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Is It Possible to Get Vendor Credit for New Businesses? Yes!

Published By Faith Stewart at February 5th, 2020

Vendor credit accounts, also known as business tradelines, are vital to the business credit building process. However, getting vendor credit for new businesses can be tricky.  It doesn’t happen overnight, but if you follow the process, it can happen.

Yes!  It’s Possible to Get Vendor Credit for New Businesses

First, we have to define what a new business is in this context.  When we discuss vendor credit for new businesses, we mean businesses in operation for less than a year. You can get starter vendor credit if you have been in operation for less than a year, but most require you to be in business for at least 6 months. There are a few that do not have a time in business requirement however. 

Then, we have to define vendor credit.  Vendor credit is credit from vendors that you make purchases from for your business.  When it comes to vendor credit for new businesses, you need those that will offer credit without a credit check. This is because, as a new business, you have not yet had time to sufficiently build business credit. 

When it comes to new businesses, some vendors will extend net terms and report your payments to the business credit reporting agencies (CRAs).  For new business, they generally do not offer revolving credit, but that’s okay. That can come later. The whole point of vendor credit for new businesses is to help you build your business credit score so you can qualify for more types of funding. 

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What is a Business Credit Score and Why Do You Need One? 

If the point of vendor credit for new businesses is to build your business credit score, it can be helpful to understand exactly why you need one.  A business credit score is a credit score similar to your personal FICO credit score, but in the name of your business. It is not associated with you as the owner, or with your personal credit score. 

The problem is, it doesn’t matter how much vendor credit you get, it will not count toward your business credit score if your business is not set up to be a separate entity from you as the owner.  If it isn’t, any credit you get will just be applied to your personal credit report. 

Set Your Business Up As A Separate Entity from Yourself

Here are some practical steps to take to create separation between your business and yourself. 

Do Not Use the Same Contact Information

Make sure your business has its own phone number, fax number, and address.   That’s not to say you have to get a separate phone line, or even a separate location.  You can have a business number forwarded to your current phone. You can even still run your business from your home or on your computer.  It’s not even necessary to have a fax machine.

EIN

Next, get an EIN.  This is an identifying number for your business that works similar to how your SSN works for you personally.  Some business owners use their SSN for their business transactions such as opening credit accounts. This is what a lot of sole proprietorships and partnerships do.  However, it really doesn’t look professional to lenders, and it can cause your personal and business credit to get all mixed up.  To be fundable, you need to apply for and use an EIN.  You can get one for free from the IRS.

Incorporate As Soon As Possible

Incorporating is an absolutely necessary step. Not only does it play a huge role is separating a business from the owner, but it also lends credibility to your business as one that is legitimate. In addition, it offers some protection from liability. 

Which option you choose does not matter as much for being fundable as it does for you budget and needs for liability protection.  The best thing to do is talk to your attorney or a tax professional.  If you do not do this from the beginning, there will be some issues to work through. When you incorporate, you become a new entity.  This means you lose any time in business you already have. You basically have to start over.  You’ll also lose any positive payment history. 

This is why you have to incorporate as soon as possible.  Not only is it necessary for fundability and for building business credit, but so is time in business.  The longer you have been in business the more fundable you appear to be.  That starts on the date of incorporation, regardless of when you actually started doing business. 

Separate Business Bank Account

A separate, dedicated business bank account is also a must.  There are a few reasons for this.  First, it will help you keep business finances separate.  This is good for a lot of reasons, but the big one is tax purposes. 

However, there are also several types of funding you cannot get without a business bank account.  Many lenders and credit cards want to see one with a minimum average balance.  In addition, you cannot get a merchant account without a business account at a bank. That means, you cannot take credit cards payments.  Studies show consumers spend more when they can pay by credit card.

Proper Licenses

If anyone were to check to see if your business has all of the licenses it needs to operate and finds that you do not, it will cause a massive hit to your credibility with that person.  For a business to be legitimate, it has to have all of the necessary licenses it needs to run.  If it doesn’t, warning flags are going to start waving. Research what licenses you need to ensure you have all of those necessary to legitimately run your business at the federal, state, and local levels. 

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Check out our best webinar with its trustworthy list of seven vendors to help you build business credit

Business Website

I am sure you are wondering how a business website can affect whether your business is separate from you as the owner.  Here’s the thing.  These days, a business doesn’t even really exist if there is no business website. Of course, that isn’t technically true, but practically is could be.  The website is the first impression you make on many, and if it appears to be unprofessional it will not bode well for you with consumers or potential lenders. 

Spend the time and money necessary to ensure your website is professionally designed and works well.  Pay for hosting too. Don’t use a free hosting service.  Also, your business needs a business email address that is different from your personal one. That goes along with separate contact information.  Make sure it has the same URL as your website.  A free service such as Yahoo or Gmail will not work the same way. 

Why is Vendor Credit for New Businesses So Important?

After you have all these pieces in place, you can start applying to get vendor credit from starter vendors.  These are those vendors we discussed earlier that will offer net terms and report payments. This is important because, if you have your business credit set up properly, those payments will start building positive credit history on your business credit report, and your business credit score will start to grow.  With a strong business credit score, all kinds of funding options will be open to your business. 

Where to Start to Get Vendor Credit for New Businesses

That’s the big question, right?  Sure, you know you need vendor credit, but which vendors will actually extend these terms without a credit check?  There are more than you may think, but here are a few to get you started. 

Behalf.com 

Behalf is way of getting paid through an app, but they also offer funding. The more you have your customers pay you through Behalf, the more likely Behalf is to offer you favorable terms when it comes to funding.  

Funding can be through purchase financing or a virtual Mastercard option. Terms run from Net 30 to 180 days, and they report to Dun & Bradstreet, Experian, and Equifax. This fact alone, that they report to all the major credit reporting agencies, makes them an extremely valuable tool in building business credit. 

Wells Fargo Business Secured Credit Card

This card is only available to Wells Fargo Online customers.  Credit lines are available from $500 to $25,000, and there is a $25 annual fee.  The grace period to pay is 21 days, and they offer purchase protection. You can apply for a Wells Fargo Business Secured Credit Card online, in a store, or by phone. They report to Business Experian. 

Uline Shipping Supplies

Uline sells shipping, packing and industrial supplies. This means you can use them to purchase things you would use in the everyday course of business. You will need two trade references and a bank reference to get approval for net terms.  In addition, they will usually only report payments on orders of over $50. They report to Dun and Bradstreet, so you will definitely need a D-U-N-S number before opening an account with them. 

Also, your first few orders might need to be prepaid.  It’s easy to apply. Just add an item to your cart, go to checkout, and choose the open an account option.  Then, select the option to receive an invoice.  

Quill Office Supplies

Quill is similar to Uline in that they sell packaging supplies.  However, they also sell office and cleaning supplies. You have to have an established PAYDEX or place and initial order before you can apply for net terms.  They report to D&B as well. If you place an order each month for 3 months you can usually get approval. Their application process is similar to Uline’s. 

Grainger Industrial Supply

Grainger will approve almost anyone that has a business license for credit of less than $1,000.  If you need over $1,000, they will ask to see trade and bank references. You can fax your application or apply over the phone. 

What Happens After You Get Vendor Credit for New Businesses?vendor credit for new businesses Credit Suite

These are great to get started with, because it is super easy to get accounts reporting with them.  That will get your business credit score started and allow you to get even more accounts reporting. Once you have several of these accounts, maybe 8 or 10, you can apply for different types of accounts.  

The next credit tier after this vendor credit tier is the retail credit tier.  This is commonly referred to as store credit.  Retailers like Office Depot and Lowe’s offer these cards, but you can only use them at those particular stores or on their specific websites.  However, after you get 8 or 10 of those reporting, you can move on to the next credit tier. 

That would be the fleet credit tier.  These are credit cards that companies like Shell and Fuelman offer to use exclusively for fuel costs and auto repair and maintenance.  This is the last step in the business credit building process before the cash credit tier, which is the last tier.  

This tier consists of those standard credit cards that are not regulated to a specific store or specific types of purchases.  Generally, they have better interest rates and terms, and often they offer nice rewards. 

Vendor Credit for New Businesses: A Word About Business Credit Monitoring

Pretty much the only way to start building business credit is with vendor credit from starter vendors.  However, you have to be actively involved in the process. You must monitor your business credit reports on a regular basis for more than one reason.  

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Check out our best webinar with its trustworthy list of seven vendors to help you build business credit

First, you have to see which accounts are reporting.  This is the only way to know when you have enough accounts reporting to qualify for approval for cards in the next credit tier.  In addition, you need to keep an eye out mistakes and information that needs updating. Take action on this quickly, in writing, to keep them from affecting your fundability. 

Vendor Credit for New Businesses Is Necessary for Building Business Credit

Unlike personal credit, you have to actively work to build business credit.  After setting up your business to be a fundable entity separate from you as the owner, the next step is to find vendors that will extend credit and report payments to the business CRAs.  Once you do that, if you handle your credit responsibly, the snow ball will only keep building.  

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