The No. 1 Source of Small Business Lending in America (and How to Access It)

What is the largest source of capital from business to business and remains the #1 alternative to personal and small business loans?

Here’s another hint.

The SBA reports it as the single largest source of small business lending in America today.

Still not sure what it is?

It’s called vendor credit also known as ‘trade credit’ or ‘supplier credit’.

Did you know that vendor credit is the second largest source of capital for Wal-Mart? It’s used trade credit as its largest source of capital than even its bank borrowings!

Even though your business may not be a Wal-Mart it’s pretty exciting that you have the same opportunity to acquire this type of credit for your company as well.

Vendor credit basically works like a charge card meaning that the balance must be paid in full on or prior to the due date and usually the terms range from net 30 to net 60 days.

It not only helps your company build a positive payment history but also provides thousands of dollars in products and services it needs up front while allowing your business to defer the payments for later.

This helps you conserve cash flow for more critical short term expenditures your business may have. The flexible payment terms also allows your business plenty of time to pay the invoice when it comes due.

But one of the biggest mistakes is assuming that every vendor you have credit with reports your payment history to the business credit bureaus.

Currently there are over 500,000 vendors who extend lines of credit to businesses but less than 6,000 report your payment experience to your company's credit files.

One alternative solution is having your trade experiences added to your report by using a service like D&B’s Credit Builder Plus. Unfortunately this is the only bureau that allows you to add trade references to your files.

Another major benefit to using this type of credit source is in its approval guidelines. Many vendors will pull a business credit report and base their approval solely on the credit worthiness of your business and may not require a personal credit check or guarantee.

This makes obtaining vendor credit lines much easier and more convenient compared to credit cards or loans. A prime example of one of these types of vendors is a company called Quill.

Quill offers a net 30 account and reports to Dun and Bradstreet.  Best of all they report your payment history every 30 days. For small orders you can get approved if your business has a listing on the 411 directories and a working website. New businesses can start out with smaller limits that will increase when you pay on time every month.

As you can see vendor credit is a premier source of lending that your business can take advantage of today without having to put your personal credit or personal assets at risk.

What small business friendly suppliers do you suggest looking into?

Marco is founder of the Business Credit Insiders Circle, a step-by-step business credit building system. You may contact Marco directly at: marco@businesscreditblogger.com Follow Marco on Twitter @MarcoCarbajo and read more of his insights on how to build business credit.