For the 31.7 million small businesses in the U.S. economy at the moment, business credit remains their lifeline. Much like personal credit, it controls their apparent trustworthiness with regards to money in the eyes of banks and any other would-be creditors. Their business credit reports effectively act as a metric of a business’s reputation financially.
According to the Small Business Association, 27% of the businesses surveyed indicated that they could not access the capital they needed, which, as consequence, prevented them from growing their business. The number one factor affecting a business’s access to capital is its credit score. It is therefore vital for a business to know how to improve its credit score.
There are a number of ways to achieve this goal, one of the most effective means – regardless of the business’s credit score – is a Net 30 account. This article will explore the primary benefits of using this tool.
What Is A Net 30 Account?
Net 30 accounts are a powerful tool available for businesses to use in order to improve their credit score and, as a consequence, increase the amount of funding they can access. These accounts enable businesses to buy certain products from specified vendors on credit, stipulating that they repay the balance within a 30-day period.
These transactions are then reported to the major credit bureaus, which allows businesses to build a tradeline with them. This tool grants businesses the ability to improve their credit score, regardless of what they begin with.
To get started, businesses must open a bare minimum of five accounts that announce their transactions to a bureau. Once such lines of credit have been built, and the business has demonstrated its credibility with money, it will be permitted to apply for business credit cards to further accelerate the improvement of the credit score.
Other Benefits Of Net 30 Accounts
1. Increase Supply Network
Using a net 30 account widens the network of suppliers your company is able to access. Setting up these accounts enables a business to purchase stock from these vendors by utilizing their 30-day payment option. This is critical for businesses struggling to muster the capital to buy it in the first place, who are struggling with cash flow problems, to begin with.
2. Gives A Good Impression To Lenders
Frequently buying from such vendors reflects well on a business’s reliability with money in the eyes of banks and other potential lenders. By offering credit terms, Net 30 accounts offer businesses with no credit history a great opportunity to build one with little associated risk.
3. Access Discounts
Outside of the positive reflection on a business’s fiscal responsibility when they repay their Net-30 credit terms earlier than the stipulated agreement, there are a number of other powerful benefits not related to the goal of improving one’s credit score.
One of these benefits is the access to discounts that would be inaccessible if the business chose to buy the stock from any other vendor. Furthermore, many Net-30 vendors offer discounts for repaying credit terms earlier than agreed upon.
As an example, if a Net-30 vendor wished to reward businesses who repaid a purchase on credit within 10 days, they could alter the billing term to 2/10 Net 30. This would mean that, as long as the invoice was repaid within 10 days, the customer can benefit from a 2% discount on the overall cost of the stock.
Should the business choose not to pay earlier, the deadline for the invoice will remain what it always did: 30 days.
4. Remain Competitive
Businesses can benefit lucratively from taking advantage of ‘buy now, pay later’ terms. This allows them to utilize their money in the meantime for another endeavor. In this way, businesses can grant themselves an edge that enables them to stay competitive with challengers.
Our Thoughts
Clearly, there are numerous benefits for businesses associated with taking advantage of Net 30 accounts. While the main objective of this will be to build credit so that smaller businesses can access previously out of reach loans and finance, there are many peripheral benefits related to their use too.
For more information on Net 30 Vendors, see the attached link for an article by TRUiC on the topic.