Vendor credit

One important consideration when operating a small business is to determine if you need vendor credit lines.Vendor credit lines exist to provide businesses with a way to access the goods and services they need to manufacture their product or services.It is not prudent or realistic to assume that you can operate a business of any considerable size on a cash only basis. Today's technology will force you to have vendor lines of credit that can provide records of what you have spent and where you have spent it.Having vendor credit lines with your suppliers will allow you to purchase quickly the goods you need to maintain your business.In addition another benefit to having vendor credit lines is that you can then access suppliers who are out of your local geography.No longer do you have to settle for what you can just physically access if you have a vendor credit line with a supplier across the world or across town you can quickly get what you need.

Vendor credit lines are typically given for "net 15", 30 or 60 day terms. These terms can be determined when the line of credit is established and usually can be set to accommodate your cash flow needs.This type of credit line can be used as a revolving credit account for your business for any products and services that your business needs.

As of today there are over 500,000 vendors in the United States who are currently extending business credit for their products and services. Of those vendors there are only 6,000 that will report your payment history to the business credit reporting agencies. And in that group there are only about 1,000 that will extend business credit without requiring your personal guarantee and without basing it on your personal credit scores. Therefore it is crucial that you have the best possible credit worthiness.

Vendor credit lines normally have no interest charges. Keep in mind however that before a vendor extends credit they look at your business's credit report for approval. Business financial experts recommend that you take a look at both your personal and business credit scores before applying for credit.This way you can know well beforehand if you have problems or corrections that need to be made.In addition this will save you the embarrassment of being turned down by a supplier with who you may need to do business with in the future.

You should keep in mind that most vendor credit lines are unsecured.Unsecured credit means your business will not be required to provide collateral to secure them. Some vendors may require a deposit and then float the balance for the agreed upon time period. You should have a clear understanding of all the terms of your vendor credit line before signing any credit agreement.

Business financial experts also have recommendations on how you should manage your vendor lines of credit. It is advised that for your business to have a strong credit profile it must have a least 5 vendor lines of credit to build a strong a credit history.By having 5 vendor lines of credit this then sets the stage for most business credit card (revolving) accounts and bank lines. Keep in mind however that this credit foundation will be made of sand if the vendors that extend credit to your business do not report to the business credit reporting agencies. It is crucial that all your vendors report your good payment history, not just if you default.It is very important that you make sure that these vendors will report all activity to the credit reporting agencies beginning from when the line of credit is extended.