Published By Janet Gershen-Siegel at August 26, 2018
Written by Janet Gershen-Siegel
When you are initially beginning to set up corporate credit, your first step needs to be vendor or trade credit. You want to get into good credit practices. This means you need vendors who help build business credit.
So this is everything from not borrowing too much, to paying your debts back on schedule, to staying on good terms with your sources of credit.
The absolute most vital thing you can do, which will make the swiftest and biggest beneficial difference, is to pay off your invoices punctually or early, and establish a responsible and good payment record.
You will need to start a corporate credit profile and score with what are called starter vendors. These are also known as trade accounts or trade lines. Starter vendors are ones who will bring your small business initial credit even though your firm has no credit, no score, or no trade lines.
Note that the majority of the more prominent and better known merchants like Staples or Walmart will not give you initial starter credit, so do not even try starting a business credit application with them.
Here are three vendor accounts that you can use to start to develop your corporate credit. Keep in mind: if you are rejected in the beginning, keep making an effort!
This company offers for sale shipping, packing, and industrial supplies. These feature janitorial materials, shipping boxes, and material handling products just like hand trucks and dollies. Most importantly, they report to Dun and Bradstreet.
That is why your business must have a D-U-N-S number before you start trying to get vendor credit with them.
Uline will want two references and a bank reference. Your initial few orders might need to be prepaid at first so that your company can get approved for Net 30 terms.
Grainger Industrial Supply sells hardware, power tools, pumps and more. They also do fleet maintenance. To qualify, you need the following: a business license, An EIN number, and a D-U-N-S number from Dun & Bradstreet.
For less than $1,000 credit, they will approve nearly anyone with a business license. For over $1,000 credit, they want to see trade and bank references. Fax them your application or apply over the phone. You can visit them online at: www.grainger.com.
Check out Behalf online at: behalf.com. Behalf is a means of having your customers pay you using an app. They also provide funding. The two go hand in hand, so if you start off with your customers using their app, you will have a better chance at getting good funding terms.
They offer purchase financing, and also have a virtual MasterCard in order to facilitate funding your purchases.
They can give you terms of 30 to 180 days. Behalf reports to all three of the big business CRAs: Dun & Bradstreet, Experian, and Equifax. That makes them extremely valuable for building business credit.
Behalf’s fees are based on the terms they offer to customers. Their fees rise as the number of days to pay rise, with an apparent cap at 3%. Behalf offers products to both merchants and their business customers.
For business customers, you select the amount to finance, and the amount of time to pay it back. Then choose if you will pay on a monthly or a weekly basis.
Since the end of 2017, all funding from Behalf is through FinWise, a Utah-chartered bank which is located in Sandy, Utah.
There’s one important thing to note. Behalf online lender will make a hard inquiry on your personal credit when you first apply for financing.
Behalf has a maximum line size of $50,000. It can extend this in instant purchase capacity to any business customer. Their minimum transaction size is $300. Plus there is no upper limit on individual purchase transactions.
Monthly fees start at 1%. Also, there is a fixed monthly rate. There are no origination fees and no maintenance fees. You can save 10% on finance fees if you choose a weekly plan.
Advantages to online lender Behalf include a fixed monthly rate to make your budgeting easier. In addition, there is a discounted rate option if you select weekly payments.
Disadvantages include higher fees if you give your clients longer payment terms. As a result, a business will suffer a penalty for providing better payment terms to its customers.
For companies just starting out, allowing for longer payment terms for customers can help to convert one-time customers into regulars. But because Behalf effectively penalizes a company for providing longer terms, this is one strike against using them.
That is, if your company is a startup trying to build a reputation with your clients.
They sell office, packaging, and cleaning supplies. Their products also include toner, office furniture, and even coffee and snacks. You can even get your company’s coffee machine through them.
Quill reports to Dun and Bradstreet. You have to place your initial order first unless your D & B score has already been developed. Often, they will place you on a 90 day prepayment schedule.
In addition if you order products monthly for three calendar months, they will typically approve you for a Net 30 Account.
The easiest way to keep your scores high is to know what those scores are in the first place.
Know what is happening with your credit. Make sure it is being reported and address any mistakes as soon as possible. Get in the practice of taking a look at credit reports and digging into the details, and not just the scores.
We can help you monitor business credit at Experian and D&B for only $24/month. See: https://www.creditsuite.com/business-credit-monitoring. Update the data if there are errors or the details is incomplete.
So, what’s all this monitoring for? It’s to contest any problems in your records. Errors in your credit report(s) can be corrected. But the CRAs typically want you to dispute in a particular way.
Disputing credit report inaccuracies normally means you mail a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never send the original copies. Always mail copies and retain the original copies.
Disputing credit report mistakes also means you precisely detail any charges you challenge. Make your dispute letter as clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.
Always use credit sensibly! Don’t borrow more than what you can pay back. Track balances and deadlines for payments. Paying on schedule and fully will do more to elevate business credit scores than nearly anything else.
Growing company credit pays. Great business credit scores help a company get loans. Your lender knows the business can pay its financial obligations. They understand the small business is authentic.
The company’s EIN connects to high scores, and lenders won’t feel the need to demand a personal guarantee.
Business credit is an asset which can help your small business for many years to come.
Acquiring merchant accounts for small business credit signifies that you are on your way to acquiring excellent business credit.
Once you have more than five vendor accounts and they are all reporting with the bigger business credit bureaus, then you can start attempting to get store credit. These should easily get you started.
Once there are 5 – 8 or more vendor trade accounts reporting to at least one of the CRAs, progress to revolving store credit. These are service providers such as Office Depot and Staples. Such companies are more likely to have items you need.
Use the business’s EIN on these credit applications.
Vendors who help build business credit include Lowe’s. They report to D&B, Equifax and Business Experian. Lowe’s wants to see a D-U-N-S and a PAYDEX score of 78 or better.
Are there 8 –10 accounts reporting? Then progress to fleet credit. These are businesses such as BP and Conoco. Use this credit to purchase, repair, and take care of vehicles. Also, make certain to apply using the business’s EIN.
Vendors who help build business credit include Shell. They report to D&B and Business Experian. So they need to see a PAYDEX Score of 78 or better and a 411 company phone listing. Shell might claim they want a specific amount of time in business or revenue.
But if you already have adequate trade lines, that won’t be needed and you can still get an approval.
After that, the next stop is cash credit. These are companies like Visa and MasterCard. Keep your SSN off these applications.Use your EIN instead.
One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or more and 10 trade lines reporting on your D&B report.
Also, they want a $10,000 high credit limit reporting on D&B report (other account reporting). And they want you to have an established corporation.
Vendors who help build business credit are businesses such as Walmart and Dell. And there’s also Home Depot, BP, and Racetrac. These are normally MasterCard credit cards. If you have 14 trade accounts reporting, then these are doable.
Use your credit responsibly and start with the vendors who help build business credit.