Module 4: Vendor Credit Lines
Optimizing your business credit requires obtaining vendor lines of credit on Net 15, 30, 60 or 90 day terms.
Step 4
In this module you’ll find your business various types of vendor lines of credit for products and services that add value, saves cash flow and builds your business credit.
Vendor Credit Lines
A vendor credit line is when a company (supplier/vendor) extends a line of credit to your business on "Net 15, 30, 60 or 90" day terms. What this means is your company can purchase their products or services up to a maximum dollar amount and you have 15, 30, 60 or 90 days to pay the invoice in full. So if you have a Net 30 account with a vendor and purchase $300 worth of products today, then that $300 is due within the next 30 days.
***Special Note***
In Module 3 you checked whether or not your company was listed with the business credit reporting agencies. Your aim at this point is to establish at least 5 reporting trade lines with all three business credit agencies. If you already have 2 reporting tradelines then you would need only 3-4 more from this step, not 5 new ones. The goal is to have a total of at least 5 reporting trade lines before proceeding to Module 5.
Facts You Should Know
- You can obtain products and services your company needs and defer the payment on the purchase for 30 days. This is called a "Net 30 account" and helps conserve cash flow.
- When your first Net 30 account reports to agencies such as Dun & Bradstreet then your report will reflect that new trade line. For Experian Business and Equifax Small Business this will activate a company credit file if one is not yet established.
- Some vendors will approve your business for Net 30 payment terms upon verifying that your company simply have an EIN number and a 411 listing.
- Always apply for vendor based credit without using your social security number. Although some vendors may require it and even tell you that they need to have it. Submit your credit application first without it.
- Some vendors may require an initial prepaid order before they can extend a line of credit to your business.
- Prior to moving to Module 5 your business should have at least (5) trade lines reporting with all three major agencies for maximum impact (Dun & Bradstreet, Experian Business and Equifax Small Business). The goal is to acquire credit from vendors and suppliers that will help you grow your business while at the same time building your business credit reports.
- Pay your Net 30 accounts 10+ days ahead of the due date. Paying better than terms will help your business achieved a 90-100 Paydex® Score.
- During this stage of the process you must be patient and allow time for the vendors' reporting cycles to get into the reporting system. It typically takes 3 cycles of "Net" accounts reporting to build credit scores.
There are over 500,000 vendors extending credit to businesses, but less than 6,000 actively report to the business credit reporting agencies. For the vendors that don't report, you can still use them as trade references on future credit applications as well as add them to your D&B file which we covered in Module 3.
In this module you will have the option to access our highly researched database of reporting vendors. You will be able to see what each vendor requires for credit approval so be sure to only apply if your business currently meets the requirements.
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Task to Complete
By moving onto the next step you have read and understand all the above facts about vendor credit lines.
