One of the easiest ways to start building business credit is to get accounts with companies that report to commercial credit agencies. Many entrepreneurs think that means getting a loan or line of credit. Those help, but not all business owners will qualify for a business loan or line of credit, as those often require strong business and/or personal credit scores, and may require proof of business income.
So here’s a simple way to get started if your business is young, or your business isn’t making a lot of money yet: Purchase from vendors that allow you to buy now and pay later, and which then report those payments to commercial credit agencies.
Where do you find these vendors? Below, we’ve provided three that will make it easy to get started. Want more? Get a free Nav account and use the free Business Launcher tool, which provides the names of lenders and vendors that report.
First Things First
Before you jump in and open accounts, we recommend you take a few essential steps to make sure your business is viewed as legitimate. If your business is not set up as its own legal entity (such as an LLC or S Corporation, for example), consider creating one. If you decide to operate as a sole proprietor, make sure your business is at least registered with your state’s Secretary of State. You’ll also want to make sure your business has a D-U-N-S number, used to identify it in commercial credit reporting agency Dun & Bradstreet’s database. And use a business email address on your account, rather than a generic email address like Hotmail.
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While you can always purchase items from these vendors and pay with a credit card at the time of purchase, that doesn’t help you build business credit. You need to purchase on credit, as described below. Again, if you haven’t taken the time to set up your business properly, you may not get approved for credit. This free guide explains how to set up your new business the right way.
Now that you’ve been warned, here are those three vendors you can use to get started.
Grainger offers a large variety of products for businesses, including tools, plumbing supplies and safety equipment. They also offer office and janitorial supplies. There is a very wide variety of merchandise offered, so you should be able to find something your business needs.
Signing up for a Grainger account is free and easy. Just follow the instructions online. When you do, you’ll be offered the opportunity to request a $1,000 line of credit with Grainger. You simply check that box to apply. This is considered one of the easiest vendor accounts to get.
You won’t get an answer immediately if you qualify, but if you don’t hear back within a day or two, reach out to them.
Uline also offers a wide variety of products your business may need including shipping boxes, office furniture and supplies, food service packaging and kitchen supplies, and more. Shop for supplies your business needs, then at checkout you’ll be offered the opportunity to be billed, with payment due in 30 days. (That’s referred to as net-30 terms.) Use that option so you can build a credit reference. If you check out successfully, then you’ve been approved for terms.
Pay on time or early and you’ll have another credit-building account under your belt. Like Grainger, this account is considered quite easy to get. No Social Security number is requested and your personal credit scores won’t be checked.
When you open a Quill account you will be asked to fill out a profile that describes your business. That information includes the year the business was started and the industry in which you operate. (Don’t be discouraged if your business is young; newer entrepreneurs often report success getting a Quill account.) Shopping online using a Quill account is like shopping at your local office supply store, but with a huge inventory of products.
Once you find what you want to buy, add it to your cart. Proceed toward checkout and you’ll see a notice that you can order now and pay later. If approved, you’ll get net-30 terms. According to Quill, approval can take 1-2 hours during business hours, or up to a business day if you apply outside normal business hours, Monday through Friday.
Similar to the other two vendors mentioned here, you don’t need to provide a Social Security number. Quill will verify your business address before extending terms. Again, most business owners who have properly set up their business should find it to be an easy process.
Tips for Success
There are a few important caveats in this process.
First, and this is important, you do not have to run up debt and pay interest to build business credit via vendor accounts. Most vendors allow you to purchase items and pay them off in full by the due date to avoid interest. That’s perfectly acceptable when it comes to building business credit.
It is also worth noting that credit limits typically do not appear on these reports. Instead, the highest recent balance will be reported. So if you spend a very small amount you may not see the same impact as if you are able to make larger purchases. You don’t want to fall into the trap of buying things your business doesn’t need, but if you do need more expensive items consider getting them from companies that will report whenever possible, to get the added benefit of building credit.
Note that unlike personal credit, the names of your vendors will not appear on your business credit reports. Instead they will report as “business type” such as packaging. So keep track of which accounts you have opened and when; you may need to match that to your credit reports if you aren’t sure which account is coming from which vendor.
Pay early when possible. Unlike your personal credit accounts, where you can usually go online to pay your account and have your payment credited the same day, it may take longer for payments to vendors to be processed. If you mail in your payment, do so at least a week before the due date to ensure your credit reports reflect on-time payments.
It may take a month or even two before one of these accounts shows up on your business credit reports. Be patient and monitor your credit. If it doesn’t appear by the third month after you’ve opened it, contact the vendor to make sure it is properly associated with your business and to confirm it will be reported.
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