If you’re an entrepreneur trying to establish business credit, you’ve probably heard terms like “tradelines, trade credit, corporate tradelines, or vendor accounts.” You may even know they are important, but aren’t sure how to get them and how they can benefit your business. Here we’ll demystify them.
What is a business tradeline?
A business tradeline is a credit account between a business and vendor. Typically, a supplier or vendor will offer the business payment terms such as net-30, which means the business can pay for purchases in 30 days, rather than upfront. Net-30 accounts can improve the cash flow of the business since goods or services don’t have to be paid for upfront.
What you should know about business tradelines
Business tradelines can be a valuable tool when it comes to preparing your business for financing. In a nutshell:
- Easier approval than loans
- Can improve cash flow
- Often available to startups and established businesses
- On-time payments may help build business credit scores
- Credit limits may be small initially
- Limited to purchases with one vendor/supplier
- New businesses may be charged fees
- May forfeit a discount for faster payment
How many tradelines should a business have?
Payment history helps lenders understand how borrowers have handled credit in the past. A business credit report that lacks tradelines or other credit references makes it difficult for lenders to assess the creditworthiness of the business and how it is likely to pay in the future.
There is no perfect number of tradelines, but if your goal is to build business credit, you will probably want to make sure your business credit report lists at least three accounts reporting to business credit bureaus. The Paydex score produced by Dun & Bradstreet, for example, requires three tradelines to calculate a score. You don’t have to use those accounts each month, but keeping them active by making purchases (and paying on time) can be helpful for establishing good business credit.
How do I get a tradeline for my business?
Establishing business credit is often a confusing process because not all lenders and vendors report to all major business credit reporting agencies. For example, information about a supplier account may appear on your Experian credit report, while information about business credit cards is often shared with lenders via the Small Business Financial Exchange (SBFE).
One great way to establish tradelines is to simply ask. Ask your suppliers or vendors if they offer credit or payment terms. There may be a basic credit check involved, but most don’t require good credit and will rarely check a FICO score.
If you aren’t yet doing business with suppliers or vendors that report to commercial credit bureaus, you can seek out vendors that report. Purchase items your business needs (such as office supplies) then pay on time.
Some types of business financing also report to business credit; many business loans, business lines of credit, business credit cards and other types of financing can help establish a business credit profile.
Tip: Before you begin establishing business credit, create the foundation for your business, including details such as getting a business license, getting a business phone number and requesting your D-U-N-S® Number. Learn more here.
Are business tradelines legal?
Absolutely. But there are some questionable practices associated with something called “seasoned tradelines.” Some companies (including some credit repair firms) offer to sell seasoned tradelines to help business owners establish credit quickly. Here’s how it works:
A company will establish a corporation and open accounts under that corporate name, with the goal of “flipping” it. It will then sell this “shelf corporation” to another business with the promise that it will immediately have access to thousands of dollars in credit lines. But rarely does this turn out to be what it seems.
The established credit lines may not be the type of funding the new business needs, and if lenders catch whiff of the new business owner trying to take advantage of this scheme they can quickly shut those accounts down. “It’s usually shady,” says Nav’s Chairman of the Board Levi King. While there may be legitimate reasons for buying a shelf corporation, using one to try to get access to funding your business otherwise would not qualify for is not likely to be one of them.
Building strong business credit is a worthwhile goal. It can open up avenues to better financing for your business, help separate personal and business credit, and give potential lenders a reason not to focus on personal credit scores. Establishing positive tradelines is a crucial step in that process. To do so, you will want to take the following steps:
- Open a business credit card that will be reported to commercial credit agencies.
- Establish accounts with lenders and/or vendors who will report to the business credit agencies.
- Pay your accounts on time (early is even better) and you’ll be on your way to establishing a solid business credit rating.
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21 responses to “The Truth About Business Tradelines”
Very helpful thank you
Great information thankyou
I’m a new venture. How many vendors do I need to build business credit as fast as possible (of course I will pay all bills early)?
It’s a good idea to have at least 2-3 vendors reporting.
Having issues getting a 3rd vender to report. When prospective vender calls D&B they say not enough information due to only 2 venders so they do not do Paydex score. Several venders have backed off. Please advise.
Please I need help , Iam registered as King of Bling Sports Apparel&Novelties, I guys have me down for Hats off Studio , can we fix this problem
Aundrey – Are you talking about your Nav account? Please reach out to our customer support team so they can help: email@example.com or (855) 226-8388
There are so many conflicting reports as towards the personal credit business credit, just who does report it and when I reached out to my credit line and they said they report 2 the bureau’s and Dun & Bradstreet. 8 years later I’ve checked they’ve never been reported.
Hello, I opened a Weex Fleet Credit Card in June 2020, and from what I researched it should report to Equifax but it hasn’t (nor to any of the other two agencies). I called Weex and they say they do report every month. The only tradeline I see in Equifax is NAV : ) but NAV seems to only be reporting to Equifax, not D&B and Experian.
Any ideas. Thank you. Regards.
Hi Oscar – For Nav reporting, please feel free to reach out to our customer support team at 844-636-2445. Not sure what’s going on with Weex though.
Great information, im joining Nav ASAP!
i have 6 trade lines but they are all reporting. how can correct this
I’m sorry I don’t understand the question.
Would it be good to get a tradeline for a business to help establish the credit and get credit cards for funding the company
We recommend you build business credit sooner rather than later, and tradelines can help. This article goes into more detail: Easy Approval Net-30 Accounts
If you never had a credit card for personal or business, with never having a card and you have no lates, no open or any current cards within the last 4 years. How do you get approved for a credit card with a 526 score
I have two suggestions for you Tony: a secured credit card and a credit builder loan. One will give you a revolving account reference and the other an installment account reference. If you don’t have any negative information on your credit reports, my prediction is you’ll see some results fairly quickly from having current positive references listed.
Hello. I am in the process of trying to build my business credit. Please contact me in regards to steering me in the correct direction.
The best place to start is with a free Nav account. Once you sign up you’ll have access to our free tool called Business Launcher. It will help walk you through the steps of building business credit. If you have specific questions as you go through that, you can reach out to our customer support team. They’d be happy to help.
ds9design.com will give you a business tradeline with no credit check for use of their web design services
please send me more information to build my business credit