Small businesses: Lessons on how to build business credit
Experience is a great teacher, as these two small business owners discovered when faced with questions about credit.
Leroy Chico, owner of a cattle ranch in Porterville, California, had never applied for a business loan or a credit card. Instead, he relied solely on cash to run his business. So he was shocked when, feeling the effects of the extended California drought, he was turned down for a loan because he had no credit history.
“I didn’t know that in order to borrow money in the future and grow my business, I needed to establish my credit history first,” he said.
Wells Fargo is helping educate customers like him through the company’s Small Business Credit Coaching Program — in which Wells Fargo helps coach small business owners who have been declined for credit and explain why their application was declined and discuss ways to strengthen their credit profile.
Chico is one of 17,000 small business owners who have been proactively contacted by Wells Fargo since the Credit Coaching Program launched in March 2015. He said that phone call helped him realize he needed to focus on his credit profile now rather than when he faces another emergency. He’s now on the path to establishing a solid credit history and has a Wells Fargo business credit card.
Empowerment through education
“Helping educate small business owners on the credit process and empowering them to maximize credit options are two of our top priorities,” said Lisa Stevens, Wells Fargo’s head of Small Business.
Those priorities are behind the launch of the online Wells Fargo Works for Small Business® Business Credit Center. The site, which includes an educational video series, helps business owners understand and navigate the three phases of building credit:
- Before applying for credit.
- During the application process.
- After the financing decision.
The center also provides business owners with a clear view of the financing process so they can decide which credit options are right for them.
“For small business owners, financing a business can be complex without the right tools,” Stevens said. “While some small business owners are credit-ready, others may need support and guidance to build a successful credit profile.”
The benefits of credit
On the other end of the credit spectrum, some business owners use credit extensively to develop their businesses. Hice Stiles, CEO and founder of Corporate Business Interiors in Newport Beach, California, has a business credit card and a line of credit through Wells Fargo. He said the credit card covers vendor payments and travel expenses for his office furniture dealership, and the line of credit funds short-term debt when he takes on new jobs.
Both types of financing were instrumental to the growth of his business, Stiles said, helping him increase revenue and serve more customers.
“At first, I didn’t know the difference between certain credit products and which was best for me,” said Stiles. “But after working with Wells Fargo, I received guidance on what type of credit was best for my short-term and longer-term needs.”
This kind of information is available to any small business owner through the Wells Fargo Works for Small Business® Business Credit Center.
In addition to educational resources, the site also features a Business Credit Quiz, which assesses your business credit knowledge, and the Business Credit Finder Tool, which helps business owners find the financing options that best fit their needs.
Stiles added, “Wells Fargo has increased my credit limit over time, allowing me to bid on bigger projects and grow revenue. My business is growing because I built it on the foundation of a strong credit profile.”