Business owners think that they need just cash to finance their business operations. In fact, having products, inventory, or materials on Net 30 day payment terms can accomplish the same thing. There are thousands of vendors who are extending lines of credit to other businesses.
Here at the basics about obtaining and using vendors credit lines:
Obtaining Vendor Lines of Credit - Most businesses have to start slow with small credit lines and build their way up to larger accounts. Most vendors will want to see that your business can handle a credit line and that you will make your payments as agreed. Once you can the free business finance pre-qualification test you will be given access to multiple vendor credit lines. There is a set that we call "Starter Vendors" who will provide your business with small credit lines to get you started. If you already have good business credit scores, then there will be many vendor credit lines available to your business and in larger amounts.
Using Vendor Credit - It is not enough just to have vendor lines of credit you have to use them. In the personal credit world just having a credit card will cause it to show up on your credit report. Not so with vendor credit. Vendor credit requires that you have it, and you use it each month. If you don't use it then they don't report to the business credit agencies, and your credit line doesn't show up on your business credit report. To optimize your business credit scores, your business will need at least five (5) vendor credit lines. Those credit lines will need to used each month and report each month for at least two (2) years to get the maximum benefit.
Payments on Vendor Credit - With your personal credit lines or credit cards, if you pay 29 days late each month it will not effect your personal credit scores. The same is true if you pay your personal credit bills early it has no effect on your scores. That is not the case with your business credit scores. Business credit is tracked around the "Net 30" payment system. This means from the day you get the goods or services you have 30 days to pay the bill. With personal credit, you are striving for a FICO score of 800, but you will settle for a score of 700 still have excellent credit. In business credit, you are striving for scores of 80, but if you obtain scores of 70 your business will have excellent credit.
Vendor Credit Reporting - To have a positive impact on your business scores and shoot for those 80 scores you will have to pay all your Net 30 vendors at least 10 days early. That is because vendor lines of credit report to the day how you paid your bill. If you pay it 10 days early they will report it as such. If you pay it 10 days late they will report that too. Paying 10 days before your bill is due will get you closer to a score of 80, paying on time will put you at a solid 70 and paying 10 days late will earn you 60 business credit scores.
By completing a business finance pre-qualification test, you will get access to vendor lines of credit, be able to select from many different types to fit your business and know exactly what it takes to obtain them.
The pre-qualification test is free and it will show you exactly what business finance programs you pre-qualify for now and what to do to pre-qualify for more in the future.