EXPANDING VENDOR RELATIONSHIPS
For most small business owners, the relationships they build with their vendors and suppliers are the backbone of their very existence, providing them with the goods or services they need to be able to function on a day-to-day basis. Understanding how you can actually manage those relationships to help build your business credit is key to a successful future for your small business, especially if the addition of a single supplier can positively impact your potential.
Are you maintaining a positive relationship with a variety of business creditors?
Jack owns a small auto repair shop. It has been his bread and butter for several years and, while the work is hard and the profits lean, he takes comfort in knowing his business supports his family comfortably. He buys his parts from a specific distributor, shop rags, gloves, and cleaners come from another supplier, and his solvents and degreaser are purchased from a third. No matter how slow business is, he always makes sure his invoices are paid on time.
Lately he has been getting lots of offers from other suppliers hoping to win his business, but since he is happy with the ones he uses, the offers hit the trash can as soon as they come in. What Jack doesn’t realize is that those offers represent an effective means to business credit building, simply by spreading his purchases over a variety of providers.
Linda and her husband Tom have been maintaining a property management business for a little over two years. Their highest expenses revolve around the maintenance sector of their company – things like fuel, equipment, and labor. Tom maintains a good relationship with the vendor where they purchase their equipment, but the supplier recently stopped carrying the specific brand they usually buy. Eventually, parts to maintain their equipment were harder to pick up locally. Linda ordered replacement parts online from a different supplier using a prepaid account.
Shortly after her second order, she began receiving offers for a gas card that had denied them credit just a couple months earlier. Tom and Linda had no idea the online parts store had an affiliate relationship with the fuel card provider. By adding a new parts supplier to their existing prepaid accounts they were able to expand their credit-building to another segment of their regular expenses.
In addition to his regular day job, Sammy has a home-based real estate investment company. He buys foreclosed or distressed properties, makes a few necessary upgrades or improvements, and then sells the properties for a modest profit. He usually pays for the materials out of pocket, paying cash or using his personal credit cards for his purchases. He worked out an arrangement with a local carpet supplier who provides the materials on a discounted basis if he hires their laborers to do the installation, but he has to pay the invoice within 10 days of the work being completed.
Sammy didn’t realize the company could report his positive payment history to his credit profile until he took proactive steps to build his own business credit. Just a few months have passed and he is already being contacted by major carpet distributors and credit card providers offering accounts he could never have gotten in the past. Sammy has come to understand that those credit relationships will lead to the bank credit lines he needs to further grow his company.
It’s been almost a year since Debbie opened a small Net30 credit account with an online office supply company as a means to build credit for her home-based website design company. She ordered just enough to get the account active and reporting to her D&B® file, but never thought about using them again since she can buy locally so much cheaper.
The creditor recently sent her a marketing email offering 30% off pre-Christmas pricing. After looking over the website again, she found a few items she was running low on, as well as really great pricing on something her husband had hinted about wanting for Christmas. She placed an order that was almost double what her original purchase had been, knowing the higher dollar amount will get reported to her credit profile and help to improve her creditworthiness.
LESSON: These are just a few examples of how diversifying and maintaining your company’s business credit needs can help increase credibility and boost future credit approvals. Each small Net30 account you carry has the potential to provide huge benefits for your company, such as opening additional doors to more opportunities and higher approvals. The more doors you have open, the more doors that will get opened for you, helping you to build solid business credit and get the approvals you need to run your business now and grow into the future.