How To Build Business Credit Using Net 30
Net 30 accounts can help you build business credit when used properly. In this article, we'll define Net 30 and explain why you may want to take advantage of it for your business.
This guide will serve you whether you're an established business or just starting out.
What Is Net 30?
Net 30 accounts let you pay vendors within 30 days of receiving goods or services, as opposed to paying before or immediately after the sale. The vendor is extending a 30-day line of credit that allows you to buy now and pay within 30 days.
Oftentimes, the vendor will report your payments to commercial credit agencies to contribute to your business credit. These accounts are also known as vendor, supplier, or trade credit.
Think of it like how you pay utilities. You don't pay utilities immediately, because charges are accruing constantly and it would be a hassle to report the cost daily, hourly, or by-the-minute. Instead, every month the utility company reports how much you owe for the previous month's consumption and you pay within a certain period – usually 30 days.
Why Use Net 30 Accounts?
There are several reasons a business can choose to open Net 30 accounts with vendors, ranging from practical to strategical.
Simplify business accounting. Having 30 days to pay an outstanding invoice can give your business time to process purchases accurately and manage workflows. You may need to confirm the quantity and quality of orders, run them through a purchase order system, and have your accounting team file paperwork.
Manage complex cash flow schedules. Depending on the complexity of your business, you may have natural peaks and valleys in cash flow every month due to sales rhythms, payments processing, and accounts receivable. Net 30 allows you to continue business throughout.
Buy materials to create your product. If you have a steady track record of producing and selling your product quickly, Net 30 may enable you to pay for materials after closing your sales, so that the remainder is profit.
Better calculate your business budget month-to-month. Costs like office supplies, printing, or consulting services can vary each month. Make business budgeting easier by knowing how much you'll be paying vendors 30 days ahead of time.
Establish business credit to apply for leases and business loans. Both applications typically require credit checks. If you're a new business, opening at least 5 Net 30 accounts can establish the credit you need.
Develop business credit without running up debt and interest payments. Net 30 accounts can contribute positively to your business credit without requiring that you pay interest. And because you're making regular business purchases that you pay in full within 30 days, you're unlikely to gather debt you can't afford to pay off.
Build business credit as a new business. Unlike other lines of business credit, the barrier to entry for Net 30 accounts is low. Vendors typically give you a small starter line of credit, $500-$1,000, and increase it as you continue to make purchases.
Who Offers Net 30 Accounts?
Vendors offering B2B (business-to-business) products and services, such as:
- Office supplies
- Printing and labeling services
- Creative consulting
- Wholesale and retail products
Apply To The Right Vendors
To build business credit, apply to vendors who report to one of the three main business credit reporting agencies: Dun & Bradstreet, Experian Commercial, and Equifax Small Business.
Over 500,000 vendors sell in the marketplace, but less than 10,000 report to agencies.
Top 8 Vendors For Net 30 Accounts
The following eight vendors are well-known for offering Net 30 accounts. See a comprehensive list of 24 Net 30 vendors.
|Name||What They Sell||Requirements & Initial Account Size||Credit Agency Used||Application|
|Strategic Network Solutions||Computer and information technology products||A $75 downloadable product for a $2,000 account||Experian Commercial||Link|
|Summa Office Supplies||Office products and supplies||$60+ initial purchase for a $2,000 account||Dun & Bradstreet||Link|
|Quill||Office supplies, cleaning, paper ink and toner products||One initial purchase for a $500-$1,000 account||Dun & Bradstreet||Link|
|Newegg Business||Consumer electronics||Application must be approved for a $500-$1,000 account||Dun & Bradstreet||Link|
|Grainger Industrial Supply||Hardware, cleaning & plumbing supplies, power tools, appliances, and safety equipment||Application must be approved for a $500-$1,000 account||Dun & Bradstreet||Link|
|Uline||Shipping boxes, office furniture and supplies, food service packaging, kitchen, janitorial, food service, and safety warehouse supplies||Application must be approved for a $250+ account||Dun & Bradstreet||Link|
|Crown Office Supplies||Office supplies, office artwork, computers and snacks||$99 annual fee + application approval||Dun & Bradstreet, Experian Commercial, Equifax, Credit Safe, and NACM||Link|
|The CEO Creative||Office supplies, branded items||$89 annual membership + application approval||Equifax, Dun & Bradstreet, NACM and Creditsafe||Link|
|Creative Analytics||Marketing services, physical products||$79 annual fee + application approval||Equifax and Creditsafe||Link|
Best Tips For Using Net 30 Accounts
Net 30 accounts can be a great practical and strategic asset for your business. Use them well with these top tips.
Have the cash flow to cover the purchases. Going back to our utilities example, you need to pay your electricity or water bill. Think of Net 30 accounts the same way. Don't buy unless you know you'll be able to pay the invoice in 30 days.
Pay as soon as possible. You don't need to take the full 30 days to build business credit. Pay Net 30 invoices as soon as possible to avoid holding onto debt. Paying early is typically rewarded. A common discount is called 2/10 Net 30, where you receive 2% off for paying within 10 days.
Plan your cash flow well. We mentioned cash flow schedules can be complicated. Keep on top of your upcoming cash flow so you're not left with outstanding invoices and no cash to pay them. Late payments negatively affect your business credit and can dig you in a hole.
Don't provide your personal information when applying for vendor accounts. Net 30 accounts should be based solely on your business information and impact your business credit. At times you may need to provide a personal guarantor, which is fine as long as there's no default that would affect their personal credit or finances.
Use Net 30 accounts immediately and consistently. If you're looking to build credit, one purchase won't cut it. Establish relationships with vendors you need to purchase from regularly.
How To Apply For Net 30 Accounts
If you're already making regular business purchases and would like to open Net 30 accounts for practical or strategical reasons, get your business information in front of you. To increase your chances of approval, you'll need the following in place beforehand:
1. A legal entity. Your business is set up as a corporation, LLC, or a sole proprietor registered with your Secretary of State.
2. Good standing with your state. Search your business on your state's website and make sure your annual report filings are up-to-date.
3. Your EIN (Employer Identification Number) and D-U-N-S (Dun & Bradstreet) Number. These are used to identify your business with business credit reporting agencies. Learn how to apply for each.
4. A separate business bank account. Make sure your business account is separate from your personal, and have your account information handy.
5. Your business contact information. Have it nearby for the application.
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