Businesses do not always have enough funds to restock their inventory. Sometimes this happens because there’s a backlog of customer payments that haven’t come in yet. They have to find a way to keep things going for the duration of the cash squeeze.
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One way businesses choose to navigate this situation is by seeking lines of credit from their suppliers. This means that they borrow goods worth a certain amount of money from the vendor, and pay for those items over a period agreed upon by both parties.
This allows the recipient of the credit to carry on with their operations until they have collected outstanding payments from their own clients. A portion of those payments may then be used to settle the debts incurred on the borrowed goods or services.
If you run a small business, here’s how to get a line of credit from your supplier.
Be Diligent With Payments
The first thing you’ll want to do is to build trust between you and your vendor. And the best way to do this is to become a good-paying client to them.
Be sure to settle the bills for the things you purchase from them as promptly as you can. Make this your standard attitude to payments, so that they recognize you for this.
If you establish a track record of paying suppliers on time, they should be more open to providing you with credit when you eventually request it.
Ask For A Small Line Of Credit
It’s smarter to begin by asking for a relatively small amount of credit. Vendors are more likely to decline your request if you start with a large amount. It also makes it less probable that they’d oblige if you ask them in the future (the outcome of this depends on the strength of your relationship with them).
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Beginning with a small request doesn’t just increase your chances of having it granted; it also allows you to apply for greater support later on.
If you do get the line of credit, ensure that you pay your vendor early. Sustain your efforts to recover the money your business is owed so that you’ll be able to meet your obligation to your supplier.
Be consistent with settling your debts with suppliers, and you’ll make them trust you even more. This should prepare the grounds on which you can ask for larger lines of credit in the future.
Seek An Increase In Credit
You may do this if your business is capable of paying for it within the period agreed with the supplier. Hopefully, your business will grow steadily enough to support the increased credit that you desire.
Many businesses rely on supplier credit to sustain them through periods of stifled cash flow. You can benefit from it too by following the steps we have laid out here.
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