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Business Finance

Creative ways to get vendor credit when cash flow is tight

Whether cash is tight or not, obtaining vendor credit is one method for keeping flexibility in your company’s finance and has some added bonuses we’ll address below.

vendor credit

vendor credit

Obtaining vendor credit

Many of us have had a time or two when we’ve experienced cash flow problems. Maybe your personal checking account is rapidly approaching $0 and you still have 4 days until pay day. Or it’s time for your business to place an inventory order but you don’t really have cash on hand yet to pay for it. During times like these, businesses can find creative ways to obtain vendor credit and negotiate a “buy now, pay later” setup; it’s a great way to build business credit and give you some breathing room.

In order for a vendor to extend this delayed payment option to you, they need to trust you. If you’re just starting out and don’t have an extensive business credit history, compile statements and financial documents that you do have and see if there’s anything you can utilize to prove your case as a responsible business.

If you have financial statements that detail your business transactions for a set period of time, you can take these to the vendor to show you have record of maintain positive cash flows. If you have positive credit references, check to see if they would be willing to speak with the vendor and give a good review on your business’s behalf.

Don’t be afraid to ask

If you have neither of these things, you can take the high points of your business plan and projected revenues and try to make a case for yourself in that way. The bottom line is to take whatever financial records and credibility that you have and create a compelling case for that vendor to extend credit to you. Don’t be afraid to ask any company that bills you for this payment option – if you have a strong enough case, they may extend it to you.

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Vendor credit operates similarly to personal credit in the way that some consumers may have the money for a purchase, but buy it on a credit card first in order to build credit and then pay off the amount for the due date rolls and charges interest. This can allow them to receive points or miles if it’s a rewards card, or they may simply do it to keep their account active and show positive payoff history to the credit bureaus.

Vendor credit has an added bonus: building credibility

In a similar aspect, your business may have enough cash for an inventory order, but just because you have it doesn’t mean there isn’t a better use for that money and that you may benefit from having a later pay date. For instance, if a piece of machinery breaks down, you can use your cash on hand to fix it, purchase inventory on vendor credit, sell that inventory and use the profits to pay the vendor before their net deadline.

Vendor credit essentially lets you be more strategic with your cash and build financial credibility – you just have to get creative to show why you deserve and will make good on that that privilege.

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Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.

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