Business Tradelines: Everything You Need to Know
By Nick Mann
Your business credit impacts everything from purchasing inventory and hiring staff to negotiating favorable repayment terms with suppliers and accessing future capital to fuel growth.
Like personal credit, business credit is something you build over time. But one of the best ways to accelerate the process is with business tradelines.
What Are Business Tradelines?
A business tradeline is any credit account given to a business that shows up on a business credit report. In some cases, this account may also appear on a personal credit report, too.
One of the more common examples is a vendor tradeline given by a vendor or supplier. Rather than having to immediately pay the balance for products or services, it can be paid at a later date.
With this arrangement, a small business and vendor will agree to payment terms such as net 30 or net 60, which determines when the payment is due.
If it’s a net 30 account, for instance, the money is due within 30 days after receiving the products or services. If it’s a net 60 account, the money is due within 60 days, and so on.
Because the money isn’t due upfront, this gives a business some financial wiggle room to get what it needs without having to pay the invoice right away.
There’s also a financial tradeline which includes a business credit card or loan where payment history appears on a credit report.
As you might imagine, business tradelines can be extremely helpful for improving cash flow. And that’s important given that a lack of cash flow is a leading factor in the failure of 82% of businesses.
Besides improving cash flow, however, there are some other key benefits.
Why Are Business Tradelines Important?
First, promptly paid business tradelines can help you build business credit. Because tradelines tend to have a quick turnaround time (30 days or so), this allows you to rapidly establish business credit in a way that’s difficult to do otherwise.
Assuming you pay your invoices on time (or in advance) and maintain a low credit utilization ratio, your business credit score should quickly improve.
And this can have a positive ripple effect where it becomes easier to obtain additional funding through other lenders.
Not to mention, this should help you get better loan terms. If, for instance, you wanted a new business credit card, you could likely get a lower interest rate because of your improved business credit score.
While there can be many reasons why business owners seek out tradelines, the ability to improve their credit history is one of the most common.
Next, business tradelines offer an excellent opportunity to build relationships with vendors and suppliers.
As long as there’s never a late payment, you can potentially partner with vendors for years to come, and they can supply you with the goods or services needed to fuel long-term business growth.
Finally, primary tradelines tend to have a higher approval rate than many other business loan options. This is something worth noting if you’re a newer startup just trying to get off the ground.
Things to Know About Business Tradelines
Shelf Corporations vs. Legitimate Tradelines
One term you’ll likely encounter when researching business tradelines is “shelf corporations.” In simple terms, a shelf corporation is a company that’s launched with the intention of opening accounts and letting it sit “on the shelf” for several years to build a credit profile.
Once the company has “matured,” it’s then sold to another business with the promise of gaining access to credit lines.
In reality, however, a shelf corporation doesn’t actually have any real assets and may not even be a legitimate business. This isn’t to say that shelf corporations are necessarily illegal (although some certainly are), but many do engage in unscrupulous business activities.
If you buy a shelf corporation, you’re basically purchasing the credit profile of another company.
While this could potentially give you a longer credit history and access to higher credit lines, it’s generally not something you want to get involved with.
That’s because creditors are well aware of this concept. And many will close your account and deny you from applying for future accounts if they suspect you’re using a shelf corporation for credit hacking.
The cost is prohibitive, too. A single shelf corporation can cost thousands of dollars, and there is no guarantee that it will enable you to access business financing.
On the other hand, making payments on legitimate tradelines doesn’t involve any schemes like this and is above board. Therefore, these are the types of tradelines you want to bolster your credit rating.
Financial vs. Vendor Tradelines
As we touched on earlier, there are two types of business tradelines — financial tradelines and vendor tradelines.
Financial tradelines include things like business credit cards and loans where the tradeline appears on your credit report. Vendor tradelines involve accounts with vendors or suppliers with repayment terms of net 30, net 60, and so on.
You can think of vendor tradelines as supplier credits where you can get products or services in advance and pay the invoice at a later time. (This is also known as trade credit.)
Note that both types of tradelines report information. This can include when you open an account, the credit limit, how much is owed, and most importantly, your payment history.
That’s why you should always be diligent about paying your balance on time, or, if possible, in advance.
This brings us to our next point.
Know Which Credit Bureaus They Report To
Companies can report the information just mentioned to different credit bureaus. The three business credit bureaus that are the most well-known are Dun & Bradstreet, Experian Business, and Equifax Business. There are also others such as Creditsafe and Ansonia.
Dun & Bradstreet, Experian, and Equifax are usually considered the “big three” business credit bureaus and the ones most businesses want to have their payment history reported to.
Note that not every business tradeline account will report to the three major business credit bureaus, as many will only report to one or two. For that reason, you should always check which specific bureaus a potential lender reports to before applying for financing.
You should be able to find this information on their website. But if there’s any uncertainty, be sure to contact the company directly via customer service before taking the next step.
The more business credit bureaus your business tradelines report to, the better. This is critical to optimizing your credit report and achieving good credit.
How Do I Get Tradelines for My Business?
1.Use eCredable to Build Business Credit with the Bills You Already Pay
A great place to start is to ask your current vendors or suppliers if they report payments to the business credit bureaus.
If they do, you can likely leverage your existing relationships to get business financing from them with favorable terms and build your credit. They may not even require a credit check or personal guarantee if you’re in good standing.
If your current vendors or suppliers don’t offer tradelines, you’ll want to consider switching to new ones that do and that report to Dun & Bradstreet, Experian, and Equifax. That way you can start taking advantage of credit reporting and raise your credit score.
It’s just a matter of finding vendors or suppliers with solid terms and a big enough credit limit that fits your needs. From there, be sure to always pay your invoices on time or in advance.
If you’d like to build business credit without changing suppliers, consider eCredable Business Lift. It reports your bill payments to the business credit bureaus for a very low cost. That way you can build business credit without seeking out new vendors.
Many businesses that use eCredable are even able to improve their credit scores in as little as one week. Just by signing up for eCredable Business Lift, your monthly subscription is automatically reported to D&B, Experian, and Equifax providing you with one tradeline just for using the product!
As for financial tradelines, this simply involves applying for business credit cards or loans that report to each major credit reporting agency.
Financial tradelines are typically more difficult to qualify for than vendor tradelines.
2. Get a Financial Tradeline with FairFigure
FairFigure offers you the ability to tap into two tradelines with one $30/month subscription.
FairFigure’s Business Credit Monitoring solution helps you stay on top of your business with comprehensive monitoring and reporting tools. They report this vendor tradeline to CreditSafe, Equifax Commercial, the SBFE, and their Foundation Report.
You can also tap into a financial tradeline with the FairFigure Capital Card. The FairFigure Capital Card is an EIN-only card that extends financing based on your monthly recurring revenue.
Eligibility requirements are fair. All you need is a business that generates at least $2,500 and has been operating for at least three months. You get flexible payment terms and cash back benefits. They also report to the same credit bureaus as listed above.
Sign up with FairFigure to maximize your credit-building activity!
How Many Tradelines Does a Business Need?
The number of tradelines your business needs depends on what type of financing you want to qualify for. But to start, you’ll want around 10 tradelines reporting to each of the three major business credit bureaus.
That should be a high enough volume to create a solid payment history, which lets lenders assess your reliability as a borrower in the future. In turn, this should help you establish adequate business credit and achieve a favorable business credit score.
Just note that it’s important to know which business credit bureaus they report to. Tradelines that report to three or more bureaus will help raise your business credit score more quickly.
And as we mentioned before, a big part of boosting your business credit score is following best practices like making payments on time or in advance and maintaining low credit utilization.
Also keep in mind that the higher the credit line you get, the easier it should be to raise your credit score because this helps you naturally lower your credit utilization.
Say, for example, one business credit card had a limit of only $20,000, while another had a limit of $50,000. If you used $10,000 to fund your business on the $20,000 card, you would have a 50% credit utilization ratio on that card. This is considered high.
High credit utilization isn’t a recommended practice and could hurt your business credit scores.
It is recommended that you keep your credit utilization as low as you can.
FAQs
Can You Buy Business Tradelines?
While you can’t really “buy” business tradelines, you can buy a shelf corporation. And as we discussed earlier, that’s not a good way to go about building a solid business credit history.
However, you can buy business credit builder products that report legitimate bills and credit accounts. eCredable Business Lift is a great example of a product that small business owners can use that reports to each major business credit bureau and can significantly improve their credit score.
Are Business Tradelines Legal?
Yes, a business tradeline is completely legal and an excellent way to build your credit history as a business owner.
Just note that renting authorized user-seasoned tradelines for personal credit boosting is questionable. (Many credit repair firms sell or recommend these.)
A similar business credit practice is buying a shelf corporation, which is something we advise against.
At the end of the day, if something seems too good to be true, it probably is. But as long as you stick with a legitimate business line, you should be in good shape.
What Are Examples of Tradelines?
A business tradeline is any tradeline that appears on your business credit report and can include financial tradelines and vendor tradelines.
Examples of financial tradelines are credit cards and business loans.
Examples of vendor tradelines include net 30 vendor accounts, net 60 accounts, and so on. This can also include a supplier trade credit where you purchase goods or services and repay it at a later date and the vendor reports it to a credit bureau.
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