Net 30 accounts are also known as vendor credit, trade credit, or supplier credit. This type of buy now, pay later shopping allows you to purchase the products you need in advance of payment. Once your order is fulfilled, you’ll have a full 30-day billing cycle to pay it in full.
From product packing, office, and renovation supplies, to computers, company clothing, and well-prepared business plans done for you, there’s a lot you can purchase with a Net 30 account.
Building Business Credit
When starting out, getting business credit can be a difficult process, yet it’s needed to spur company growth. A lack of credit history is usually the main reason you may get denied for approval. If you have an existing business, another reason could be, poor credit history.
The solution to both of these issues is use to Net 30 vendor accounts to boost your credit score. By making steady purchases and paying them off within the 30-day window, your activity will get reported to major credit bureaus, thus helping increase your business credit score.
As long as you pay your Net 30 bills on time, the vendor’s monthly reports to Duns & Bradstreet, Experian, and Equifax will build up your good business reputation.
The more positive activity you have in your reports, the easier it will be to secure future business loans and credit lines.
How It Works
Net 30 vendors will usually work you with right away without looking much into your credit history or business credit score. At times though, they might ask for the business owner’s personal credit score, or do a soft pull to see if there are any glaring issues in your reports.
A Net 30 vendor account is also called trade credit, or supplier credit, and companies that offer them usually collaborate with businesses of all sizes, and in all areas. In short, they become a lender to their customers for 30 days with the purchase process centered around a buy now, pay later billing cycle.
The 30 in Net 30 refers to the number of days, starting from the invoice date, that your payment is due. At times, a vendor could even extend this to 45 or 60 days.
Pay on Time
For the good of your business credit score, you must ALWAYS pay your Net 30 invoices on time. It’s not the interest or the late fees that are the issues, is that they’ll report all late payments to the credit bureaus when your bills are not paid on time.
Paying on time will ensure you get that all reporting is positive and in turn, this will help you build a strong credit rating that will lead to more business lending opportunities.
The Dun & Bradstreet credit scoring system encourages early payment, and the sooner you pay your invoice, the bigger your Paydex score increase is per transaction.
In most situations, Net 30 vendors do not charge any interest, as long as you pay on time. If payment is late, however, look out, as both the interest and late fees found in the fine print can be steep.
The whole point of using Net 30 accounts in regards to business credit and loans, however, is to boost your credit score. So, always make sure you pay on time, or early where possible, so each time a vendor reports your purchase activity to the major credit bureaus, they will be providing positive feedback, rather than negative.
Some vendor accounts might have minimum purchases limits attached to them, so you’ll have to spend a certain amount of money to be able to do business with them.
At times, maximum purchase limits, or access to full product catalogs can be also restricted until you’ve proven to be trustworthy, and your account has long been in good standing.
Some Net 30 vendors might also require you to sign up for a membership plan before placing your first order. They do this because it takes time to set up an account for you, as well as, to report all of your purchases to the major credit bureaus.
Good Customer Discounts
As long as you’re a good customer whose account is in good standing, you might also qualify for special discounts geared to keep your business. If you sign up for a higher costing membership plan, these too generally lead to more discounts.
While discounts are nice, remember, the goal is simply to use Net 30 accounts to boost your business credit score, so only buy what you need and can afford to pay for it on time.
Before applying for Net 30 vendor accounts, you will need to have a legitimate business profile set up. The more complete your profile is, the easier it will be to get vendor account approval.
Once you have an Employer Identification Number (EIN) you’ll generally qualify for roughly 20% of available Net 30 vendor accounts. An EIN generally implies that you are legitimate, since this number is issued by the IRS and requires you to report business income.
Register Your Business
Filing taxes in our own name, as a sole proprietor rather than a business name, can be problematic when it comes to Net 30 vendor approval. Anyone who generally does a decent amount of legitimate business will register themselves, as an actual business.
The most recommended incorporation types at the beginning of your business activity are a Limited Liability Company (LLC), S Corp, or C Corp. If you’d still prefer to be a sole proprietor, you can register a business name as a legal entity, known as a DBA (Doing Business As), which again will add legitimacy to your vendor account application.
So the saying goes. You can’t do business if you be can’t be found. Most Net 30 vendors’ account applications will require your business to be easily found in 411.
If you don’t already have a business phone number, now is the time to contact your local phone service provider and get one. If you use your cell phone as your main point of contact, then your cellular service must be registered under your business name rather than your personal one.
The fact you WANT vendors to report your purchase activity to D&B each month, also means you absolutely NEED to be registered first.
Registration of a DUNS Number is free and easy with a quick online application on the dnb.com website. If you’re an existing business and unsure if you already have one, you can use the same form to search for your company name in their database.
How to Apply
Net 30 vendor accounts are some of the easiest business credit applications to fill out. Generally, they’ll only require the following details to apply.
- Your Name, Email Address, and Date of Birth
- Company Name, Address, and Phone Number
- Employment Identification Number (EIN) and DUNS Number
When you first create your Net 30 account, you’ll most likely be limited on how big your orders can be. As you make purchases and pay your bills on time, they’ll extend your credit accordingly.
The biggest advantage to using Net 30 vendor accounts is that they can help you build up your business credit score quickly, even if you’re a brand new, startup business. As well, their buy now, pay later invoicing will help free up much-needed cash flow at specific times of the month.
Build a Strong Credit History
By making monthly purchases for things you already need to business and paying your bills on time, you will create a strong business credit history. When Net 30 vendors report to the three major credit bureaus (D&B, Experian, and Equifax) how you pay your bills on time, it will have a positive effect on your business credit score.
The more consistently you receive positive reporting from Net 30 vendors, the easier it will be to make partnerships with banks, and other lenders when further extending your credit.
Increased Cash Flow
With Net 30 invoicing you’ll receive your purchases in advance of payment, freeing up money that can be invested elsewhere. This ability to buy now and pay later for even basic business necessities like packing materials and office supplies will increase your company’s cash flow while ensuring you have what you need to conduct business.
No Credit Card Required
Net 30 vendors can help you avoid paying for business necessities on your personal credit card, by allowing you to pay by check or online debit from your business account. This allows for easy tracking of the filing of purchases when it comes time to do your taxes.
While this is not recommend while building credit, if you already have a great business credit score, have more time to pay your bills can help free up your cash flow.
While 30 days should be more than enough to earn the money required to pay your bill, at times you can even extend this. If your vendor account continues to be in good standing, some companies might offer to extend your invoice payment dates up to 45, 60, or even 90 days.
If you’re looking to building up your credit score, however, we recommend you only use Net 30 invoicing or less, so that your purchase history will be reported monthly to the major credit bureaus.
If you’re able to only order Net 30 products that you are fully capable of and willing to pay their invoices within 30 days, there is absolutely no downside to opening up a Net 30 vendor account.
With most vendors filing credit reports monthly, this is the fastest way to increase your business credit score with very little effort. Most vendors that offer Net 30 invoicing offer B2B products that you already need.
From office supplies, cleaning supplies, and packing materials, you can easily stock up on monthly essentials while building up your credit score. Other Net 30 vendors sell items tools and safety equipment, and even clothing that can also be custom printed with your logo.
If you need larger items like office furniture, computers, and HVAC systems they too are available with Net 30 invoicing. The only caveat is, that if you order something that costs a lot of money, you need to pay your bill within 30 days to receive a credit boost.
If you have bad credit, you can also build it back up using Net 30 purchases. Many vendors will still accept businesses with bad credit, but will simply limit your total purchase amounts.
There are only two credit building rules associated with Net 30 vendor accounts:
- Pay your bills on time, EVERY time and you’ll see an increased credit score
- Pay your bills early, and you’re like to get an increased Paydex score from Duns & Bradstreet