Building Business Credit: 4 Steps for Black Entrepreneurs

While each business owner possesses a personal credit report, not every business maintains a business credit report. The creation of a business credit report involves the following steps.

Every business owner is equipped with a personal credit report, yet the same cannot be said for a business credit report. While a personal credit report is automatically established when an individual with a Social Security number begins employment or seeks financing, building a business credit report requires intentional steps. Here’s a guide to initiate this crucial business financing tool:

1. Properly Establish Your Entity:
   • Choose to incorporate your business as a C-Corp, S-Corp, or Limited Liability Company (LLC).
   • Obtain an Employer Identification Number (EIN), open a dedicated business bank account, set up a business telephone line, create a business website, establish a business location, and maintain a clear separation of personal and business affairs.
   • Ensure proper insurance coverage, develop a quality business plan, and engage legal advisers.
2. Register the Entity with Major Business Credit Bureaus:
   • Set up a business entity profile with major business credit bureaus, including Experian Business and Dun & Bradstreet (D&B).
   • Acquire a D-U-N-S number and D&B PAYDEX Score from D&B, and an Intelliscore Plus from Experian.
3. Begin Building the Business Credit Profile:
   • Identify creditors that report on-time payment information to business credit bureaus.
   • Consider shared secured loans and secured credit cards from local credit unions, ensuring they report to business credit bureaus.
   • Explore companies like Grainger, Uline, Quill, OnDeck, and others that report on-time payments.
4. Continue Building Your Business Credit Profile:
   • After six to 12 months, apply to various business credit card companies to add additional trade lines.
   • Reach out to vendors, suppliers, and consultants for potential trade credit that can be reported on your business credit report.
   • Maintain a record of on-time payments and consider making payments earlier than scheduled.
5. Advance Your Business Credit Profile:
   • After 12 to 24 months of consistent efforts, explore options for business lines of credit, leasing, term loans, asset-based lending, and lower APR business credit cards as your business maintains a well-structured business credit report.