Develop Business Credit

A good business credit score, just like a good personal credit score, is critical to the financial health of your business. It supports financial stability, better payment terms, and access to resources in emergencies.

In the US book industry, supplier terms accounts are often very generous (at some tiers of usage, they can give you 60-90 days before payment is due) and allow you to take advantage of the time-saving efficiencies of electronic ordering through MVB’s Pubeasy or Pubnet services.

This longer dating can be great for managing your cash flow, especially during slower periods in your year. However, if you'd like to build your business credit without building debt, then simply get into the habit of paying all your open invoices weekly instead of waiting until they actually come due.

To start building your business credit, take these 3 easy steps:

1. Open a business bank account that you use solely for your business transactions. Credit reps like to see at least 3 months of history, so open this account as early as possible.
2. Apply for a business credit card, instead of using a personal one. (Business debit cards can also be useful, but it is the credit card that will build your business credit score.)
3. Manage your business bank account and credit well – absolutely no overdrafts or late fees.

Bookstores often request their first terms supplier account from Ingram Wholesale. This may be because Ingram is their oldest account, having been the first established. Ingram also has a very easy iPage system for paying your monthly bill via ACH and getting a 1% cash back reward. To apply for terms with Ingram, simply email creditservices@ingramcontent.com and request an application. For contacts for other suppliers, click here.

Once you have your first terms account, make sure you manage it well and that you pay your bills on time. If you were given a very low credit line, you may need to pay before your bills are even due to keep from hitting your credit limit and having shipments held. It is up to you to know your credit limit and keep on top of it; your credit rep will not necessarily tell you they are holding up your shipments.

Store the name and contact info for your credit rep and get in the habit of communicating with them regularly. For example, email every time payment has been made and every 6-12 months to ask if you qualify for a credit line increase.

As you begin establishing your business credit, it can be helpful to collate the information into a business credit sheet (see a sample). The sheet has all the information a supplier would need to check your credit references.

In the beginning, your business credit may rely solely on your business bank balance and your personal credit, in which case you may be asked for deposits or to sign personal guarantees.

If you have a separate physical location for your business, then your utilities may be credit references if you pay for service after it has been provided. If your POS provider or fixture company lets you pay in installments, then they have extended credit to your business and can be used as credit references. A business credit card can also be a trade reference.

As your credit increases, you can edit your sheet to include the more standard trade references of 3 suppliers (typically a wholesaler, a large publisher, and a smaller publisher and/or sidelines supplier).

When filling in a new supplier credit application, you can usually simply sign the application and write “See attached credit sheet” over the rest of the form.

A Data Universal Numbers System (DUNS) number is supplied by Dun and Bradstreet, and is a unique identifying number for your business that is linked to your business’ credit report. To apply for a free DUNS number, go here.

Unlike with personal credit, you cannot request a copy of your business credit report for free. Generally small businesses do not see a need to pay for access to their credit report; however, suppliers may decide to pay to view your credit report before approving a credit application.

As your business grows, consider which suppliers you order from most frequently and which support electronic ordering via Pubeasy and/or Pubnet. Either open new terms accounts or request to have your prepaid accounts converted. Click here for supplier contacts. Note: When opening new accounts, suppliers often want you to have an order ready to go since there is a cost for them to do credit checks and open your account.

Please contact Jill Hendrix, MVB Customer Success Specialist and former bookseller, j.hendrix@mvb-online.com, 862-397-1214.