Tier 1 Business Credit Vendors
As a business owner, one of your most important responsibilities is to find capital for your business, but it can be challenging to find commercial lenders willing to provide capital and financing for your business when you’re just starting it up.
This is where tier 1 business credit vendors come in. These vendors can provide you with the opportunity to start building your business credit history, which can give you the track record you need to qualify for more traditional business financing options in the future.
In some cases, these vendors can also provide much-needed supplies for your company.
Vendors that help build tier 1 business credit
As you consider how to build business credit, it’s important to consider several lenders. Here are five tier 1 business credit vendors to help you narrow down your list of options.
Quill offers a variety of office supplies, furniture, electronics, and several other products that you’ll need to run a successful office. If you open a business account with Quill, you can apply for a credit line, which you can use to make purchases from Quill.
You’ll be automatically reviewed for a credit line after you make your first purchase with the ‘Invoice My Account’ payment option. It generally takes up to one business day to determine whether you’re approved. There’s no personal credit check.
If you qualify, payments are due 30 days from the invoice date. There is no interest on payments made within the net-30 terms, and your payments will be reported to commercial credit bureaus.
Summa Office Supplies
Another net-30 lender, Summa Office Supplies offers filing folders, envelopes, labels, pens and pencils, and more. To take advantage of the 30-day payment plan, choose the “Bill My Net 30 Terms Account” when you check out.
When you make your payments, Summa Office Supplies reports them to Experian and Equifax for your business credit report. Over time, you can request a larger credit line if you make your payments on time.
Also, if you need written trade credit references, the company writes them on request. Register your business to apply for the line of credit. There’s no personal credit check.
Crown Office Supplies
In addition to office supplies, Crown Office Supplies also offers electronics, T-shirts, home goods, home school supplies, and more.
If you sign up for a net-30 account, you can finance your purchases and pay them within 30 days interest-free. Keep in mind, though, that Crown requires a down payment of 15% to 30% of the purchase price, which you’ll need to provide upfront.
Also, the account includes a $99 annual fee and charges a late fee of up to $39, depending on your balance.
You’ll need to register your business and apply for the account to be considered. There’s no personal credit check. The vendor reports your payments to all the major business credit bureaus, including Experian, Equifax, and others.
Like some of the other credit vendors on our list, Uline sells a long list of business supplies, ranging from shipping supplies and warehouse equipment to office furniture and safety products.
Like the other supply vendors, this one offers net-30 terms on payments. If you’re a new customer, you’ll provide your customer number from the back of your catalog then request the net-30 billing option. You’ll then be considered for a credit account without a personal credit check.
If you’re an existing customer, you can use the net-30 payment option simply by logging in to your online customer account and requesting it during the checkout process.
All payments under this payment option are reported to commercial credit reporting agencies.
Credit Strong Business
Rather than offering products you can use to stock or replenish your stash of supplies, Credit Strong provides a credit builder account for small businesses that build credit under the Employer Identification Number (EIN) of your company.
The big difference between Credit Strong and the other Tier 1 Credit options listed above is that Credit Strong is part of an FDIC insured bank and issues you a ‘financial tradeline’ that it reports to the major commercial credit bureaus, the other options only report ‘vendor tradelines’.
A financial tradeline is typically a commercial loan, lease, or credit card. A vendor tradeline is typically the credit terms a vendor issues to you for purchases from that vendor. If your goal is to receive commercial financing in the future, a financial tradeline is essential. Credit Strong offers a great resource to learn more about commercial credit and tradelines.
When you apply for a Credit Strong business credit builder account, the lender deposits the loan amount into a commercial savings account and locks the funds while you pay down the loan. You can choose between a 60-month term and a 120-month term. Credit Strong reports your payment history to the commercial credit bureaus Equifax and PayNet and plans to include Experian, Dun & Bradstreet, and SBFE in the future.
Once the loan is paid in full, Credit Strong transfers the loan funds to you, and you can use the funds to invest in your business.
The credit builder account is available to small businesses that are at least three months old. While you’ll need to provide your Social Security number or individual taxpayer identification number when you apply, this information is only used to satisfy federal banking identification requirements and is not used for your personal credit profile in any way.
Unlike the vendors on our list who sell goods with a price markup to make money, Credit Strong charges interest to cover the cost of providing its accounts. It’s important to note that a long-term financial tradeline is probably more beneficial to building your business credit profile in the long run than vendor credit.
What are the tiers of business credit?
As a small business owner, finding the right form of financing can be difficult, especially if you’re still in the beginning stages with your company.
There are four tiers of business credit that you can obtain. Understanding each category and how the type of financing works can help you determine which paths to pursue for your small business.
The first tier of business financing is basic vendor trade credit. You don’t typically need to have an established business or even personal credit history to get approved, and there’s also typically no personal guarantee involved — in other words, if your business can’t repay the debt, you’re not personally liable to pay it out of your own pocket.
Tier 1 business credit provides the chance to establish your business credit score as a new business while you purchase the supplies, inventory, furniture, and other items your small business needs to function.
Just note that while some vendors may be willing to work with you as a brand-new business, some may require that you have other trade credit references before they’ll approve you with a credit line.
In general, vendors make money on margin they charge on the goods they are selling, so you don’t have to pay interest on this type of credit, as long as you pay your balance by the due date.
The second tier of business credit is commonly called advanced trade credit. These types of vendor accounts typically offer larger credit lines and longer repayment terms (longer than net-30, for instance). In some cases, you could even use advanced trade credit to finance an equipment purchase.
While this financing option may sound better, it’s important to note that you’ll likely need to have established some business credit before you can apply. Because of the better terms for you as the small business owner, these types of vendors are taking on more risk and will typically require a business credit check to determine whether you’re eligible.
Rather than working with another business to get credit, tier 3 business financing involves getting credit from a lending institution like a bank, credit union, or online lender.
Tier 3 financing is the most well-known type of business financing. It can come in the form of an installment loan, a revolving line of credit, or even a business credit card.
In most cases, you’ll be required to undergo a business and personal credit check to get approved for this type of financing. That said, eligibility requirements can vary substantially.
For example, some banks may require that you be in business for one or two years with a solid track record of revenues and good business credit. In other cases, your business can be brand new without any established revenues or cash flow and still qualify.
In many cases, you’ll also need to provide a business plan, as well as a detailed look at your company’s finances and projections.
Because loan terms, including repayment schedules, interest rates, and fees, can vary with tier 3 credit, it’s important to shop around and compare multiple lenders before you submit an application. And with credit cards, you may also be able to take advantage of other perks like rewards and travel benefits.
Because of its business friendly structure, the Credit Strong business credit builder account is one of the most readily obtainable forms of bank financing for many small businesses and it can provide the first step to getting additional Tier 3 financing from other lenders in the future.
With tier 4 business financing, you move beyond the lending industry in general and work with investors. This can include private investors, angel investors, and venture capitalists.
In many cases, it can be challenging to get an investor for your business unless you’re outperforming the competition or there’s a strong reason to believe that you will outperform the competition. This means that you typically need to have been in business for a while and have a strong track record so far.
You’ll also need a strong business plan, including your strategy for growth and detailed and reasonable projections.
While you won’t pay interest to an investor, you’ll likely need to give up a share of your business in exchange for their financing and advice. Carefully consider what that might look like and whether you want to invite someone else to own part of your business and have a say in how it’s run.
The Bottom Line
There are four tiers of financing available for small businesses, but many new business owners may want to start with tier 1 business credit vendors.
You may also consider applying for a business credit builder account with Credit Strong, which can provide you with a long-term commercial installment loan on your business credit profile without many of the stringent requirements typically associated with business loans.
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