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Intermediate terms

Business Credit Essentials: Key Terms

Navigate the initial steps of building your business's financial foundation with this curated collection of key terms. These carefully selected concepts are essential for understanding how to separate personal and business finances, establish credibility, and protect your assets. Use this reference to clarify terminology you'll encounter when setting up your business credit profile.

Learning Path

1

Employer Identification Number

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS to identify a business entity for tax purposes, often required for real estate investment structures like LLCs and partnerships.

Beginner5-6 min
2

Asset Protection

Asset protection involves legal strategies and structures designed to safeguard an individual's or entity's wealth from potential claims by creditors, lawsuits, and other liabilities, particularly crucial for real estate investors.

Intermediate15-18 min
3

Financial Statement

A financial statement is a formal record detailing the financial activities and position of a business or property, providing critical insights into its performance, cash flow, and overall financial health for informed investment decisions.

Intermediate5 min
4

SBA Loan

An SBA Loan is a small business loan partially guaranteed by the U.S. Small Business Administration, primarily used for owner-occupied commercial real estate with favorable terms and lower down payments.

Intermediate5 min
5

Personal Finances

Personal finances refer to the management of an individual's or family's money, including income, expenses, savings, investments, and debt, to achieve financial stability and goals.

Beginner2-3 min
6

Net 30 Account

A Net 30 account is a trade credit agreement allowing a business to purchase goods or services and pay the invoice within 30 days, offering short-term, interest-free financing and an opportunity to build business credit.

Intermediate5 min
7

Commercial Loan

A commercial loan is a debt financing product used by investors to acquire, develop, or refinance income-generating real estate properties, distinct from residential mortgages due to its focus on property performance and business use.

Intermediate5 min
8

Business Credit Score

A numerical assessment of a company's creditworthiness, reflecting its ability to manage financial obligations and repay debts, distinct from personal credit scores.

Intermediate5-6 min
9

Corporate Veil

A legal concept that separates the liabilities of a business entity from its owners, protecting personal assets from business debts and lawsuits.

Intermediate5 min
10

Business Finances

Business finances involve the management of all money-related activities within a company, including income, expenses, profit, and cash flow, crucial for understanding investment performance.

Beginner2 min
11

Business Credit Card

A financial tool for businesses to manage expenses, separate personal and business finances, and build business credit history.

Beginner3 min
12

Business Credit Report

A Business Credit Report details a company's financial reliability and payment history, influencing its ability to secure commercial loans and favorable terms for real estate investments.

Intermediate5 min
13

Line of Credit

A Line of Credit (LOC) is a flexible financing option that allows borrowers to draw funds as needed, up to a pre-approved limit, and only pay interest on the amount borrowed. It provides continuous access to capital, making it a versatile tool for real estate investors.

Intermediate6 min
14

Financial Separation

Financial separation is the practice of maintaining distinct bank accounts, credit cards, and financial records for your real estate investment activities, completely separate from your personal finances.

Beginner3 min
15

Credit History

Credit history is a record of an individual's past borrowing and repayment behavior, crucial for lenders to assess creditworthiness for loans and mortgages.

Beginner3 min
16

Liability Protection

Liability protection encompasses legal and financial strategies used by real estate investors to safeguard personal assets from claims, lawsuits, or debts originating from their investment properties. It creates a crucial barrier between business risks and personal wealth.

Intermediate5-6 min
17

Business Bank Account

A dedicated financial account used exclusively for business-related transactions, separate from personal finances, crucial for legal compliance and clear financial tracking in real estate investing.

Beginner2-3 min
18

Personal Guarantee

A personal guarantee is a legally binding promise by an individual to repay a business debt if the business entity defaults, exposing the guarantor's personal assets to the loan obligation.

Intermediate18-20 min
19

PAYDEX Score

The PAYDEX Score, from Dun & Bradstreet, assesses a business's payment history with vendors on a 1-100 scale, indicating its reliability in making timely payments. It's vital for securing business credit and favorable terms.

Intermediate3 min
20

Dun & Bradstreet

Dun & Bradstreet is a global provider of business decisioning data and analytics, offering credit reports, risk scores, and the D-U-N-S Number to help investors and lenders assess the financial health and creditworthiness of business entities.

Intermediate5 min
21

Trade Line

A trade line is an entry on a credit report detailing a specific credit account, such as a mortgage, credit card, or loan, including its payment history and current status.

Intermediate2-3 min
22

Business Loan

A business loan is a type of financing provided to a business entity or investor to acquire, develop, or renovate real estate for investment purposes, with repayment based on the business's financial health and the property's income potential.

Beginner5 min
23

Limited Liability Company

A Limited Liability Company (LLC) is a business structure that protects its owners' personal assets from business debts and liabilities, while offering flexible taxation options.

Intermediate13-14 min