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Starting Out Right: Building Business Credit
by Conchie Fernández
March 12, 2023
hispanic man shaking hands with black man over desk

Build Your Small Business Credit Score

Business credit is one of the most important tools in any entrepreneur's arsenal. Good business credit can help you qualify for a business credit card, an SBA loan, and many other types of funding that can help your small or minority-owned business to flourish. While our credit follows us throughout adulthood, business credit begins when you register your new company. Starting right is pivotal to the success of any great financial endeavor. 

Financial trends show discrepancies in access to capital between White and Hispanic-owned companies. White business owners tend to foster closer relationships with their bankers.  Both groups had similar risk and liquidity profiles, but White-owned firms are more likely to get loans approved. The larger the loans the deeper the gap. In comparing White- and Hispanic-owned firms with annual revenues over $1M, 29% of Hispanic-owned businesses got the loans they requested vs. 76% of White-owned businesses.  Despite these trends, there are multiple ways to boost minority-owned businesses’ chances at funding. Building credit before you need it is part of a winning strategy.

In addition to opening lines of funding, good business credit can also extend your trade credit terms with suppliers, giving you more time to pay for products and services. It can also lower all-around costs, as lenders and insurance firms sometimes check your business credit when setting your rates. Entrepreneurs who understand how their business credit works are 41% more likely to be approved for a business loan.

Want to get approved for the lowest-cost loans, credit cards, and insurance? Here are some ways to build your business credit.

Preparing your business 

To start, make sure that your business has an identifying number assigned by Dun & Bradstreet, one of the major business credit reporting agencies. A DUNS number is also required for business grants and contracts when you register as a supplier for government or corporate procurement platforms or going after government bids. It’s free and takes about 4 to 6 weeks to receive. Learn about Dun & Bradstreet’s Small Business Solutions, building credit, and getting your DUNS number.

You’ll then want to be aware of where you’re opening your accounts. Establishing accounts with suppliers or vendors that report payment history to business credit bureaus will help you build up your credit. 

Vendor credit is generally available to most businesses and will help you build a strong business credit profile quickly. Our partners at Nav, the leading Business Financial Management platform, have put together a list of accounts that are easy to get and don’t check personal credit history. Many small and minority business owners fund their startups with personal funds and credit cards, which could affect you and your family’s credit histories if you have repayment issues.  Be sure to check with your accountant or SCORE mentor how to best incorporate your business structure and separate your personal and business accounts to protect both. You might also be able to get your credit built up faster by using a service that verifies and reports some of your other existing accounts to business credit bureaus. These services report on business loan payments, residential and business lease payments, and other financial commitments related specifically to the business, and not the business owner’s credit, if you prefer. 

Meanwhile, small business credit cards are a great tool you can use to build your company’s credit. Since credit card companies generally report payment history to business credit bureaus, such accounts act as a credit reference. Applying for your first business credit card and worried that you haven’t established your company's credit history yet? Always remember that financial institutions and credit card companies take your credit score in to account when evaluating applications for business funding.

Building and maintaining your score 

Variables that affect your business credit don’t always relate to moves you have made as an entrepreneur. The industry you are in and the credit performance of your peers, for example, play a role in establishing your business credit profile. In many states, businesses in construction (one of the primary industries for the U.S. Hispanic demographic), for example, need surety bonds to cover disruptions or financial losses in large, often public projects. Smaller contractors are often unable to get bonding, so they act as Tier 2 or subcontractors until they can build up their bonding capacity.

While this may take time, there are tools you can use to build up your business credit, but the number one thing you can do is to pay your bills on time. Payment history is the single most important factor in any credit report, accounting for at least half of your business’s credit score. One late payment - even if it’s just a day late - can affect your score. 

Setting up reminders and automatic payments to ensure you don’t miss a payment can go a long way toward preserving the health of your business credit. Meanwhile, paying your bills early can, in some cases, help to raise your score. The D & B PAYDEX® score, for example, takes early payments into account when calculating your business’s credit rating. 

Information like your cash flow, your annual revenue, how long you’ve been in business, and your available collateral can also be included in your business credit profile.

Once you’ve got a plan set in place to build up your business credit, you’ll need to be sure to monitor your credit score, checking for things such as fraud and identity theft, which have been on rise in recent years. While you can freeze your personal credit, no such mechanism exists for business credit reports. Check your business credit at least once a month so that you can catch suspicious activity early. If monitoring your credit sounds too time-consuming, you also have the option of subscribing to a credit monitoring service that will do it for you. 

Creating business credit and financial structures takes time, but the volunteer mentors at SCORE have decades of experience leading entrepreneurs through the challenges of building a business, from ideation through successful launch and sustainability.  Our mentors know that your business credit is a record of all the financial actions your business has taken - both good and bad, and they can help you establish other processes and motions to make sure the scales tilt more in your favor when it comes to your business credit.  What’s best, our mentors can work with you in Spanish, or in English.

With hard work and attention to detail, any entrepreneur can build a healthy credit profile and reap innumerable benefits to help any small business grow and thrive. Imagine how much farther you could go with the free guidance of someone who’s successfully walked in your shoes.

About the author
Conchie Fernandez Headshot
Conchie Fernández
Conchie Fernández is the founder of CF Creative, a business development, communications and tech enablement consulting firm based in South Florida that helps small and minority-owned companies to scale and expand their service footprints in public and private sector supply chains
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