Vendor Credit: What It Is And How It Works 

Vendor credit is the first and most accessible form of credit small businesses can attain.  

We help you understand what vendor credit is, how it functions, and how you can begin building business credit with vendor credit easily.  

What is Vendor Credit? 

Vendor credit, also known as trade credit or supplier credit, is a form of credit extended by businesses you purchase products or services from.  

It acts as a form of short-term financing during a time when businesses might have trouble qualifying for more traditional credit solutions. It also doesn’t require a personal credit check or personal guarantee.  

It enables you to purchase goods or services without having to pay for them immediately. However, it can be beneficial for you to pay for them right away (more on that later).  

If you’re a small business owner with no credit history and a need to build positive credit history and establish a credit score, vendor credit is something you’re going to be taking advantage of right away.  

How Does Vendor Credit Work? 

So, how exactly does vendor credit work? Vendor credit is quite simple. All you do to take advantage of vendor credit is: 

1. Find Vendors Offering Credit Accounts That Report  

The first step is to find vendors offering credit accounts that report to business credit bureaus. It’s ideal for your vendor to report to Dun & Bradstreet, Experian, or Equifax. Most will advertise directly on their site that they’re net 30 vendors, net 60 vendors, or net 90 vendors.  

These payment options will give you flexibility in your payback terms. Apply for tier 1 business credit vendors, which are the easiest to qualify for.   

2. Submit an Application  

The application process for businesses with vendor credit accounts is typically simple. You need to provide them with your business’s information, EIN, and contact information.  

Turnaround times are often quick, allowing you to take advantage of your net 30 terms immediately.  

3. Purchase Products or Services  

Once you have been approved for a vendor credit account, shop as you normally would. Then, when you reach checkout, select “pay with net 30 terms” or a similar option to receive vendor invoices from the business that you will pay off later.  

Keep in mind that vendors will approach this first step differently. Some vendors require you to pay half on your first order or will engage in other practices to make sure you’re a reliable business first. Then, you can start using your net 30 terms as usual with the next purchase order.  

Think of it like using a business credit card, only you pay in full when the billing period rolls around. The credit amount you receive with your credit account from suppliers may vary. 

4. Pay On Time or Early  

To build business credit, it’s crucial that you pay on time. Never make a late payment. That being said, it can also be beneficial to pay early. The PAYDEX Score provided by Dun & Bradstreet uses data from payment history with suppliers and vendors.  

If you make the bill payment early, it can help you bump your score up. Whether you have net 30 terms or net 90 terms, paying off your debt early helps you get closer to a perfect score of 100.  

5. Build Business Credit Over Time  

Each vendor bill payment will help you build your business’s credit and extend your business’s credit history. Vendor credit will also help you boost your cash flow. The more vendor accounts you can apply for and manage, the faster the results will be.  

However, take care to read the fine print. Some vendor accounts are free. Other vendor accounts require annual fees and application fees. The last thing you want to do is inundate yourself with unnecessary fees trying to build business credit.  

Vendor Credit Example 

So, what does vendor credit look like? An example of these financing options can be useful in understanding the process.  

Let’s say that you need marketing services. You may turn to an organization like NAMYNOT.  

NAMYNOT allows you to pay for marketing services with net 30 terms. They report to Dun & Bradstreet and Experian Business.  

They do require you to purchase a service and pay 50% now and 50% two days after project completion. This will grant you the ability to use net 30 terms on future purchases.  

Once you apply, qualify, and go through this first step, you can purchase marketing services with their up to $10,000 line of credit, receive your invoice, and then pay ahead of time or on time.  

It’s that simple. Whether you need products or services, all you have to do to tap into vendor credit is select the “pay later” option and pay later.  

Building Business Credit with Vendor Credit 

As stated above, there are caveats to building credit with vendor credit. These include the following:  

You must select vendors that report to business credit bureaus  

Some net 30 accounts may seem like the perfect match. For example, Amazon offers net 30 terms for businesses.  

But while you will be able to buy now and pay later, none of your payments are being reported. Review their net 30 terms and make sure they explicitly list where they report.  

You’re going to need multiple net 30 vendor accounts to start building business credit rapidly  

Some estimate that this number is around five to ten. In any case, sign up for as many as you can and manage them properly to build business credit fast.  

This will allow you to access better credit solutions that will have a larger impact and help you fund your business.  

Not every net 30 account is going to be worth your time  

If a vendor costs too much, is too difficult to get answers from, or otherwise makes the experience a hassle, chances are you can find another vendor who offers net 30 payment terms with far less trouble.  

Being picky can be useful when building business credit.  

Build Your Business Credit With Multiple Tradelines Using eCredable 

Are you looking to build business credit rapidly with multiple business credit tradelines? eCredable can help! 

eCredable helps you build business credit with the Business Lift and Business Lift+ subscriptions.  

To get you started, your monthly subscription payment is reported to Dun & Bradstreet, Equifax, and Experian to help you build credit quickly and reliably.  

Then, we work with you to turn eligible business accounts into multiple business tradelines. Whether these include phone bills, lease payments, or other business expenses, we report these to Equifax.  

Building business credit doesn’t have to be complicated. Sign up for eCredable today to start building business credit with ease!