Last updated: May 18th, 2023
As a new business, establishing a solid credit history is crucial for your long-term success. Building business credit not only enhances your financial reputation but also opens doors to financing opportunities, favorable supplier terms, and growth potential. While navigating the world of business credit can seem overwhelming, there's one essential element that can provide a stepping stone for emerging enterprises: Net 30 accounts.
In this blog, we'll delve into the significant benefits of net 30 accounts for new businesses and explain why they offer a viable pathway to establish and strengthen your business credit profile.
What does net 30 accounts mean?
Net 30 accounts refer to a payment term commonly used in business-to-business transactions. It means that the buyer has 30 days from the date of invoice to settle the payment with the seller.
Net 30 accounts are a convenient way for emerging businesses to build a solid credit history. When an account is paid in full and on time, vendors report this credit account usage to major business credit bureaus that issue business credit reports, and the business begins to build its credit history and increase its credit score. This is an ideal option for new businesses and startups as generally all the information required for approval is evidence that the business is, in fact in business, and there are no late payments owing to existing vendors.
What about net 30 vendors?
Net 30 vendors, also known as Net 30 suppliers or Net 30 creditors, are businesses that offer products or services to other businesses on credit terms with a payment period of 30 days. In other words, these vendors allow their customers to make purchases and defer the payment for a specified period of 30 days from the date of invoice.
Many net 30 vendors that offer net terms work with products and services that are indispensable across all types of industries, including:
- Office supplies
- Computer software
- Office furniture
- Lab equipment
- Janitorial services
- E-commerce solutions
If it’s something that is part of the physical or digital infrastructure of a business, it will likely be sold by a Net 30 vendor. As a new business, this is obviously helpful as paying in net 30 allows them to build credit history at the same time.
Net 30 accounts help to build business credit
Net 30 accounts are classed as vendor tradelines, which are not the same as financial tradelines (financial tradelines are business loans or lines of credit financed by a bank or traditional lender and are largely out of reach of new businesses).
As a new business, opening net 30 accounts with at least five vendors who report to credit bureaus will quickly establish a solid credit history. Once a proven track record for on-time payments is established, other financing avenues become available with banks and other lenders, such as net terms financing.
If building solid business credit is a goal (and this is highly recommended for all businesses), it is important to make sure the net 30 vendor does actually report to a credit agency, as not all companies do so. This information is readily available, but an email or phone call to clarify whether they do or not is time well spent.
Net 30 accounts also offers easy approvals
One simple metric used to approve an application for net 30 accounts makes the approval process incredibly quick and easy. Across the spectrum of net 30 vendors, common application requirements include (but are not limited to):
- Providing a legal business name
- Paying a fee to become a member
- Evidence you’ve been in business for a certain number of days (30 to 90 days is common)
- Good business credit trade references
FAQs on any website are also a good source of additional information. Notification of approval or requests for more information are usually made within two business days. Once approved, you'll receive a vendor tradeline which can be used for essential purchases and to build credit.
Different vendors may ask for extra information, but on the whole, this is a far less complicated application for financing than a traditional business loan.
Not all vendors are set up to offer net 30 accounts. But doing so increases access to new customers, leads to higher sales, and opens up new markets—particularly government and municipal customers.
With fintech advancements, it’s recommended to work with a company that supports offering net 30 terms online.
Companies like Resolve conduct quick and quiet business credit checks on potential and existing customers. The business (sellers and vendors) use this information to set appropriate credit limits and net terms of 30, 60, or even 90 days.
Newer companies or those with cash flow challenges may find it difficult to extend net terms, knowing that their working capital won’t cover operating expenses when invoices are not paid promptly. That’s why many companies choose to work with Resolve, like Archipelago Lighting.
Resolve pays out up to 90 percent of each invoice for approved customers into the company’s business bank account within just one day of issuing the invoice, eliminating the need to consider invoice factoring. Buyers then use a company-branded payment platform to pay their invoices online with credit card, ACH, wire transfer, or check within the net terms in their agreement. Offering multiple forms of payment is a key component for building good customer relationships.
This type of solution is truly win-win, giving customers net terms (while building a positive credit profile), while giving businesses convenient access to credit information on customers, and fast payments of invoices.
So, what about net 30 terms?
Net 30 terms are exactly as they appear. A business receives an invoice when there’s a purchase for products or services, and payment in full is due in 30 days. Early payment is also accepted. Paying within the net 30 terms means there is no interest accrued, cash flow is improved, and vendors report the timely payment to credit bureaus.
Net accounts can continue to improve cash flow even after a sound business credit score is established. When a business has proven itself as a reliable customer, it may qualify for net-45, 60, or 90 day payment terms. With extra time to pay invoices, working capital is put to good use, driving innovation and growth for the company.
Some companies which offer net 30 terms also provide other finance solutions, which become available once good credit is established. Wise business plans, for example, also broker access to business loans, venture capital investment, and business credit cards through partner organizations.
Here are a few other examples.
Case Study: Uline
Uline is a net 30 vendor with an extensive catalog of offerings. Everything from packaging and shipping supplies to retail operations equipment and safety products are available via their physical catalog, as well as the Uline website.
The company has been in business for over 40 years and has a solid reputation for customer service and fulfilling orders at an astonishing speed. 99.5 percent of products ship the day the order is placed. With over 40,000 products in stock at any time, Uline is an excellent choice for both purchasing necessary goods and establishing a sound credit history for the business by using their net 30 payment option. Uline also offers a 30-day satisfaction guarantee on all purchases.
Case Study: Creative Analytics
Creative Analytics offers a different indispensable service to businesses, especially small business owners just starting out. They provide digital marketing solutions and consultation, which is a vital component of any business in today’s dynamic landscape.
This innovative company takes a business’ project and applies its expertise to take the brand to the people who will become the client base. Their objective is to convert prospects into customers and clients. They do this by offering:
- RAPID UX+ WordPress Web Design & Development
- Advanced social media marketing (including content development and copywriting)
- Digital strategy
- Email campaigns
If the business is not a part of the digital universe, new clients and the revenue they create are passing by.
Creative analytics extends their net 30 credit lines up to USD$12,000. This helps businesses to more quickly establish higher lines of credit for faster credit building. Not only an incredibly smart investment in the growth of a business but a wise choice when considering ways to quickly construct a credit history. Creative analytics reports to Equifax and Credit Safe.
Case Study: Business T-shirt Club
There are so many ways to have a brand seen and recognized by potential customers. Business T-shirt Club is designed to help any business’ employees to become a unified team of brand ambassadors by wearing custom-designed apparel.
With t-shirts, hats, sweatshirts, corporate apparel, masks and more, a team can takes their brand wherever they go. Business T-shirt Club offers high-quality apparel brands at wholesale prices, with custom print and embroidery services. This could be particularly beneficial in the service industry, where having staff in uniform elevates the professional appearance of a brand.
As stated in the name, Business T-shirt Club has a membership model, with an annual membership of USD$69.99. They report to Equifax, Credit Safe, Ansonia, and Cortera, so net 30 purchases are still building business credit history while also building brand equity in the marketplace.
Case Study: Grainger
Grainer is a supplier of mainly industrial goods and services, for the purchase, maintenance, and repair of the equipment needed to operate a business. Emergency preparedness, and health and safety solutions also fall under Grainger’s scope of products and services.
Before approval as a net 30 account, Grainer requires businesses to operate for three months as part of the credit application process. This is longer than other net 30 vendors, but as they also offer a selection of services to support operations, Grainer offers many benefits to their customers and is worth the extra wait time. Particularly in the B2B manufacturing sector, Grainger is a valuable net 30 vendor.
Grainger reports to the Dun & Bradstreet credit agency. This is one of the main business credit reporting agencies that issue a duns number, which is an indicator credit reporting agencies may use. Dun & Bradstreet also issues the paydex score which is a dollar-weighted indicator that reflects how well (or poorly) a business has issued on-time payments across its business history. It’s an important figure for some vendor credit offerings.
Case Study: Wise Business Plans and Quill Financial
Wise Business Plans provide new businesses with the tools they need to start strong and move forward. With professionally written business plans, pitch decks, business cards, and PowerPoint presentations, new businesses are equipped to stand out in their industry regardless of the length of time they have been operating.
In addition to business plans, branding, web design, marketing services, and digital marketing are also within Wise Business Plans’ scope. A professional website is absolutely essential in all industries to build credibility, drive growth, and attract new customers.
Wise Business Plans have options suitable for a diverse range of businesses, including non-profits and franchises, and their staff are highly qualified and skilled in their fields.
There is a USD$99 annual fee to become a net 30 business account with Wise Business Plans, and they report on orders over USD$97 to Dun & Bradstreet, and Equifax Business. Once credit is established, there are various alternative financing options available within this company. Other options can be investigated that conduct credit reporting to additional business credit bureaus like Experian business (Crown Office Supplies and Summa Office Supplies may be options).
Another financial services company that offers solutions for businesses is Quill Financial. Quill offers payment solutions, accounting software, payment distribution services, and more. It provides services for personal financial transactions and to accept check payments into a prepaid visa card. With personal credit checks often part of a start-up’s business evaluation, this may be advantageous to build credit while managing transactions.
Net 30 accounts for emerging businesses
For start-up businesses entering into a competitive B2B arena, it can be difficult to garner the resources needed to make a strong impact like established businesses have. Lack of working cash flow, good credit terms, and challenges accessing financing are real barriers for many new and small businesses.
Net 30 vendors offering vendor accounts are a readily accessible option for these businesses, giving an option similar to monthly payments. With no requirement for in-depth credit history, and transparent terms of payment, new businesses can hit the ground running and build credit at the same time.
By taking advantage of net 30 accounts, business owners can keep their business and personal credit separate. Trade credit means owners aren’t forced to use their personal credit cards to keep the company afloat during the early phases of operation when revenue is not yet pouring into the business accounts.
Taking the time to choose the right net 30 vendor
With so many vendors offering net 30 accounts, taking the time to carefully choose the right vendors to suit each unique business will most definitely be beneficial. The goods and services available, the threshold for reporting to credit agencies, and importantly, whether they do actually report to credit agencies, all need to be taken into account to be sure they align with the company’s goals.
The diverse goods and services offered by these net 30 vendors allow start-up companies to not only procure the machinery and other equipment they need to fulfill their orders but to build their brand identity and digital footprint.
A resource for any business considering credit management is the national association of credit management (NACM). NACM is a non-profit organization that advocates for both business credit and professionals offering financial management services. Their website and online library contain a vast amount of information about business credit.
Another resource is the small business financial exchange (SBFE), which is a trade association that collects payment history data that is primarily for small business lenders.
Both physical and digital assets are absolutely vital to success in business, and net 30 accounts remove the traditional barriers start-ups have faced when acquiring these goods and services.
Learn more about efficient and effective ways of managing your net terms online.