How startups can use trade credit to scale faster


The benefits of establishing a solid financial history and a good business credit rating are widely recognized, especially among those who have been in the business industry for several years.

Having said that, this usually involves a significant amount of time, capital, and procedures, and is therefore still avoided by many business owners in the United States.

More often than not, businesses tend not to even consider building a solid credit score history until they need to apply for business loans or credit extensions.

This is a very impractical approach to adapt according to The Really Useful Information Company (TRUiC), as it will (likely) mean that companies will have to significantly postpone any business venture requiring significant financial assistance until another moment. – where they have sufficiently built up their credit.

Below, we’ll take a look at the best ways to do it for businesses in 2021.

1.Negotiate favorable terms

Ultimately, every business needs money. Negotiating better terms for yourself and your business with vendors can go a long way in building your business’s credit score adequately quickly. Indeed, this will allow you (in general) to repay the loans you contract more quickly and with more reliability.

Whether you own a premier business or just a small startup, the way you deal with your suppliers will reflect: a) credibility and b) reliability – especially vis-à-vis future creditors, and therefore may mean that (in the future) you will be in a position that will allow you to obtain lower loan interest rates when negotiating financial-related contracts.

2. Work with your lender

In addition to being able to negotiate better terms for your business, liaising with your lenders can also help in that it will allow you to quickly and accurately understand the ins and outs of business credit.

Lenders may also choose to offer your business an installment arrangement; Simply put, it allows your business to pay off its debt in installments over a period of time. By doing this, your business credit score will automatically improve (assuming you don’t miss any payments due).

While this is undoubtedly one of the best options for any business owner with “small business debt” according to TRUiC, the added benefit of improving your credit score in a holistic way. in fact one of the most frequently cited steps in most “how to build business credit guides.”

3.Open new accounts

Opening new business accounts can be one of the easiest ways to fix your business credit score quickly and properly. This is because a variety of lenders tend to offer commercial lines of credit; these can be used to finance: a) new business equipment, b) loans to other businesses, and c) any other business related improvements that will significantly affect the nature of day-to-day operations of your company.

That said, it should be noted that these commercial lines of credit are usually associated with exorbitant interest rates. This means that you will inadvertently increase your opportunity cost significantly.

4.Establish trade credit with Tradelines (Net-30 accounts)

After building strong business credit reports for a reliable period of time, you can (according to TRUiC) reap significant benefits by liaising with a variety of “mainstream” financiers – such as banks, and acquiring multiple lines of credit. credit.

This can provide a variety of benefits for your business, including: a) demonstrating that you are financially credible in the eyes of future lenders and potential investors, b) proliferating your total available funds significantly, and c) flexibility increased – due to the possibility of using a variety of different trade lines for different purposes.

From a practical standpoint, nothing would prevent you from using your additional business lines to further improve your business credit rating, thereby strengthening your business’ position as a “low risk” option for your business. potential lenders.

Final thoughts

As briefly touched upon above, the importance of building a strong business credit score history cannot be understated.

Specialty companies like Obsidian Bear Funding (TRUiC’s # 1 choice) can offer a variety of products and services that enable new business owners to build and maintain a good credit rating from the start.

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