For many businesses, surviving the startup stage is always the biggest challenge. The first year is usually full of challenges before the business stabilizes. A business at any stage will always have some challenges, especially financial ones. The main reason is the need for growth or to take care of hard times. If an entrepreneur is sourcing business funds, the options are numerous. They range from personal savings to banks loans or using suppliers. The latter is an interesting option that many businesses have not exploited fully because they do not understand how it works.
The Role of Suppliers in a Business
This topic sounds controversial to many entrepreneurs, especially starters. It can be confusing to think that suppliers and vendors will give you capital or equity to run your business. It is even more complicated when you think about improving your credit score through this option. So, what is it that they do? They provide you with materials and services in the form of credit. Here is what suppliers do:
· Supplying raw materials – If you are in the production industry, you definitely need raw materials, which are supplied by different suppliers. This is done on different terms depending on the agreement that you have with each supplier.
· Supply of goods – For those who are in the retail business, there is a supply of the goods that they sell. It can come from one supplier or different ones with varying terms and conditions.
· Consultancy services – Apart from the physical materials, a business may need various consultancy services for marketing, staff training, and customer relations, among many other things. It could be on a regular basis or when need be.
Buying on Credit from Suppliers
Now that we have seen what suppliers give to a business, it is time to learn how they offer financial support. As mentioned above, they can supply on credit to the business. If a good relationship is maintained through timely payments, they forward a good report to the credit bureau both for you and the business.
According to experts in credit rating, Boostcredit101, this avenue has not been tapped well by business people yet it holds a lot of potential. Those who have tried it have also enjoyed repaying for goods supplied at a later date without any interest. Additionally, they also get some discounts extended by their suppliers or special rates.
Endorsement for Loans
Suppliers who sell to businesses on credit have a better chance to endorse the entrepreneur for loans. Lenders are always looking for information that shows how responsible an entrepreneur is in repaying debts. So, make sure that you remind your suppliers to remit your history to the credit bureau and to always be there to endorse for loans.
Conclusion
A business can further increase their credit rating when they get loans and service them in a healthy way. If you did not know that buying on credit from the suppliers is important in building your credit scores, now you know.