As small business owners recover from the recession it’s hard to imagine that getting business credit can be simple. However, the largest use of capital from business to business is the use of vendor credit which happens to be the single largest source of small business lending in America today according to the SBA.
The primary benefit to getting business credit with this type of financing is that it will provide your business with 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 expenses your business may have. The flexible payment terms also allows your business plenty of time to pay the invoice when it comes due.
A second benefit is vendors report your positive payment experience to the business credit reporting agencies. The more vendors you establish credit lines and payment experience with the stronger the profile you will build. This alone can positively impact the size of the credit limit recommendation for your business which is determined by the bureaus and publicly disclosed on your file.
If getting business credit to build your file is your primary goal then make sure to select vendors that report. You can verify this by inquiring with a vendor that you plan to apply with but with more than 500,000 vendors across the country and less than 6,000 companies that report to the bureau it can be a task most small business owners are unwilling to undertake.
Another option is joining communities like the Business Credit Insiders Circle which provides its members business finance information, credit sources, tips, tools and even a business directory of companies that report to the business credit bureaus.
One of my favorite aspects to vendor credit lines is the minimal qualifications required for approval. In many cases an application only requires your business contact information, Federal Tax ID, Dun & Bradstreet#, authorized name and signature and not your social security number or personal guarantee.
The specific vendors requesting only this information will pull a business credit report to base their approval which 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 getting business credit with vendor credit lines can be an ideal source to fund short term needs at the same time provide your business a way to build a strong file while avoiding the use of your personal credit and guarantee.
Marco is founder of the Business Credit Insider’s Circle available at Start Business Credit.com
You may contact Marco directly at: email@example.com