Most businesses rely upon credit to get started or for continued growth. Overall, business credit includes, but is not limited to business loans from banks and similar lenders, business credit cards, business gas cards, equipment leases and automobile leases. All of these can be acquired without personal guarantees. In fact, it's not only possible, but desirable to keep business and personal credit separate. In other words, you want to make sure that when you build business credit is not dependent upon your personal credit rating and vice versa.

The steps toward building business credit without personal guarantees include:

• Getting incorporated
• Creating your profile with the major business credit reporting bureaus
• Negotiating
• Using business credit cards and business gas cards
• Establishing an ongoing positive business credit rating

Let's take a look at each of these in detail.

Getting Incorporated

In order to build business credit without personal guarantees, your business needs to be incorporated. It cannot be a sole proprietorship or a partnership. By definition these types of business structures are tied to the individuals who own them, so creditors expect personal guarantees. By contrast, a business that is incorporated, either as an S or C Corporation or as an LLC, has established itself as a financial entity separate from its principles and will be able to establish its own corporate credit profile through all the major business credit reporting agencies and bureaus.

Requirements for incorporation vary from state to state, so often it is helpful to have an attorney to complete the necessary paperwork and file for incorporation. The bottom line, however, is that incorporating your business is a necessary first step in building business credit without personal guarantees.

Creating Your Profile with the Major Business Credit Reporting Bureaus

In addition to incorporating your business, you must also create your business profile with all the major business credit reporting bureaus. Some of the major business credit reporting bureaus will automatically create a profile for your business once you have a reporting credit account in the name of your business, but some agencies require you to create your own profile.

Negotiating

Most lenders prefer personal guarantees for business loans and lines of credit, but there are still many who do not. In fact, even lenders who do require personal guarantees might be willing to negotiate. This is easier with smaller lenders. For example, if you need to lease a car, your best bet might be to go to a small, local dealer instead of going through a larger chain. This small dealer may be willing to offer the lease without personal guarantees, whereas the big guy might not. In other words, the lending policies of bigger companies may be less flexible than those of smaller ones. Sometimes, acquiring credit without personal guarantees is simply a matter of asking.

Using Business Credit Cards and Business Gas Cards

As stated earlier, you want to keep your personal and business credit separate and this includes credit cards. Often, new business owners overlook this key point and will use personal credit cards to fund some business expenses. This can negatively affect both the personal credit score of the cardholder and ultimately the business's credit profile. The personal credit score is based upon several factors, including, among other things, the amount of available credit and the number of inquiries received each year by the credit reporting agency. A business may need several different types of credit and higher credit limits and may require several credit report inquiries per year. All of this would result in a lower personal credit score.

It is much better for the business to apply for its own business credit cards which can be obtained without personal guarantees. For example, a business may have three or four different retail business credit cards. If the business makes regular purchases with these cards, then follows up with timely payments, the result will be a positive credit score with the major business credit reporting agencies. This positive credit score will then give other potential creditors the confidence they need to issue more credit to the business.

One especially useful type of credit card is the business gas card. Not only do these cards help build business credit, but many provide, through rebates or other cash back offers, as much as two to five percent discounts on gas purchases. Another advantage of the business gas credit card is they provide an easy way for businesses to track and manage travel expenses which are tax deductable.

Establishing an Ongoing Positive Business Credit Rating

Just as lenders look at personal credit scores for personal loans, they also look at a business's corporate or business credit profile. A business credit profile is made up of the business credit score as well as other factors, such as the longevity of the business. A business can earn a high business credit score by paying bills on time, by not over extending lines of credit and by keeping a reasonable debt to assets ratio.

Once you begin building your business credit and generating positive credit reports through the major business credit reporting agencies, you will find more and more opportunities to secure business loans without personal guarantees. The key is to be persistent and to maintain a positive business credit profile.