Hardware Reference
In-Depth Information
The idea behind trade credit is to have goods shipped to your business and sell them before
you have to pay for them. One of the best tools for slowing cash outlay of your new busi-
ness is the trade credit available from some suppliers. Trade credit is one part of the process
to build business credit. It is an open account with a vendor who lets your business buy
now and pay later. There are other ways to finance your inventory, but most include having
to pay interest on a loan. This is why trade credit is key in reducing the amount of working
capital needed.
Many suppliers may require the first order (or even several orders) to be paid by credit card
until your business has been deemed creditworthy. Once a relationship has been established
and a vendor feels that your business can pay its bills on time, it is possible to negotiate
open credit and terms with your suppliers.
New customers such as your business may need to fill out a credit application and provide
some other financial information about the business. Other items found on a credit applic-
ation could include:
n Company name, address, contact information
n Business structure: corporate, partnership, sole proprietor, etc. n Terms requested
n Sales-tax number
n Tax EIN
n DUNS number
n Years in business
n Annual revenue
n Bank information
n Credit-card number
n Trade references of other suppliers
n Signature of an authorized officer
In all cases, buy only what you need in the beginning so you can ensure that you pay your
bills on time. You will want to keep open credit terms with your vendors, and some of them
may become as dependent on you for the success of their business as you are on them!
Buy Low & Make a Profit
Speaking of credit with vendors, as a customer you should always be on the lookout for
suppliers who offer not only the lowest prices, but also fast, dependable delivery. Try not
to become too committed to one vendor because it offers credit terms to your business. In
the long run this is not the right way to handle your profits.
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