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Can Any Business Get Business Credit?

Yes! Almost any business can get business credit as long as it has an EIN number and entity setup. You won’t need any collateral, and you don’t need financials, you can even be a startup. Personal credit quality won’t matter and you just need to arm yourself with the proper building steps.

Now here’s a heads up. ANYONE can pull your business credit reports without your permission. Clients, prospects, potential buyers, and even competitors can see your business information. This means they can see your payment history, high credit limits, employees and revenue, pasty payment performance and so much more. ALL lenders and credit issuers will also review your business credit reports to determine if you’ll be approved or denied, and the rates and terms you’ll pay to see how much you will get approved for.

What is vendor credit?

Vendor credit is sometimes referred to as trade credit. This type of credit is extended from one trader to another of the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment and is often used by business organizations as a sources of short-term financing.

Trade credit is the largest use of capital for a majority of business-to-business sellers in the United States. For example, Walmart, the largest retailer in the world, has used trade credit as a larger source of capital than bank borrowing. Trade credit for Walmart is 8 times the amount of capital invested by shareholders and is actually the second largest source of capital for Walmart, with retained earnings being their largest.

Trade Credit is usually offered with terms

including Net 1, Net 15, Net 30, and Net 60. These forms of trade credit specify that the net amount is expected to be paid in full and received by seller within that 10, 15, 30, or 60 day time period.
The word net in this sense means “total after all discounts”. An example includes a company such as Quill letting you purchase items on a Net 30 term. You make the purchase using your credit, and are given an invoice with Net 30 terms.
This means you have 30 days from the day the services are rendered or your items are shipped to pay your balance in full, minus any discounts. So, if you purchased $100 worth of office supplies, you need to pay back the $100 within 30 days of your items being shipped.

What do I need to know legally speaking?

Legally speaking, net 30 means that you as the buyer will pay the seller on or before the 30th calendar day (including weekends and holidays) of when the goods were dispatched by the seller, or the services were fully rendered. Transit time is included when counting the days.

If you pay after that 30-day period, you’ll typically be charged interest for not meeting the terms. If you pay late, you’ll also damage your business credit scores if the account reports to a business reporting agency.

Net 30 terms are the most popular form of trade credit. Net 10 and Net 15 terms are widely used as well, especially with contractors and service-oriented businesses. Net 60 terms are not as common due to the longer pay-back term, but are sometimes issued.

Trade credit is VERY popular in the United States but, of the millions of vendors who issue credit, over 97% of them do not report to the business credit reporting agencies. When using trade credit to build your business credit profile, it’s essential you find vendors that will give you credit without a personal credit check and report your credit to the BUSINESS credit reporting agencies.

Stay tuned for next week’s blog as we dive into the first steps to using trade credit and vendors to build your business credit!

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