Expanding a business often requires access to more capital and credit. One way for small businesses to strategically improve their business credit is by qualifying for a net 30 accounts with suppliers and vendors. Net 30 business accounts allow a business to purchase inventory and services and then pay their bills within 30 days with no interest or fees. This essentially functions as free short-term financing that can be used to grow operations.
In 2024, qualifying for good payment terms with key vendors can be a vital component of managing business finances and establishing strong business credit. Here is a guide on how to qualify for net 30 accounts this year to strategically leverage and improve your company's credit standing.
What are Net 30 Accounts?
Net 30 accounts (also known as net 30 terms) allow you to purchase goods and services from a vendor and then pay the bill within 30 days. This allows you to obtain inventory, materials, and services without paying upfront.
Essentially, a net 30 account functions as an interest-free 30-day loan from suppliers. Instead of paying cash or putting purchases on a credit card, you can buy what you need and then pay off the balance within 30 days. This improves cash flow and gives you more flexibility when you need to pay.
Strong and reliable vendors may also extend net 60 terms, allowing 60 days to pay. However, some suppliers will start with net 30 terms before eventually extending longer payment windows.
Benefits of Net 30 Accounts for Small Businesses
There are several key advantages to qualifying for net 30 payment terms from major suppliers:
Improves Cash Flow - Being able to purchase inventory and services without paying upfront improves cash flow and gives you more working capital to operate your business. You can sell inventory or deliver services and get paid before you have to pay your suppliers.
Functions as Free Short-Term Financing - A net 30 account allows you to buy now and pay later. This essentially functions as free, interest-free financing for 30 days. You get access to inventory and materials now without taking out loans or paying fees.
Establishes Business Credit - Making on-time net 30 payments will get reported to business credit bureaus and help demonstrate that your company reliably pays its bills. This strengthens your business credit profile.
Strengthens Supplier Relationships - Suppliers want to work with companies that pay on time. Making net 30 payments reliably can help you build improved relationships with vendors, which provides benefits over time.
No Credit Checks - Suppliers generally do not run personal credit checks when providing net 30 terms. This allows you to access a line of credit without impacting your score.
Requirements to Qualify for Net 30 Accounts
Suppliers offer a net 30 accounts for businesses that demonstrate they have established businesses with strong finances. While every vendor has their criteria, most will want to see:
Time in Business - Most vendors will want to see that your business has been operating for a certain period, usually at least one year. Some may require 2+ years in business.
High Sales Volume - Suppliers will want to see that you place large, consistent orders and have strong sales. Bigger purchases make it worth their time to manage their net 30 accounts.
Good Personal Credit of Owner - Even though it's business credit, the owner's strong personal credit score helps assure the vendor that you manage your finances responsibly. A score of 680+ is ideal.
Clean Financial History - Having no history of late payments or bills sent to collections reassures vendors that you will pay on time.
Business Credit Profile - While not always required, having an established business credit file and business credit scores can help.
How to Get Approved for Net 30 Accounts
If you want to get approved for net 30 payment terms with vendors, follow these best practices:
Have Time in Business - Before applying, make sure your business has been operating for at least 3 months, if not longer. This demonstrates staying power.
Get a Business Credit Profile - Having business credit reports and scores from Experian, Dun & Bradstreet, etc. can help demonstrate your legitimacy.
Purchase Consistently from Supplier First - Do not apply for net 30 immediately. Make regular cash purchases first to establish your relationship.
Make All Payments on Time - Be sure ALL your business bills and expenses are paid on time, not just the supplier you want credit from.
Have Good Personal Credit - Review your credit reports and scores. Anything below 680 will likely disqualify you. Pay down balances and correct errors first.
Formally Apply for Net 30 - Follow the vendor???s application instructions. Be prepared to provide business documents, like financial statements.
Consider Providing Personal Guarantee - Some vendors may require owners to personally guarantee net 30 payments. This gives them recourse if the business defaults.
Following these steps, being patient, and consistently demonstrating that you are a strong business will help you eventually qualify for net 30 terms with major suppliers.
Start with Small Suppliers First
When first establishing business credit, it often makes sense to start building relationships with smaller suppliers to qualify for starter net 30 accounts.
Large national suppliers may require an extensive payment history before approving net 30 terms. However, local or niche vendors have more flexibility. If you consistently pay smaller vendors on time over 3-6 months, you can then leverage these existing net 30 accounts with larger suppliers.
Some smaller suppliers to consider applying to first include:
Local office supply stores
Custom apparel shops
Specialty parts and component suppliers
Custom packaging and labeling companies
Local food distributors
Building relationships with these types of specialized local vendors can help you get an initial net 30 approvals, establish a payment history, and then ultimately work up to national suppliers.
Use Net 30 Payments to Build Credit
A major benefit of net 30 accounts is that making on-time payments can help build your business credit profile. Most major suppliers report payment information to credit bureaus like Experian and Dun & Bradstreet.
This means making full net 30 payments by the due date will positively impact your business credit scores with the bureaus. Late or missed payments can negatively impact your profile.
You can check your business credit reports from Experian and other bureaus to make sure new net 30 accounts are being reported and see if your scores improve over time as you make consistent on-time payments.
Even if you currently only qualify for terms with smaller suppliers, making these payments reliably can start strengthening your scores, which will eventually help you get approved with bigger vendors.
Leverage Financing Options If Needed
While net 30 accounts provide short-term financing, some businesses may need additional working capital to bridge the gap between making purchases and getting paid by their own customers.
There are business financing options, like merchant cash advances and short-term loans, that can provide this capital. The key is finding affordable options that fit your budget.
For example, Quickcard in San Diego provides access to low-rate merchant cash advances. They offer approval in 24 hours, with funds available in 72 hours to qualified applicants.
The right financing source can provide the capital needed to take full advantage of net 30 terms from vendors and then pay off the balance once you get paid by your customers.
Weigh the Pros and Cons of Net 30 Accounts
While there are many benefits, there are also some potential downsides to consider with net 30 accounts:
Pros:
Improved cash flow
Access to inventory and services without taking on debt
It helps establish a business credit history.
Cons:
You need to wait 30–60+ days for supplier payments.
Potentially delaying paying other bills
Risk of late fees if the due date is missed
Requires closely managing the payment calendar.
Be sure that the improved cash flow and credit benefits outweigh the need to carefully track payment due dates across multiple net 30 accounts. Get systems in place to avoid missed payments.
Consult the Experts
As you explore options to improve business credit in 2024, be sure to consult qualified experts who can answer all your questions about getting approved for net 30 accounts, maintaining supplier relationships, building credit, and managing payments.
Payment consultants at companies like 5-star processing have years of experience helping businesses qualify for terms with major vendors. They can provide advice on which suppliers to target first, making on-time payments, and leveraging net 30 accounts as part of an overall business credit strategy.
Conclusion
Qualifying for a net 30 accounts with key suppliers and vendors can be an important milestone for any growing small business. Take time in 2024 to review all the criteria needed to get approved for terms and strategically apply with local suppliers first to establish your business credit profile, revenue history, and reliability.
With strong personal credit, time in business, and consistent on-time vendor payments, you can leverage net 30 accounts this year to improve business cash flow while also building your company's credit standing for larger purchases in the future.
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