Understanding Tradeline Business Accounts

by | Feb 8, 2022 | Business Finance | 0 comments

Basically, a tradeline business account is a line of credit that a vendor will extend to a company. Some people may call these vendor accounts, some refer to them as corporate tradelines; whatever you call them, a tradeline business account can certainly benefit your small business, especially in the initial phases of your company‘s lifecycle. Usually, within the context of a business tradeline account, a supplier will give you up to 30 days to pay for your purchases. So, for example, you have the opportunity to get the goods or products you need right now, and then you have a month-long window within which to pay this amount off. This saves you from having to come up with cash upfront. For those companies whose cash flow may not be consistent or that depend upon selling a product in order to generate the necessary cash flow, getting a business tradeline account could certainly help with any such cash flow issues.

As with any loan or account type, a business tradeline account does have its pluses and minuses. In this article, we take a look at some of the benefits and some of the drawbacks of getting a tradeline business account.

How Do You Get a Tradeline Account for Your Business?

First off, let’s examine how a small business owner procures a tradeline business account. The simple way to get a tradeline for your business is to ask. Especially if you intend to do a great deal of business with a particular supplier or vendor, proposing a long-term relationship and then within the context of that relationship, asking about opening a tradeline is an excellent way to approach the subject. Keep in mind, too, these types of accounts can be a perfect way for you to build credit as long as the vendor or supplier reports to major credit agencies.

As mentioned, even if your business is relatively new, getting a tradeline isn’t as difficult as it might be to get some other forms of financing for your company. This is why you must make all tradeline account payments on time. The vendor will likely check your credit—personal or business—before approving any such tradeline account. They might also ask for referrals and, consequently, call those suppliers you have dealt with in the past to ensure that you keep up with your payments.

The Benefits of a Business Tradeline Account

The approval process can be easier than with bank loans

Suppose a company is newer or their credit history is not exactly stellar. Instead of a traditional loan, they may go directly to the vendor and open a tradeline. This is one beautiful quality of a business tradeline account.

A tradeline business account can help with cash flow

As noted earlier, you don’t have to come up with the money to purchase the inventory or materials needed upfront. Instead, you generally have 30 days to pay for the goods purchased.

Making your payments on time helps build credit

It is essential to ask the vendor or supplier if they report to the credit agencies. And if they don’t, it doesn’t hurt to request that they do. This will help you build up your credit and improve your overall business credit score.

A tradeline can be available for newer businesses

While yes, a vendor does like to see some track record of repayment, this isn’t always the case, and some suppliers might be willing to take a risk on newer companies in the hopes of establishing a long-term relationship with a potentially good client.

The Drawbacks of a Tradeline Business Account

Your initial credit limit could be small

Versus taking out a loan with an online lender or with a bank, when you are dealing directly with the vendor, the amount of credit they extend you is generally smaller than you could otherwise get from a more traditional loan program.

There could be fees for newer businesses

Again, the vendor is taking a risk as newer businesses don’t necessarily have a payment history from which to speak. As such, there could be higher fees attached to any tradeline.

You’re limited to that vendor

As it is a tradeline account, you must work directly with that vendor or supplier. Meaning, unlike with a traditional business loan, you can’t shop around to try and find the best price. You have to go with the terms that that vendor is offering.

Is a Business Tradeline Account Right for You?

The short answer is, it depends. If you want to establish a long-term relationship with a particular vendor or supplier, opening a tradeline account is probably a good idea. On the other hand, if you would prefer to shop around, look for discounts, and find the best price, you might look at different financing options that give you this kind of flexibility.

First Union Lending is Here to Help

We offer small businesses a variety of fast and flexible loan programs. We have you covered, from short-term loans to merchant cash advances to SBA loans. And our clients get funded quickly–some in as little as two days. If you need additional working capital now, we can help. Call today.