To Your Credit

Prove your trustworthiness to vendors.
Magazine Contributor
2 min read

This story appears in the March 2007 issue of Entrepreneur. Subscribe »

Question: I opened a children's clothing store and am amazed by how many companies require cash upfront before they will ship me product. My personal credit has always been good, but when it comes to my business, that doesn't seem to count. Any advice?

Answer: Don't take it personally. Getting vendors to extend credit is one of the toughest challenges startup businesses face. Because startups typically have limited, unpredictable or even negative cash flow, vendors generally don't want to risk shipping products or providing services to customers who may not be able to pay--or who may even file for bankruptcy and close their doors. Although a business owner with strong personal credit can easily obtain a credit card for his or her company, credit card fees are often hefty, and suppliers may not accept credit cards for large purchases.

That's why it's important for new companies to establish a solid repayment history with vendors before asking for credit, says Sol Wahba, president of Nuvo Accessories Ltd. and vice president of The Sephardic Angel Fund, a New York City-based organization that provides consulting services and funding to small businesses. Once your company has "trade references" who can vouch for your company's creditworthiness, you'll generally be able to establish "net 30" payment terms that give you up to 30 days to pay for products and services. Some vendors may also ask to see financial statements and cash flow projections. "Start small and build trust," Wahba advises. "Vendors want to know the person behind the business."

Rosalind Resnick is founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses.

More from Entrepreneur
Our Franchise Advisors are here to help you throughout the entire process of building your franchise organization!
  1. Schedule a FREE one-on-one session with a Franchise Advisor
  2. Choose one of our programs that matches your needs, budget, and timeline
  3. Launch your new franchise organization
Make sure you’re covered if an employee gets injured at work by
  • Providing us with basic information about your business
  • Verifying details about your business with one of our specialists
  • Speaking with an agent who is specifically suited to insure your business
Try a risk-free trial of Entrepreneur’s BIZ PLANNING PLUS powered by LivePlan for 60 days:
  • Get step-by-step guidance for writing your plan
  • Gain inspiration from 500+ sample plans
  • Utilize business and legal templates
  • And much more

Latest on Entrepreneur