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What Is OPM (Other People's Money)?

By BSNS Editorial Team • April 2, 2026 • 3 min read

OPM, or "Other People's Money," is a financial strategy that involves using borrowed or invested funds from external sources to finance a business, investment, or acquisition. Instead of using one's own capital, an individual or company leverages the resources of others to fund their ventures. This strategy is widely used in various industries, including real estate, startups, and corporate finance.

How OPM WorksThe core principle of OPM is to use leverage to amplify potential returns. By using borrowed funds, an investor can control a larger asset than they could with their own capital alone. If the investment is successful, the returns generated will be on the total value of the asset, not just the investor's initial contribution. After paying back the borrowed funds plus any interest or agreed-upon returns, the investor keeps the remaining profit.

Common Sources of OPMThere are many sources of OPM, including: Traditional Bank Loans: This is one of the most common forms of OPM, where a bank provides a loan for a specific purpose, such as purchasing a property or starting a business. Private Money Lenders: These are individuals or companies that provide loans, often with more flexible terms than traditional banks. Hard Money Loans: These are short-term, asset-based loans that are typically used in real estate transactions. Seller Financing: In some cases, the seller of a property or business may be willing to finance the purchase for the buyer. Partnerships: Forming a partnership with individuals who have capital to invest is another way to use OPM. Crowdfunding: This involves raising small amounts of money from a large number of people, typically via the internet.

The Benefits of Using OPMUsing OPM can offer several advantages: Increased Leverage: OPM allows you to control larger investments and potentially generate higher returns. Limited Personal Risk: By using borrowed funds, you can limit the amount of your own capital that is at risk. Faster Growth: OPM can provide the capital needed to scale a business or investment portfolio more quickly. Diversification: By using OPM, you can invest in multiple opportunities simultaneously, which can help to diversify your portfolio and reduce risk.

The Risks of Using OPMWhile OPM can be a powerful tool, it also comes with significant risks: Increased Financial Risk: If the investment does not perform as expected, you are still obligated to repay the borrowed funds, plus interest. This can lead to significant financial losses. Loss of Control: When you use OPM, you may have to give up some control over the investment to your partners or lenders.* Complexity: OPM arrangements can be complex and may require legal and financial expertise to structure properly.

ConclusionOPM can be a highly effective strategy for financing business growth and investments. However, it is not without its risks. It is crucial to have a solid understanding of the investment, a clear repayment plan, and a thorough understanding of the terms of the OPM arrangement. As with any financial decision, it is wise to seek professional advice before using O-P-M.

References Strategic CFO. (n.d.). Other People's Money (OPM). Retrieved from https://strategiccfo.com/articles/investment-shareholders/other-peoples-money/ Express Cash Flow. (2024, March 5). Understanding Other People's Money and the Float. Retrieved from https://www.expresscashflow.com/understanding-other-peoples-money-and-the-float-an-introduction/

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BSNS Editorial Team

The BSNS Editorial Team delivers practical, research-backed guides for entrepreneurs at every stage — from formation and funding to growth, operations, and exit. We distill complex business topics into clear, actionable insights.

Business credit is a measure of a company's financial health and its ability to borrow money and pay back debts. It is separate from the personal credit of the business owner and is a critical asset for any company looking to grow and secure financing. A strong business credit profile can unlock access to loans, lines of credit, and favorable terms with suppliers [1].

## How Business Credit Works

Business credit is established and tracked by business credit bureaus, such as Dun & Bradstreet, Experian Business, and Equifax Small Business. These bureaus collect information about a company's financial history and use it to generate a business credit score. This score is a numerical representation of the company's creditworthiness [2].

### Key Factors That Influence Business Credit

Several factors are considered when calculating a business credit score:

* **Payment History:** Consistently paying bills on time is one of the most important factors in building a strong business credit profile.
* **Credit Utilization:** This is the amount of credit a company is using compared to its total available credit. A lower credit utilization ratio is generally better for a company's credit score.
* **Credit History Length:** A longer history of responsible credit management can have a positive impact on a business credit score.
* **Public Records:** Bankruptcies, liens, and judgments can have a negative impact on a company's credit score.

## The Difference Between Business and Personal Credit

While both business and personal credit measure creditworthiness, there are some key differences:

| Feature | Personal Credit | Business Credit |
| :--- | :--- | :--- |
| **Basis** | Based on an individual's Social Security number and personal financial history. | Based on a company's Employer Identification Number (EIN) and its financial history. |
| **Credit Bureaus** | Reported to personal credit bureaus (Experian, Equifax, TransUnion). | Reported to business credit bureaus (Dun & Bradstreet, Experian Business, Equifax Small Business). |
| **Impact on Personal Assets** | Personal assets are at risk if the individual defaults on a loan. | Business credit is separate from personal credit, which helps protect the owner's personal assets. |

## How to Build Business Credit

Building a strong business credit profile takes time and effort. Here are some steps you can take to establish and improve your company's credit:

1. **Incorporate Your Business:** Formally incorporating your business as an LLC or corporation creates a separate legal entity and is the first step in establishing business credit [3].
2. **Obtain a Federal Tax ID Number (EIN):** An EIN is like a Social Security number for your business and is used to track your company's financial activity.
3. **Open a Business Bank Account:** A dedicated business bank account helps keep your business and personal finances separate and establishes a financial track record for your company.
4. **Establish Credit with Suppliers:** Many suppliers will extend credit to businesses and report payment history to the business credit bureaus. This is a great way to start building a positive credit history.
5. **Apply for a Business Credit Card:** A business credit card can help you build credit and manage your expenses. Be sure to use it responsibly and pay your bills on time.

## Conclusion

Business credit is a valuable asset that can help your company secure the financing it needs to grow. By understanding how business credit works and taking steps to build a strong credit profile, you can position your business for long-term success.

## References

[1] Bank of America. (2025, October 27). *What is Business Credit and How do I Build It?*. Retrieved from https://business.bankofamerica.com/en/resources/what-is-business-credit-and-how-do-i-build-it

[2] U.S. Small Business Administration. (2023, May 19). *Establish business credit*. Retrieved from https://www.sba.gov/business-guide/plan-your-business/establish-business-credit

[3] Mercury. (2025, October 31). *How to build business credit in 30 days*. Retrieved from https://mercury.com/blog/build-business-credit-in-30-days