Proven Tips to Help Build the Best Wall of Business Credit

Establishing strong credit and trust with lenders can benefit your business in many ways.

Proven Tips to Help Build the Best Wall of Business Credit

Do you know the secrets to improving your standing and building the best credit possible? (Photo: iStock)

It may not seem on the surface that walls and business credit have much in common, but there is one important characteristic they share — you have to build them before you need them.

Access to capital can be one of the biggest challenges for a small business in any industry. That challenge is only being made harder for small businesses in the firearms industry today, due to the pandering, anti-firearms stance that is rapidly spreading among the banking oligarchy.

It wasn’t so long ago that the banking world’s antipathy towards the firearms industry was government-engendered via Operation Choke Point. Today, the institutional prejudice seems to be spreading voluntarily, which may have further-reaching implications, including creating a greater need than ever for business owners in all aspects of the firearms industry to understand the dynamics of business credit.

Many readers may come from an old-school upbringing like myself and are predisposed to eschew borrowing. “Granddad built his business with blood, sweat and tears, and so will I — not with other people’s money!” This is a healthy attitude in many cases, but the reality is that access to credit provides flexibility and versatility, and those things are essential to growing a small business.

What is credit at its core and why is it important to a business? There are many definitions of credit, but the more esoteric version directly underlies the financial one, and that reads, “reliance on the truth or reality of something.” For a business, that means reliance on your good faith and your willingness and ability to pay. It’s about trust, and trust takes time to build.

Banks charge interest to lend money, as does any lender. The interest rate that one pays is the “price of money” and is based on many factors, mostly trust, so for a new business partner, that trust must be earned or supported. For a new or small business, the price of money — that interest rate offered to them — can be horrifyingly high and potentially prohibitive. Even if it wasn’t, lenders will typically require personal guarantees from the owners, officers or directors of a business in order to lend, a situation that can get messy.

I just listed three potentially valid reasons to avoid borrowing from banks or other lenders on a regular basis: The price of money, personal guarantees and the need for patience. But what about when you need to expand your operations to meet a surge in demand? What happens when you need extra capital to make it through a cyclical slump? The firearms industry is nothing if not cyclical, so those circumstances occur more often than anyone would admit.

Building business credit can and will take time, as well as diligence. It is a process of building trust, and that is done by dutifully managing the risk that others have taken to extend credit to you in its various forms. Remember, too, that well-established credit can serve as a wall — a wall between your business and failure in poor circumstances, and a wall that can serve as a stepping stone to bigger things in advantageous ones.

In light of that, having established credit to rely on when necessary is an unquestionably good thing, even if you never use it. The good news is that you can work toward establishing that credit by taking simple steps in your day-to-day business that will not only build your business credit, but provide flexibility in managing your cash flow and increase your purchasing power, all without a dime of interest charges. In the next issue, I’ll cover how to do just that.

Josh Fiorini is the former CEO of PTR Industries, Inc., and started his own hedge fund that led him to the firearms industry. He is a sought-after contributor on numerous boards and discussion groups on political and economic issues.


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