There are a lot of questions out there about the business credit tiers. A lot of business owners claim they have strong business credit and they never even considered the tiers. There is a school of thought that they are not necessary and a waste of time. Tier 1 business credit gets a particularly bad rap as being unnecessary. It’s time we dive into the truth about Tier 1 business credit.
The Truth About the Tiers and Tier 1 Business Credit
What are business credit tiers? Actually, the tier system is just how Credit Suite ranks vendor credit based on how easy it is to get approval. When you work through our business credit builder, you start by setting up a fundable foundation. Once your business is set up properly, you begin applying for Tier 1 business credit vendors. After you have enough of those reporting payments to the business credit reporting agencies, you can move on to Tier 2, Tier 3, and finally Tier 4 and advanced vendors.
First, let’s get one thing out of the way. The truth is, some business owners can build strong business credit without working through the tiers. That’s a fact. Here’s another truth. Most business owners can’t. Honestly, several factors need to fall into place perfectly to be approved for business credit accounts without working through the tiers in order.
These include but are not limited to:
- Substantial income
- Willingness to give a personal guarantee
- Excellent credit
- High value collateral and the willingness to use it to fund the business
However, the tiers are the key to gaining access to advanced vendors and more business funding without these things.
The Benefit of Working Through the Tiers in Order
The vendor tiers are set up by Credit Suite. It’s a sort of formula to allow business owners to build their business credit without any more personal guarantee than necessary. So, even if you are able to skip them, it’s not wise to do so. The tiers can still be useful as a way to limit your personal guarantees when it comes to business funding.
When you set your business up the right way, and work through the vendor tiers in order, your business can eventually fund itself with minimal impact on personal credit.
A Deep Dive Into Tier 1 Vendors
What makes Tier 1 vendors so special? These are starter vendors that will extend net terms on invoices. They do so with less focus on credit score than other vendors and creditors. Not only that, but they will also report those payments to the business credit reporting agencies.
However, it only works if your business has a fundable foundation. That includes having professional business contact information, an EIN, being incorporated, and having a D-U-N-S number, among other things.
How Do You Find Tier 1 Business Credit Vendors?
Since most vendors do not classify themselves into tiers, how do you find them? A simple search will give you a few options. However, the information changes without warning. We are always finding new vendors that fit into Tier 1, and often we discover vendors have changed their requirements or reporting standards in ways that make them no longer Tier 1 vendors.
Here are just a few Tier 1 business credit vendors we know of currently.
76
76 offers a fleet card that reports to Dun & Bradstreet and Experian.
To qualify, you need the following:
- Your corporate entity must be in good standing with the applicable Secretary of State
- An EIN
- Company address matching everywhere
- D-U-N-S number from Dun & Bradstreet
- Your business license (if applicable)
- A business bank account
- Business phone number listed on 411
They will ask for your SSN for identification purposes. You can use a $500 deposit instead of using a personal guarantee if you have less than one year in business. Their terms are net 15.
The CEO Creative
The CEO Creative reports to Equifax and Credit Safe. They offer low prices on electronics, wireless earbuds, cameras for cars and trucks, speakers and more. They also have quality custom design and branding services. You can create your own logo, business cards, and business accessories.
There is a membership fee, and the minimum order before they will report to the business credit bureaus is $40.
To qualify, you need the following:
- Your corporate entity must be in good standing with the applicable Secretary of State
- Business credit history
- EIN
- Company address matching everywhere
- Your business license (if applicable)
- A business bank account
- At least 120 days in business
Grainger Industrial Supply
Grainger sells hardware, power tools, pumps and more, in addition to performing fleet maintenance. They report to Dun and Bradstreet.
If a business doesn’t have established credit, they will want to see additional documents like accounts payable balance and business financials. Terms are Net 30, Net 45, Net 60, or Net 90.
To qualify, you need:
To be an entity in good standing with Secretary of State
- EIN
- Business address (matching everywhere)
- D-U-N-S number
- Business license (if applicable)
- Separate, dedication business bank account
- Business registered to Secretary of State (SOS) for at least 60 days
What’s After Tier 1 Vendors
When you choose to build business credit this way, you need 3 to 5 accounts reporting before you qualify for vendors in the next tier. Use vendors in Tier 1 to buy the things you need for your business anyway. As a result, you will be well on your way to building a strong business credit portfolio.
The goal is at least 10 business credit accounts reporting to your business credit report. For some, it is possible to get those 10 accounts from any tier by offering a personal guarantee. However, even if this is possible for you, it’s not always the most strategic move. It’s not wise to have all of your business credit tied to your personal credit.
Some business accounts require a personal guarantee regardless. But the more credit you can get in the name of your business without a personal guarantee, the better. Tier 1 vendors are the gateway to building a strong business credit profile with minimum personal guarantee.
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