New FFL and Business Credit for Wholesalers???

S

SlopShot

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Once one receives their FFL, how does one go about establishing business credentials/credit with a wholesaler?

From my understanding, as an individual you must have excellent credit if you’re a sole proprietor. Otherwise, you must form an LLC, Sub-Chapter S, or a Chapter C Corp. and already have established business credit. Will a wholesaler only sell on credit, or can an FFL pay upfront for an item without a credit line?

Furthermore, from my understanding a wholesaler will only do business with a new FFL if they can provide references from other wholesalers. If that is indeed the case, how does one go about getting someone in the industry to vouch for them?

Obviously, I’m a little confused on a few things here… Just operating off what I’ve read online so far (which I know isn’t the most reliable source of information always).

Thanks
 
What about state/local business licenses? And a business name and location? And a business account at the bank? It may sound simplistic but the first step in establishing your business is to act like a business. BATFE says the FFL is a business license, but it is only part of the structure of establishing and operating a business.

I don't know of any wholesalers/distributors who will not take a good business check and my inclination would be to buy from a company, then ask about opening an account. It they already know your checks are good, that goes a long way toward establishing credit.

Jim
 
Not every distributor will deal with every FFL. The distributors I use will accept card payments for a processing fee, or COD check for the COD fee, or faxed personal check no fee. I do not want an open account as everything I order is either prepaid by myself or prepaid by the ordering customer.

They have an application form just like for a credit card/bank loan you fill it out and they issue a credit limit, but it is to be paid off monthly not a rolling account like a card, if you get behind in payment then you can not order till the behind money is caught up.

If you are trying to open a functional retail store with inventory right off the batt, see your local bank for a business loan, gun distributors are not in the finance business to get your business started.
 
It may be difficult for a new person to business to establish credit. Many distributors, including wholesale firearm distributors, tend to want either an established business credit history, or they will want a personal guaruntee. You should be an LLC or a Corporation to do this also. Also has been mentioned you need to also keep the finances seperate, business vs personal.

A FFL, depending on the wholesaler, you should be able to order and pay for the purchase by either credit card, or by check with various methods (faxed, telephone, COD, etc) from several different wholesalers. While I know some will disagree, if you are getting started you will probably be dealing with the lower and middle level of distributors while you build your business. It has been my experience with these if you do a steady volume, and never have any problems related to yoru payment/order history, after a while they "may" generally extend you a small account, but they will generally watch this closely. As time goes along alittle they will probably expand it for you if you ask. You dont just walk in the door and ask for or expect unlimited credit with a new business. The main thing to do over the initial year or two is to establish credit AND good credit references. Yes, pay on time, but if something comes up, then you COMMUNICATE. In my experience the businesses are willing to work around an occassional problem if you communicate with them, but that is your job to let them know as soon as you can. Dont just be quiet and send the payment in 30 days late and expect everything to not be noticed.
 
You're going to need excellent credit whether you're sole proprietor, LLC, S-Corp or C-Corp.

None of those business entities will typically affect the way that other business' interact with you.

None of them essentially change the dynamics of building credit either. You need to start with a small credit card or two and/or secured bank loan, pay them off and slowly get more credit. Pay off your credit cards monthly and allow your loan to last at least 12 months.

You can get a very cheap loans if you have money to secure them. Obviously, if you have the money there is little purpose to the loan than to build credit, but they are good for that purpose. All you need do is deposit the banks minimum loan amount ($1,000 is common) into an account, borrow the $1,000 back using the deposit account as collateral, and set up automatic payments from the account to the loan. Most banks will only charge you 1/4-1/2 percent over the deposit rate for the loan. That means you'll get 1/4% on the account and pay 1/2-3/4% on the loan.... it's almost free and it's a good way to build credit.

Almost all business' will require personal guarantees from any small business whether it be a corporation (c or s), LLC or sole proprietor.

Also, be very careful to maintain separation between your personal and business finances if you form any type of corporation. If you do not, and you are sued, the opposing lawyers will use the fact that you did not maintain separate finances as "proof" that you did not actually operate under the terms of the incorporation and they will seek judgements against you personally as a result. It's called "piercing the corporate veil"
 
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JamesK is absolutely right. You have to open a business account if you're in business. How are you going to deposit a check made payable to XYZ Gun Store if you don't have a business account in that name? Short answer: you can't. Also don't ever comingle personal funds with business funds. Rule #1.

As far as credit, every entity, whether a corporation, LLC, Subchapter C, S, or proprietorship needs to have established credit. No one is going to just accept the fact that your "corporation" will pay its bills. In fact, sometimes corporations are formed just so the owners don't get caught personally liable when their corporation doesn't pay its bills.

There's no short cut in business. You have to walk before you can run. Start off with a credit card, watch your purchases, and pay your card off, in full, every month. If you time your purchases right, you will have up to 60 days to pay off the debt. Then, after you have established yourself with a vendor, ask for a credit line. Make SURE you pay that off every month or arrange payment terms in advance. Stay in touch with the credit department of that vendor if you see you won't be able to pay on time, and NEVER lie to the credit manager. Good luck.
 
Okay, guys, let's wrap this one up soon.

This comes under that category of a topic that is not really directly related to firearms, but involves firearms as part of the discussion.

It is about starting a business and establishing a credit line. We could replace "used car lot" for "FFL" and much of this discussion would stand as is.

Since it is about Federal Firearms Licensing in particular, we will let it float for a while.

Please stay strictly on topic.

Bud
 
Hi Bud,

I would have to agree with most of what you said (as I’m the OP). I didn’t word or phrase my question particularly well as I see in hindsight.

As David Hineline stated, “They have an application form just like for a credit card/bank loan you fill it out and they issue a credit limit”. This is really the crux of what I was asking about. Since I’ve yet to establish any business credit, it didn’t appear that any of these wholesalers would be willing to sell COD or Cash/Credit without a previous business history/credit.

From what I understand now, regardless of that credit application, with a FFL and Pre-Pay, many distributors will sell (minus credit); if I understand correctly. Basically pay up-front, Check, Money Order, etc. and most of the application form doesn't apply - right?

I apologize if I still haven’t formulated my question correctly.
 
My experience when I had a FFL ( no longer) was they wanted credit information as a means of determining if you were indeed in the buysiness. They wanted to know who I had purchased from, what distributors, and what lines I carried. This is to keep the "kitchen table" dealers apart from the genuine stocking dealers.

You may find some distributors who will sell to a non-stocking dealer (buy as you sell basically) with a credit card to finance purchases. For credit purposes they may look at your personal credit but that will depend on the distributor. My experience was that most of the manufacturers would not sell directly but used a distributor system.

Hope this information helps. The firearms business is a bit different from most other businesses.
 
Most wholesalers will also have minimum $$$ amounts for placing an order - some will allow buying one gun at a time, others require you buy a certain minimum, as well as certain models in order to get others. IIRC, Kimber is like that - want their latest and hottest? You also need to buy some of their dogs. Last time i was doing this, buying directly from Browning required a minimum $25,000 order - on a regular basis - to get their best pricing.

Good luck in your venture
 
I'd start out registering as a dealer with Davidson's (galleryofguns.com) and they will send you business. It's perfect for a "kitchen table" FFL (and I've bought a couple of guns that way)

Also, set up a checking account in the name of your business. If your business is just your personal name, you might want to file with your county clerk for an assumed name (D.B.A.)
 
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