
Charles: So, you’re really talking about breaking up that big $50,000 chunk into smaller, separate lines of credit with different vendors, so each one only takes five, $10,000 of the responsibility on their products, which, that’s at their gross value, right? They’re not even … It doesn’t even cost em’ that much. So each one is actually lending you a much smaller amount, much smaller risk to them, and then you’re just … That little bit of unsecured to pay payroll or stuff that you can’t get through the vendors, that’s what you’re gonna have to take on.
Ty Crandall: But credit in the commercial world, if you have established business credit, it’s really just given out like candy. I mean, you’re not getting $5000 limits. You are in the beginning, but within four months, three months, you’re moving to $20,000 plus limits. The first card that hits your report with a $20,000 limit, everybody else follows suit.
You’ve seen this before in the consumer world. Walmart raises your limit and then boom, the rest of your card issuers start sending you notices they raised your limit too because they’re all aware that the higher limit accounts win. Those are the ones that you keep in your wallet because, maybe you need to buy a car on your credit card, so you keep it with you.
The higher limit accounts are the ones that are most commonly used. You’re going to get to 20 to $50,000 limit accounts in most of these stores. When we talk to people, this is really what it comes down to. What do you need the money for? You don’t need a loan … Don’t try to go as a start up and get a $50,000 loan. That’s ridiculous. Look at what you need the money for. If it’s furniture, if it’s office supplies. What doesn’t Amazon and Walmart have that you can possibly even really even need? That’s the way I explain it. What do you need the money for?
Once you know that, then it’s easier to look at the easiest and fastest way to get that, and in most cases it’s using revolving credit to get it. It’s not the loan and the credit line. Then that frees you up to only needing a much smaller amount of a loan or a credit line and then that’s much easier attainable. Now you’ve got the loan and the credit line to cover your payroll and then you’ve got the Dell for the computers, and the Apple for computers, and the Amazon for everything else, and the Walmart for everything else, and the Costco for supplies and Office Depot for … Etc., etc., etc.
Charles: I remember back in the day with e-Commerce, the first time I approached a vendor about a business line of credit, obviously rejected, that sort of thing, then ended up putting that on credit cards, business credit cards, paying that off as fast as we possibly could, and then at some point then approaching another vendor, they approved it, going back to vendor one, then they approved it. Then at that point all the vendors just started approving it. We had to pay it net 30, net 60, net 90 in some cases, on products that we’re purchasing.
Ty Crandall: Well, that is what it comes down to, is you have a computer that goes, “Okay. That processes information, is this business look credible, da da da, check, check, check, check, yep. Credible.”
Now, credit report comes in, good score. Means pays bills as agreed, but is it a fake score. You can get a 90, 600 score, with one account reporting. They know this. Now they divert and they start looking at how many trade lines do you have. Yep. Five, seven, eight, ten trades, you got. Now you’ve got depth. Now you got a score. Now you’ve got a legitimate credible business. What’s your highest limit? 25, boom. Here you go, you’re approved for 30.
This is how computers just … It’s their algorithm. This is how their algorithm processes data within a fraction of a second to give you a decision, and that’s what it’s looking at. You set up the business credibly, you have the trade lines, you pay the bills, now you have a good score, you have a deep profile, meaning you have a lot of trades, now you have the credibility and then you just get the automated approvals.
As you said, once the one guy comes in and approves you and then they’re giving you 25, the next one gives you 30 cuz you’ve shown you can manage 25-$30,000. They’re not gonna start you at 30 when you have five. And this is what’s interesting. When we talk to people that start businesses, they wanna $50,000 loan, but the highest amount on their credit report’s $5000 credit card. It’s like, nobody’s ever gonna give you 10X what you’ve shown you can handle.
These credit issuers in the consumer and commercial space, their approvals mimic the highest approvals they’re seeing on your commercial or consumer credit reports. The more credit you get, the more the limits raise, the higher the limits, the more money becomes accessible to ya.
Charles: That’s kind of what I found. They all will give you an approval on one stair step up from the next [inaudible 00:34:06] approval. You can only ever go one step up. Then the next one will go once step up, but you have to keep doing that step.
Ty Crandall: If you think about it, it makes sense. Would you wanna give somebody 50 grand if they’ve only shown they could ever responsibly handle 30? Probably not. On a stretch, you wanna give them 33, 35. That’s about 10-15% more than they’ve shown they can handle. Now they manage 35, now you’re okay to give em’ 40, 42. It’s this step process and nobody’s gonna take you from low to high. But, here’s the great news. Now, you’re getting loans. Now, you’re getting credit lines. They’re pulling your commercial credit report, they’re seeing $30,000 limit. Here’s 50. Here’s 60. Here 40.
Now it’s much easier to get that $50,000 loan cuz you’ve got a multitude of accounts showing you can handle them as a 50-60,000. This is when the world starts to open up on loans and credit lines. You’re right. They will not just look at credit at that point, but again, your business credit will determine if you’ll get approved, the rates and terms you’ll pay, and how much you’ll get approved. The credit reports even say, a credit recommendation of, this is what we recommend this person even be issued in credit.
Charles: Okay. That is helpful. So, when you’re getting started, is there anything you’d recommend people definitely don’t do? As kind of things to stay away from any gutchers where you’d be shooting yourself in the foot?
Ty Crandall: Absolutely. The two things we’ve kind of skipped over and talked about. Never provide your social security number on a lapel application for credit. Loans and credit lines, you’re gonna have to. You’ll be well established before you’ll be able to get away with that. When that date comes, you CFO will tell you, that day has come.
In the beginning, understand, that any credit card, if you wanna be on your commercial credit report, if you wanna do it the right way that we’re discussing here, you gotta leave your social security number off the app. The minute you provide the social, you’re providing a PG and you’re providing a personal credit check. A PG, what I mean by that, I mean personal guarantee.
The second thing to know, is don’t skip steps. Don’t go, “Hey man, Charles interviewed this guy and he said I could get a Bank of America credit card for 50 grand, I’m gonna go to Bank of America and apply without giving them my social.”
Remember, we talked about a whole series of steps up to that point. You can walk into Bank of America with no consumer credit and get a credit card. You can’t walk into Bank of America with no commercial credit and get a credit card either, nor can you Staple.
If you walk into Staples with five trades, then well, Staples will approve you. If you walk into Bank of America with 14 trades, well, then they will approve you. It comes down to, you’ve gotta follow these steps. The amount of credit, the limits you’re gonna get, the amount of credit, the sources that will give you credit, become more accessible the more trade lines, or the more accounts that report on your commercial credit reports that are reported.
The more accounts that report, the more doors that open. You can’t just go to the final step, you’ve gotta start with the credibility, getting your Dunns number, building the vendor account, the store credit, the fleet credit, and then that final tear of the Visa card, the MasterCard, the car loan through Ford, for example.
Charles: Okay. That is super helpful. I think that definitely, it’s probably a good place to wrap it up. I think that you gave a lot of great information, good place for a lot of people to start. If people wanna learn more information about you or some of the references you gave, where can people find you and contact you?
Ty Crandall: Right at our website at creditsuite.com it’s credit suite, s u i t e. So creditsuite.com/ein and at creditsuite.com/ein there’s a great free guide that maps out the exact steps to build business credit and then right there if anybody grabs that guide, we’ll also send more information regularly by email about getting business credit, getting loans. Cuz, Charles, we didn’t get a chance to dive into that, right? There’s all kinds of loans and credit lines that are available without credit checks, as a start up, etc.
When they grab that guide we’ll send more information about that type of thing too, just so, the person grabbing the free guide can access as much capital as possible to grow the business.
Charles: Awesome. I’ll definitely ad a link to that in the show notes. If anyone wants to find you we’ll have all your contact info and it’ll be good. Thank you.
Ty Crandall: That sounds good. Hey, thanks for having me on. Hopefully this helps your audience, and if there’s ever anything I can do in my world to help, then just reach out let me know.
Charles: Alright. Awesome. Great talking to you.
Ty Crandall: Same here. Thanks Charles.
Charles: Thanks, have a good one.