I will assume this is a new home based business. Understand that lending institutions look at a home-based business a little more carefully than usual. Therefore, you want your case (file) to be very strong.
Think about this, if you have a consulting business from home and a bank lends you money. How easy would it be for you to just pack up and go, defaulting on your loan? Therefore, it is logical that you choose a business that lenders consider low risk. This brings me to the topic of SIC codes. SIC stands for Standard Industrial Classification. Basically all types of business can be classified by these codes, so different businesses reflect a different SIC code.
The main point is to choose a business that has a low risk SIC code. By the way, this advice alone is worth its “weight in gold”. Many business credit consulting gurus will tell you to classify your business as “General Management” or “Business Management,” a generic name. I really think this will hurt your efforts in the long run. The nature of the business: Your corresponding SIC is an important part of developing a solid foundation for business credit development. Your goal should be to build up your business file so you can get CASH lines of credit without any personal guarantees. No personal guarantees means you shouldn’t have to use your personal credit in order to obtain business credit. Many will tell you that this is impossible in this economy. Well, it’s rare but not impossible. It’s weird because most people approach business credit like they approach personal credit. Also, remember that being asked for your social security number does not automatically mean your credit is withdrawn. For security reasons, an SS# is required, especially if the amount being borrowed is large.
Having said that, if you have a “high risk” SIC code business, such as investing in real estate, but still have enough cash flow coming from that business (and/or enough assets in the name of the business) then it will matter less anymore. that business is so strong For the rest of us, a good SIC code is a must.
So what is a low risk SIC? Try to find out what types of businesses your state gives grants/aid to. Follow the stimulus money. If the government is willing to help a certain type of business, it will know that that business has a “good” SIC code. Health care, medical supplies are good examples (many more good examples). Visit the site for more tips.
Make no mistake about it, a good SIC code can make all the difference if you want great business credit.
Always remember that a good website designer does not automatically become a business credit expert/guru.
