How To Build Business Credit For Your Real Estate Business

The U.S. real estate market is still down from the highs of 2007. There is a flood

of real estate investors buying up properties all over to grow their real estate business. In Las Vegas, over 54% of the homes under $200K were all cash deals, and by investors (many of those are foreign investors).

I will share with you how you can use business credit, specifically, vendor credit to your advantage if you are looking to either flip houses, buy, fix them up and sell or to buy, fix up and rent them out.

When you form an LLC, the business credit bureaus automatically start building a profile on your company, without your permission by the way. Make sure your entity is in compliancel: all your addresses match in all your filings from the secretary of state to the local business license.

Next, you must properly build the business credit profile with the big three, Corporate Experian(R), Corporate Equifax(R) and Dun & Bradstreet(R). Here is the big problem; there are over 50,000 vendors that will grant you credit, but less than 10% report to the business credit bureaus.

The main vendors that come into play when you think of vendors to help you with building supplies are Home Depot(R) and Lowes(R). What is the advantage of having a vendor line of credit at Home Depot(R) or Lowes(R) for your real estate business? When you secure a vendor line of credit for $20K to $30K that frees up a lot of cash flow or things you cannot use vendor credit for, like real estate commissions.

How much will your vendor line of credit be at Home Depot(R) or Lowes(R)? That depends. If your entity is three years or older and you do not provide a personal guarantee, it will match your highest vendor line of credit that is REPORTING. If the highest other vendor trade line of credit that is reporting to the business credit bureaus is only $5,000 that means that is the highest limit you are likely to start out at.

If you decide to also provide a personal guarantee, that trade line may be much higher.

Here is the bottom line, if you are looking to invest in real estate now or in the future, building business credit with the business credit bureaus and key vendors is an important part of the process to help your business better manage your cash flow to help you be in a position to accumulate more properties.

NCP can help you complete that process fast and without errors (something you want to avoid with the business credit bureaus).

by: Scott Letourneau

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