Many small businesses have trouble attaining lines of credit or loans because they don’t have established credit scores.
“To apply for credit and the best place to start is with suppliers. Many types of suppliers, including major brands, extend lines of credit to businesses like yours giving you the opportunity to finance purchases and conserve your company’s cash,” according to the SBA. “You can obtain products like office supplies, computers and marketing materials with payment terms ranging from net 30 to net 60 days.”
“You should focus on applying for credit with suppliers that provide products and/or services your company needs in order to make regular purchases using your credit line. By paying invoices on time you will build business credit history and increase your company’s creditworthiness.”
The catch-22 is that you need successful transactional histories to increase credit scores, but most suppliers and vendors are hesitant to conduct business on credit if your credit scores are too low or nonexistent.
That said, there are a few things small businesses can do to get over these initial hurdles.
1. Remit Early Payments
Many manufacturers and suppliers offer discounts for paying in cash or for paying early.
Taking advantage of deals, such as “2% 10, net 30” , can help a firm in multiple ways. Suppliers are more inclined to give this type of deal than a cash discount, and these deals are a great way for you to save money and build credit if your cash flow can sustain early payments.
2. Pay off Liabilities Before Maturity
Many reporting agencies boost the credit scores of businesses who pay off their liabilities before they mature. This is a quick and easy way for businesses to boost their credit without creating new lines of credit or increasing their total liabilities.
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