At the onset of entrepreneurship, you get the most amazing idea and the passion within leads you to the beginning of a journey. Over time, you fine tune your products/services and customers start purchasing the goods. Your idea is now your business and then, the epiphany hits, “I’m going to need more money to grow this business.” Having capital to grow a business is critical to an entrepreneur’s growth in the market. It makes all the difference from being a hometown favorite to a global sensation. While technology has made growing a vision for a business owner more accessible with information, apps, and social media, it is inevitable that cash will always be king in growing an entrepreneur’s vision.
Between 2007 and 2017, minority-owned small businesses grew by 79%, about 10 times faster than the overall growth rate for U.S. small businesses during the same time frame. Still, with this growth, minority-owned businesses have a much harder time securing a small business loan than white entrepreneurs. If you’re wondering why this happens, it is because the guidelines by which business owners are evaluated does not benefit minority business owners. Some of the most critical factors that determine if banks will extend a business loan to a business owner are:
- Net Worth and Assets- minorities do not possess the assets to become attractive borrowers. Data shows that African American and Latino entrepreneurs start off with much less working capital than white entrepreneurs.
- Location - the location of a minority owned business is usually in a less desirable neighborhood.
- Weak credit history- typically, minorities have lower credit scores, which results in receiving loans for lesser amounts, with higher interest rates.
In life, positive energy and attitudes are key to rising above hurdles that will arise on the entrepreneurial journey. The positive approach in this is to know that we should work on the things that we CAN control and leave the things that are out of our control to the side. Although minorities may not come from generations of assets impacting their net worth, or control over the characteristics of what makes their location less desirable by banks, building good credit is the one element that is well within any individual's grasp.
As an individual, good credit is defined as a score between 660-719. Anything beyond this is considered excellent credit. In business, credit scores range from 0-100, 80 being considered a good score. If your credit score falls beneath what is considered “good”, you have the power to change this. One of the services that is available to people looking to elevate their credit score is credit counseling. Credit counseling helps people with managing their debt and organizing their finances. Credit counselor, Laina Avant, owner of Leap21.com, is helping business owners’ level up by repairing bad credit. Her services include helping business owners to secure lines of credit with vendors, education on maintaining good personal/ business credit, advocating for clients against credit bureaus, and more. Knowing all of the other elements that are against you, it's imperative that business owners use their credit to leverage opportunities that are otherwise closed to them. Lenders may review a business owners’ personal credit to extend a line of business credit. There are two pieces of good news: 1) there are many alternate lending sources that waive the common requirements for receiving a loan 2) even if your personal credit is not so good, you can still take the steps to begin building your business credit.
Here are some tips on how you can start to build business credit:
- Incorporate your business- get an EIN number and register your business with your state. Open a checking account, under the business name. Register with Dun & Bradstreet and get a D-U-N-S number.
- Establish trade lines- gain lines of credit with vendors (like Staples, cell phone providers, etc.)
- Pay your bills ON TIME.
- Continue to work on building personal credit. It is becoming more common for lenders to rely on blended data, an integration of business and personal credit scores
Entrepreneurs have enough stress weighing on their shoulders, bad credit should not and does not have to be one of them! The start to a new world for you and your business has just arrived, courtesy of Leap21.com. The offer is for a free credit analysis, which will reveal your score and a full evaluation will be conducted on how to heal those open credit wounds. To receive a free credit analysis from Leap21.com, go to their website and sign up for the credit monitoring (the costs is only $1).