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wev70
09-18-2011, 10:16 PM
Hi, all -
I have been the credit provider (via American Express) for a small business for a couple of years. I am going to be closing the account and am trying to determine how much time the owner of the company will need to get access to a credit card (he needs the card for travel arrangements for the technicians who travel around the country). The glitch is that the owner of the company does not have good personal credit. The company itself is debt-free, does about $150k in revenue monthly and is very profitable. The owner is claiming that he has no other credit options -- that if i take away the American Express, his business will grind to a halt. I assume that he could get a business line of credit from a bank that could provide him a credit card to replace the Amex. Am I off-base in thinking that 2 months is enough time to allow him to get alternate means in place?

(I'm not involved in the everyday dealings of the business; we had a personal relationship that went sour and I need to sever the financial ties but don't want to do his company harm)
Much thanks
W

billbenson
09-18-2011, 10:39 PM
Its hard if you have bad credit. My own bank won't give me a credit card even though I have very high average balances because of a bankruptcy 10 years ago (it doesn't drop off your credit report like they say). AMEX may be his best bet. Have him call them and see??

wev70
09-19-2011, 08:43 AM
Hey Bill -
Thanks for the response. AMEX has declined him based on his personal credit. My hope has been that he might be able to get a line of credit set up with a bank based on the business financials only (which are impressive), but I'm not sure how feasible this is or how much time it would take to get something like this established.
From reading other threads on this board, it sounds like everything revolves around personal credit and I'm wondering at what point, if any, is the business' financials the main consideration.
Much thanks
W

Spider
09-19-2011, 09:16 AM
Different banks have different lending rules and different bank managers and loan officers interpret those rules differently, but, by and large, I think it generally applies that - as long as the business is a sole proprietor or a joint stock company that is largely owned by one person, that person's personal credit will always be taken into consideration.

Only when a company is owned by many people, has been in existance for some time, has substantial assets of its own and would have considerable value in bankruptcy, would a bank consider the company's financial reports as the sole basis for a loan.

wev70
09-19-2011, 09:26 AM
Thanks, Frederick. That info is very helpful. It's good to know what we're up against.

jadzigian
10-29-2011, 04:06 PM
Wev 70,

I have been a commercial lender for nearly a decade, and if this person sounds as though he is blowing smoke. If my client's business grinded to a halt due to a cancellation of a credit card I would be very very concerned.

I would be interested to know how your client uses the cards. Typically, I see commercial card programs used for travel & expenses, and purchasing programs. If the business is profitable, they should have no trouble cash flowing the business through internally generated funds. They should also have little trouble obtaining a traditional credit facility through a bank. They could also utilize a traditional commercial card program through a bank, which doesn't rely on personal credit scores (good or bad)

Essentially, I wouldn't worry about it, sounds like they will be fine.

phanio
10-30-2011, 12:23 PM
Couple of things:

1) Why are you worried about this person? You have to look out for yourself and if they are too much of a risk, you have to make a business decision.

2) There are other options that this person could use for a line of credit or for working capital financing - all dependant on the business. If they invoice clients, they could factor those invoices for cash today. If they accept credit cards as payment, they could look into a working capital business cash advance. If they are short working capital for new orders, they can look into purchase order financing.

There are also other alternaitve financing options that are based on average bank account balances - all designed for business owners with bad credit and good revenue.

Other than that, if the business is making $150K - then, they might have to change their management a bit and hold back some of that revenue to be plowed back into the company.

Again, I feel it is something that you should not be worrying about - expecially since their success or failure is really out of your hands.

SnellExperts
11-08-2011, 02:19 AM
I don't really understand company credit that much, but a few things stood out that I was curious about. The main thing was that if his credit was this bad, why did he have the card in the first place? Like what made Amex all of a sudden decide that his credit wasn't good enough after however much time has passed? I do agree with jadzigian though, if they are making that much, it shouldn't be a problem to fund it from within. And tell him in the mean time to work on getting his personal credit up to par so that he can get a credit card again, and self funding won't have to be a permanent ch
@ Phanio- He mentioned that they had a personal relationship. When you are remotely close to someone you don't want to wish them any form of harm, so I understand why he is worried about this. He's just trying to do his job, and take care of his (I'm guessing) friend.

nealrm
11-08-2011, 08:05 AM
OK - This business is making 150K a month, is debt free and needs your credit card to pay for business trips. There is something very wrong here. There is no reason that they need a credit card, let alone your credit card to pay for these trips. Simple have the hotels, car rentals, travel costs direct billed to the company. The technicians can submit an expense report after the trip or possibly the company could provide a cash advance before hand. Either way the company should be cash flowing these expenses. I would not worry about ending the credit, I would also be looking over the items charged against that card.

billbenson
11-08-2011, 01:57 PM
When I was a field sales guy I put hotels, airfare etc on my credit card and put it on an expense report.

Having said that, most companies have corporate cards and give them to employees. I bet 99% of my credit card purchases are on corporate cards. Literally. If I get 5 personal credit card purchases a month that's a lot.

SnellExperts
11-14-2011, 09:43 PM
Wouldn't that also help a new company build credit as well? I know that helps with personal credit but I'm not sure how that would effect the score on a corporate level.