Glow in Your Business
Hello entrepreneurs! I know you are working hard to grow your hair company and the more you look on social media, the more you may feel as if you aren’t doing enough.
You have dreams of being able to have a supply of hair extensions to make sales on the spot but can’t see how you can afford to purchase inventory. You have a goal of having visually appealing business cards, tags, branded packaging, and an eye-catching website but all of that cost money that you don’t have.
You may get discouraged because your credit score is low and you can’t seem to get approved for a bottle of hair glue not to mention a credit card to purchase inventory for your business. I understand why you believe you will never be able to grow your business with poor credit but you can.
Even if you have good or excellent credit, you need to establish a business line of credit to separate your credit from it. In this article, I am going to share with you what business credit is and how you can build it to help you establish and grow the hair empire you want to have.
You know what we have to do! Let’s go ahead and press play on your DJ Khaled playlist! As Khaled says, “we the best” and it’s time we sing and dance toward our next level of success.
What is Business Credit
I want to make sure you are clear on this topic. I also want to challenge you to change the way you think about money and your credit.
You know how important it is to maintain a good personal credit score. For most of us, this is the only credit score we have known. I want you to start thinking about your hair business as a separate entity and, therefore, your credit score should separate well.
Business credit allows you to purchase items needed for your company based on the performance of your company’s payment history. The more credit history your company has, the more credit you will be able to get as long as you have a great payment history.
What is the difference between personal credit and business credit
Personal credit scores come from businesses reporting your payment history to Equifax, Experian, and Transunion.
Your credit score can range from 350-850 points.
Business credit scores come from vendors and companies reporting your payment history to Equifax, Experian, and Duns & Bradstreet (main business credit reporter). Instead of using a credit score or FICO score, businesses are basing creditworthiness on a Paydex score.
The Paydex score ranges from 1-100 points with a good score being 80 and above.
The Importance of Business Credit
Business credit allows you to do more for your hair business and provides you an opportunity to do it right the second time around.
If your credit score is low, you will need to make sure you are more diligent in maintaining it. You don’t want to repeat the poor habits of you perform in your personal life in your business. When you seek to establish your business credit, understand that most companies will not provide credit to new business without a personal guarantee.
The main reason is that your business has not established a payment history and, therefore, they have nothing to go by when looking at your ability to pay creditors on time. The reason you need to start establishing business credit now is that you may need to have a payment history for over a period of a year.
Using your credit wisely will help you when you want to open a storefront or make more significant purchases. Handle your business credit wisely!
Later in this article, I will share with you which companies you can open up lines of credit with to establish credit when you have none.
What is Duns & Bradstreet
A D-U-N-S number is a nine-digit number which is unique to each business. It is used to establish a credit profile for your business and is used by companies and lenders to help identify your creditworthiness for your business.
Apply for your number on this site . Do not pay for your number. There is an expedite choice, but I suggest you apply for the free option by applying and waiting. Besides, you are trying to save money!
Steps to Build your Business Credit
There are critical steps to building business credit.
Follow the steps below to free yourself from the thought of never having to create opportunities to grow. Building your business credit is not an overnight process but with diligence and remaining focused on the long term you will be just fine.
1. Create your business name
I suggest your business name be your name because it allows you to create an umbrella for all your other businesses.
The additional benefit is when you seek a line of credit you don’t want lenders to assume whether you need the credit or not because of the name of your company. I also believe the hair company industry is a booming industry, but a lot of companies fall through in the first two years.
Therefore, there may be some hesitancy in providing a line of credit to hair companies. Instead of naming your company Luxury Hair Extensions you can call it Diversity Beauty Incorporated. The latter name is broad and allows you to create multiple companies under it which support the main company.
Diversity Beauty provides luxury hair extensions, educational products, beauty supplies for wholesale and other things as well. I hope this makes sense. If you need clarification, please comment below.
Check with your state and city to see if you are required to get a business license.
Your employee identification number will be used in your business. An EIN is free, and you can get one by going here https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
Make sure you are sure of your business name because your business name for your EIN should match your business license. An EIN will be very important when you file your taxes.
Note: Everything you purchase for your business will be a write-off when you file your taxes as long as it is a qualified purchase. Keep your receipts and use them during tax filing season.
Go to your state’s attorney general or your state’s website to register your company. For example, in the state of Georgia, you will use this link to register your business.
To prevent personal liability, you will need to form your company as an LLC, S-Corp, or C-Corp.
Open a bank account specifically for your hair business and do not mix personal finances in this account.
Create a social presence. If you cannot afford your ideal website at this point, create a free one via Wix or Shopify. Create your business pages on Instagram, Facebook, and Twitter. You will need to establish a presence to help build your brand and visibility.
The First Step in Establishing Business Credit
Now that you have established your business you can seek vendor accounts to begin establishing your business credit. Now, there are levels to this, and you will have to work the process to get what you want to have.
The following companies are great companies to help you build your business credit. You need to spend about $50 or more. After ninety days, these companies will report your payment history to DUNS and the other two credit companies. Most companies have Net 30 payment plans.
Net 30 means your payment is due within 30 days of your order. The earlier you pay your balance, the higher your paydex score will be. To get a high paydex score, it’s crucial not to order more than you can pay back within the term of the payment agreement.
Companies That Help
When you open a Quill account, you will be asked to fill out a profile. Quill is perfect because you can purchase large quantities of inventory with the ease of Net 30 terms.
Approval can take about 2 hours during business hours.
Grainger offers a large variety of products for businesses which include safety equipment and tools. Grainger makes it easy to set up an account. Sign up for your account online, and you should get a response pretty quickly.
Uline also offers a variety of products your business may need such as including shipping boxes, tags, shipping materials and more. At checkout, you will have the opportunity to make the with payment due in 30 days.
The second step in establishing business credit
Once you establish a credit profile with the vendors above and have a positive payment history, you will be able to apply for store credit. Remember, most vendors begin reporting to DUNS after ninety days of payment history.
At this point, you can visit your bank of choice and apply for a business credit card.
Your next option is to apply for store credit or revolving credit with some companies.
The following stores are ones you can apply to for business credit once you have established vendor account payment history if you do not want to use a personal guarantee or have it based on your credit:
- Best Buy
Credit Cards to Apply For
American Express is one of the best companies to apply for a business credit card.
Make sure you inform them, when they ask you for your social security number, that you are building your business credit and do not want to use your social security number. Your EIN will be sufficient for your application.
Fund your hair business with your business credit and keep building separate from your credit. Once you receive approval for a business credit card, you will be able to charge your hair to it. You will also be able to make more significant purchases and charge those purchases to your business card.
The Chase credit card is more lenient when providing credit to small businesses and is an excellent option.
What if I receive a denial of credit?
If you receive a denial of credit, it can be because of one of two reasons.
The first reason is that you are not establishing your business credit correctly or it’s not enough credit yet. The second reason is that your business is not set up correctly yet. Make sure you have your business license and EIN.
Your credit will not stop you from growing your business
I hope this article gives you clarity on how you can make your dreams come true for your business.
Your vision and determination can help you achieve anything you want to. Your credit score is no longer an excuse if you follow the steps above. The beauty of this process is that by building your business credit and being able to increase sales within your business, you will now have profit to put back into your business, and eventually, pay yourself. The additional income will help you pay off debts and improve your credit score.
Also, by using business credit, it frees up your income to take care of personal obligations and improve your credit.
Feel free to ask any questions about building your brand, establishing systems for your hair company, and setting up processes for growth reach out to me or comment below so we can help you move forward to achieve your goals.
Private Label Extensions and I are happy to assist you in the success of your hair company and your personal growth. Let us know how we can help you.