Net 30 vendors and trade credit

"Net 30" on an invoice means the full amount is due 30 days after the invoice date. When a supplier gives a business those terms, it is lending the business the goods for a month. That is trade credit, and it is where most companies' credit records begin.

Why it matters for building credit

A supplier account becomes a tradeline in a business credit file only if the supplier reports it to a business bureau. Many do not. Before you open an account to build credit:

• Ask whether it reports, and to which bureaus. Get the answer from the supplier, not from a list.
• Buy what you would buy anyway. An account for things the business does not need is a cost, not a strategy.
• Pay before the due date. Business files often record how early or late a company pays. Early is what builds.

Getting approved

Trade terms are often approved on the business's own details: legal name, EIN, address, phone, bank reference. New accounts may start with a small limit, prepayment on the first order, or a request for your personal guarantee. Applying under the same name and address everywhere helps the reports land in one file.

If a supplier turns you down, trade credit has its own Regulation B rule: the supplier must tell you within a reasonable time, and must give the reasons in writing if you ask in writing within 60 days. See business credit denied.

Early payment discounts

Some terms offer a discount for paying early: "2/10 net 30" means 2 percent off if paid within 10 days, the full amount by day 30. Passing up that discount is expensive borrowing. The early payment discount calculator shows the yearly cost of any terms.

Watch out for

• Paid "starter vendor" lists or memberships that promise reporting tradelines for a fee. Ask what the fee buys that applying directly would not.
• Invoices for things nobody ordered. The FTC warns about fake invoices for directory listings and supplies; see vendor invoice scams.