Managing cash flow and building a solid business credit profile are two of your most important duties as a small business owner. The Federal Reserve reported in it’s 2015 Small Business Credit Survey that 25% of startups say cash flow is their number one business challenge. Yet, when businesses try to borrow, they often don’t qualify for the money they need. The same Federal Reserve study showed that 28% of business loan applicants didn’t receive all of the money they requested because of lack of credit history.
Fortunately, there’s a tool that can help you to both solve cash flow problems and establish credit for your business at the same time. The tool is vendor accounts.
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Build Business Credit Faster
*You get free access to your business credit reports and scores when you sign up for a free Nav account. Checking won't hurt your credit scores.
By clicking "Sign Up" above, you confirm that you accept the Terms and Conditions, acknowledge receipt of our Privacy Notice and agree to its terms.
What Are Business Vendors?
A business vendor supplies goods or services to another business. If you run a clothing manufacturing company, for example, a vendor might supply you with cloth, equipment, and any other supplies you need to make your final product. If you own a construction business, you might purchase lumber, nails, tools, and equipment from a series of vendors as well.
Vendors are often willing to extend short-term credit to the companies who purchase supplies from them. This is called trade credit or vendor credit. It allows your business to get the supplies or services you need now but pay for them at a later date.
Not only can vendor accounts help your business’ cash flow by letting you buy now and pay later, they can also be an effective way for your company to establish business credit history. In fact, even if your business is new, you might be able to qualify for vendor accounts.
There’s another solid perk you may be able to enjoy when you open vendor accounts. Many vendors don’t require personal credit checks nor personal guarantees. This makes it easier to reduce your personal liability while you’re trying to establish business credit history.
Different Types of Vendor Accounts
Vendors extend different types of trade credit to their customers. The most common types of trade credit are as follows:
The accounts above are named based on how quickly you have to pay a vendor in full for the supplies or services you purchased. Net 60 vendor accounts specifically are a type of trade credit that allows you to pay back a vendor or supplier 60 days from the date of invoice.
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List of Net 60 Vendors
Typically, it’s easier to find net 30 vendor accounts from companies that are willing to extend trade credit to your business. Net 60 terms are not as commonly offered by vendors.
The good news is that net 30 accounts can work very well when you’re trying to build business credit. If, however, you’re looking for net 60 terms to help stretch company cash flow a little farther, here are two options you might want to consider.
Brex Card for Ecommerce
On the surface, the Brex Card for Ecommerce might look like any other revolving small business credit card you keep in your wallet. However, the way the Brex Card operates makes it similar to vendor accounts in a few ways.
Most notably, the account offers net 60 terms. So, you can take a full 60 days to pay your bill and help extend your cash flow, if needed. (Keep in mind, early payments on accounts may boost your credit scores.)
Your social security number isn’t required to apply for a Brex Card. However, your business will need to be at least one year old and you need to be making $50,000 or more in monthly sales to qualify for an account.
Advantages of an Account with Brex Card for Ecommerce
- No personal guarantee is required, and your personal credit won’t be impacted by opening an account.
- Receive net 60 credit terms.
- Enjoy a potential credit limit of 50–100% of your future monthly sales, up to $5 million.
- Account reported to Experian and Dun & Bradstreet.
Nav gives the Brex Card for Ecommerce an 8 out of 10 rating. You can check out the full review here.
FundboxPay is another revolving line of credit that works like a net 60 account in several ways. When you set up an account, you can send a payment to a seller (aka supplier or vendor) for an interchange fee. You get 60 days to pay back the money directly to Fundbox with no interest. If you want to take longer than 60 days to pay, additional fees (from 5.99%–19.42%) may apply.
To qualify for a buyer account, you’ll need to be a business registered in the United States with a business checking account. FundboxPay will review your business’ transactions to “assess the health of your business” and determine how much credit to offer you. Your personal FICO Score may also be checked, so expect to supply your Social Security number at the time of your application.
Advantages of an Account with Fundbox
- There is no minimum credit score required to qualify.
- Receive net 60 credit terms to pay vendors and suppliers, even if those companies don’t offer terms themselves.
Unfortunately, Fundbox doesn’t currently report to the credit bureaus. So, while an account might help you to manage your business cash flow, it won’t help you to establish positive credit for your business.
Nav gives Fundbox a 7 out of 10 rating. You can check out the full review here.
How to Choose the Right Vendor Account
When choosing a vendor account, it’s a good idea to pause and ask yourself what goals you’re trying to achieve. By asking yourself the following questions, you can narrow down the right vendor accounts for your company.
- Are you trying to stretch your business’ cash flow? A net 60 account will probably be more attractive to you than a net 30 account which requires a faster turnaround for payment.
- Do you want to build credit for your business? Consider vendor accounts that report to a commercial credit reporting agency. Vendor accounts with net 30 payment terms are more common in this space.
- Would you like to establish business credit with all three of the major bureaus (Dun & Bradstreet, Experian, and Equifax)? You may need to open multiple vendor accounts that report to different business credit bureaus to accomplish this goal.
- Do you need easy-approval vendor accounts because you’ve never established credit in your company’s name before? Finding vendors with less strict approval criteria should be a priority.
Once you identify the features that matter most to you (e.g. reports to one or more credit bureaus, easy approval, etc.), you’ll be better prepared to begin your search.
You can use the BusinessLauncher tool in your free Nav account to help you look for vendors that meet the criteria that’s most important to you. Nav’s MatchFactor technology can also help you discover your approval odds, based on your business credit profile, before you apply.
Don’t forget, you can also ask your existing suppliers if they’re willing to offer terms which will allow you to pay for goods or services at a later date. If you already have existing vendor accounts that are set up with net 30 terms, you can also ask suppliers if they’re willing to make a change. You might be able to secure lengthier payment terms and transform your net 30 accounts into net 60 accounts simply by asking.