If you’re at the beginning stage of applying for business credit for your company than you have probably seen the numerous articles, books, and posts explaining the importance of first starting with vendor credit also known as trade credit.
However, one of the biggest mistakes made by small business owners during this stage is applying for the wrong vendor accounts that grant instant business credit.
While some may have a tendency to believe that the more the merrier is a sound strategy I tend to totally disagree. The reason is simply getting approved for vendor credit is one thing but what really matters is three critical factors that seem to never get mentioned which are:
Reporting
Frequency
High Credit
Reporting
There are over 500,000 vendors extending credit to businesses, but less than 6,000 of them report to the business credit bureaus! So part of any sound business credit building strategy should include careful selection of vendors that report to the business credit bureaus. It’s also important to note which business credit bureau they report to.
Frequency
In addition you will need to select vendors that not only report to the business credit bureaus but also report on a monthly basis.
Why is reporting on a monthly basis so important?
The reason is there are vendors who do report your payment history but only on a quarterly or even yearly basis. Time is of the essence so if your payment experience is not reporting until months later this can drastically impact the speed in which you plan to build a strong business credit file.
An example of an instant business credit vendor that reports on a monthly basis is a company like Quill.
Quill sells office supplies, cleaning supplies, packing and shipping supplies, school supplies, printing supplies, and more. From filing and storage to hand held computers, Quill has a wide range of discounted top name brand products.
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 with a listing on the 411 directories and have a working website. New businesses can start out with smaller limits that will increase when you pay on time every month.
High Credit
Unfortunately there are vendors who report the balance owing as your high credit limit on your business credit file and not the true credit limit your business has been approved for.
For example, let’s say you’re approved for a $2,000 credit line with a vendor and you purchase an order of $50.
The incorrect reporting by this vendor shows:
High Credit ($) 50
Now Owes ($) 50
The correct reporting by the vendor should reflect:
High Credit ($) 2,000
Now Owes ($) 50
It’s always best to select vendors that report the true high credit limit that your business has been approved for and not just the balance owing.
This factor alone can impact the credit limit recommendation suggested for your business which is provided by the business credit bureaus in your profile report.
While you can obtain instant business credit for your business the process of building a strong business credit profile and score does take careful planning and a sound strategy. By revealing these three critical factors I hope to make the process easier and more effective for you.
As long as you select vendors that report, select vendors that report timely and select vendors that report true high credit limits than you are well on your way to business credit success!
To Your Success!
Marco Carbajo
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE “Eight Steps To Ultimate Business Credit Without A Personal Guarantee Audio Seminar“($597 Value), available by simply submitting your email below=>
Vendor credit lines commonly known as “trade credit” is the largest use of capital from business to business and remains the #1 alternative to personal and small business loans. The SBA even reports that vendor credit is the single largest source of small business lending in America today. It also happens to be the initial foundation for businesses to start building business credit.