What Is Trade Credit?
Do you know trade credit is the single largest resource of capital utilized from business to business?
The Small Business Administration (SBA) says it is the single largest resource of small business lending in the United States today.
In this post I’m covering this effective resource of short-term funding that can benefit your company in lots of ways such as financing equipment, purchasing products/services with no cash upfront, conserving capital, and establishing business credit.
So what is trade credit?
Trade credit also referred to as vendor credit or supplier credit, is when a business permits your company to purchase items and pay for them at a later day via short term financing. Typically the terms vary from Net 15, Net 30, Net 60, Net 90, or even Net 120 payment terms but the most common trade credit is from Net 30 vendors.
The key advantage to making use of trade credit is that it will enable your company to obtain various services and products it needs in advance while allowing it to defer the payments for a later date.
This allows your company to save capital for even more essential short-term expenses it may have. The payment terms are flexible depending on the supplier and is a great way to avoid paying interest since the purchase is paid in full in a short period of time.
However, a common mistake is thinking that every supplier that extends trade credit shares its payment data to a business credit reporting agency such as Dun and Bradstreet.
Currently there are more than half a million companies who offer trade credit to businesses, but less than six thousand submit payment data to a business credit reporting agency.
Not sure how to obtain trade credit with suppliers that report?
Not too worry, a benefit we provide in our business credit building system is that we list suppliers and businesses that report plus we provide the actual requirements needed to qualify for trade credit.
While some suppliers only require a DUNS number, business phone number, and business mailing address to qualify for credit, others may have a years in business requirement as well.
In addition, some trade credit suppliers may require a pre-payment on the first order prior to extending a line of credit to your business.
Another major benefit to using this type of credit source is the ease of approval. Many suppliers will base their credit approval strictly on the business without requiring a personal credit check or personal guarantor.
Looking for trade credit suppliers and businesses that report? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to trade credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($597 value) =>
To Your Success In Business and in Life!
Did This Blog Help You? If so, I would greatly appreciate if you like and shared this on Facebook.
About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, and All Business.com .His articles and blog; Business Credit Blogger.com, have been featured in ‘American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’. You can also find Marco on Google+.
Image courtesy of FreeDigitalPhotos.net