7 Reasons Why You Should Consider Building Business Credit For Your Sewing Business
When I registered my first business entity, I did so super blindly. Meaning, I just registered because that’s what I thought I was supposed to do. I didn’t have a clue about the why and I knew just enough of the how to successfully submit payment and become legal with the state. Since then, I’ve learned so much about structuring my businesses correctly. My other non-sewing related businesses have taught me a lot, but one of the things that I’ve learned is that no matter what type of business it is, having access to capital can and will open new doors.
Now I’m not a credit guru. Nor am I a lawyer. Or an accountant. Or a tax strategist, so I’m not giving you any information from their perspective. I would HIGHLY suggest that you get the latter 2 on your team as soon as possible and consult with them often. What I will give you though, is some things to consider regarding how building business credit can be beneficial for your sewing and creative business.
Below are 7 reasons why you should begin building business credit for your sewing or creative business now:
Reason # 1: Establishing business credibility better positions you as your business grows.
So I know that right now you may be a huge team of 1, but if your goal is to eventually build a team or have your own boutique, or develop your own fashion line, all of the items that you need to work with vendors, attend trade shows, or sign a lease will have already been completed. Building a strong business profile demonstrates financial responsibility and stability, which can attract more clients, partners, and investors.
Reason # 2: Having a business credit profile gives you access to working capital.
Have you ever wanted to make a ton of sample gowns but didn’t have the funds to do so? What about the need to upgrade to industrial machine? What about the fact that you may still be incurring expenses although you’re having a slow prom or wedding season? Establishing business credit allows to maintain a steady cash flow. You can use credit facilities based on your business credit to cover expenses during slower periods or to take advantage of growth opportunities without draining your personal funds.
Reason # 3: Having a business credit profile gives you access to financing options and trade credit.
With strong business credit, fashion designer, seamstresses, and creatives can access a range of financing options. You can secure loans, lines of credit, or business credit cards to fund your operations, purchase equipment and sewing, cutting, and printing machines, invest in inventory, or expand your business. You can also access trade credit with suppliers. This means you can purchase materials, fabrics, and equipment on credit and pay within agreed-upon terms, which helps manage cash flow and maintain inventory levels.
Reason # 4: You get the opportunity to build your relationship with banks and suppliers.
Let’s say that your business has grown like crazy because your post went viral. You now have a team, but you really need a studio. You can leverage your relationship with the bank to help secure a commercial lease on a retail space. A strong business credit profile enhances credibility and trust with suppliers and vendors. You’d be able to negotiate better terms, such as longer payment periods, discounted prices, or bulk purchase options, which can improve profitability and competitiveness.
Reason #5: Having business credit allows you to separate your personal and business finances.
Building business credit helps separate personal and business finances, reducing the risk of personal liability. It establishes a clear distinction between personal assets and business assets, protecting personal credit and assets in case of business challenges or bankruptcy. Remember I told you I didn’t even know why I needed an LLC - this is it. Having an LLC protects your personal assets and if you’re drawing from your personal account to pay for fabric or having your clients send you payments that goes directly in your personal account, you are putting yourself at risk because you are piercing the corporate veil.
Reason #6: Having business credit can provide growth and expansion opportunities.
With solid business credit, you can seize growth opportunities by investing in marketing campaigns (think Facebook ads and Brand Reps), opening new locations, hiring additional staff, or launching new product lines. Access to capital and credit can fuel expansion and help businesses scale more rapidly.
Reason # 7: All business credit tiers are useful for your sewing business.
You have to think outside the box for this one. I talk about credit tiers in the workbook, but essentially these are levels of vendors that would extend different types credit to you based on certain criteria. Tier 1 vendors tend to extend you credit based on netted terms. For example, you could use a Net 30 account with Uline to purchase garment bags for $150 (for example). This means that within 30 days, you must pay Uline the entire $150 back. You can use a fuel company as a Tier 2 vendor. Don’t you use your car to go shopping for fabric? Sounds like a business need to me.
Whew - the wheels are SPINNING in my head thinking of all of the possibilities and growth opportunities! If you want to get started building business credit, check out my Building Business Credit Workbook and Vendor List. It is over 150 pages of action items and vendors that you can use to help you in your business!
A few things that I want you to know though:
Business credit can be used in place of personal credit, but that doesn’t mean that you shouldn’t maintain good personal credit. If you need some suggestions for people to help you with this, then send me an email at hello@ashleythesewcialite.com and I’d be happy to help!
Building business credit takes time and effort. It involves maintaining consistent payment history, managing debt responsibly, and establishing relationships with lenders and suppliers. The only thing that improves or hurts your business credit score is not paying on time or paying too early. There is no debt-to-income ratio or balance history that affects your business credit, only good payment history.
It's advisable to consult with a financial professional or credit expert to understand the specific steps and requirements for building business credit. Find an accountant and a tax strategist (not just a tax preparer - a STRATEGIST) that understands your goals and make them the next members of your team!
Let’s grow - ALWAYS!
xo