A lot of thought goes into how to get a vendor account. For new and small businesses, using vendor accounts is a great way to build business fundability and credit ratings. However, too often, new business owners rush into obtaining vendor accounts without any thought as to the quality of the account. The basic fact is that a vendor account is only as good as the vendor supplying it. If the vendor isn't a company you would choose to buy from for any reason there is no reason to open an account.
Lines of Credit
A vendor account is similar to a bank line of credit, although the payment process is shorter. If you are a new business without previous loan history a bank will expect you to have at least 5 vendor accounts when you apply for a traditional loan. This helps them establish your business' fundability. However, open lines of credit mean open access to money. That makes you risky if you have too much credit available that you haven't already used. You could take the new loan and then run up additional debt in your vendor accounts until you can't pay back either in a timely manner. Don't open a vendor account if you aren't going to use it.
What to Watch Out For When Judging a Vendor
Vendors who treat you with kid gloves and tell you how wonderful you are may be telling you the truth, but in reality they also may just be telling you what you want to hear to get your business. Check out what the vendor has to offer, what their prices are and what their relationship is with other clients/customers.
Know what You Need
Just because a vendor offers credit for businesses doesn't mean you need what they offer. If you are a business office getting vendor credit at a construction supply company doesn't make any sense even though you may be able to get it. Ask other similar business owners who their vendors are. It is helpful to be a part of a community and you can find many resources online to connect with other small business owners just like you. Look within the profit and growth section to find out more about creating B2B relationships and picking the right vendor for your needs.
Vendor Credit Lines