Beginning Vendor Credit

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Some important information I wanted to bring to your attention, as you begin to build credit for your business entity:

Some vendors will deal with startups having no credit history. Of those, some may extend credit right away.

Yet others will want you to pay up front for the first 90 days. Then, they'll report the entire 90 day period as on-time payments to the bureaus. So, it's entirely reasonable to go a whole calendar quarter buying from your vendor and paying up front, yet seeing no progress from them on your credit history. Then, of a sudden, you'll find you have a history with that vendor and they reported 90 days of on-time payments!

So, that was unexpected.

It's also the good news! Since you pay up front, your payments don't get a chance to be late! Rather an interesting plan, eh?

If you've been reading along as I publish my experiences, you may have noticed that I've been advocating opening two lines of credit a month and buying $60 or more from each vendor every month. If you follow these guidelines, your expenses will look like this:

Month 1
Vendor 1: $60
Vendor 2: $60
Month 1 Total: $120

Month 2
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Month 2 Total: $240

Month 3
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Vendor 5: $60
Vendor 6: $60
Month 3 Total: $360

Total, 1st Quarter: $720

Of course, that's a low estimate. By the time you pay taxes and shipping, your actual purchases will likely run closer to $75 each month, more or less, from each vendor. So, now the numbers look like this:

Month 1
Vendor 1: $75
Vendor 2: $75
Month 1 Total: $150

Month 2
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Month 2 Total: $300

Month 3
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Vendor 5: $75
Vendor 6: $75
Month 3 Total: $450

Total, 1st Quarter: $900

That's not inconsequential, but it's not too bad. It's as close to "no cash, no credit" as we can come given what we're trying to do. I mean, how do you establish credit for your business entity if the entity doesn't buy stuff and pay for it?

On the other hand, you're reading this blog for the cost of what you're already paying. If you're at home, you're already paying your power and internet bills. If you're reading this at the library on their computer, that's about as low cost as it gets.

I'm blogging to help you do what I'm doing. I'm not asking for a month's take-home pay like some "get rich" gurus might ask.

All I'm asking is to stop by here every so often and look for a new post. I try to post at least once a month, more when I have news that won't wait.

Let's layout the timeline, then:

From the time you start buying, figure two calendar quarters before you can start looking for startup lenders who will honor your entity's established credit. That's six months.

For me then, that means I have six months to study large multi-family properties and explore lenders and other options. So, I'm looking at June of 2011.

At last! A "stake in the ground"! A concrete target I can aim for. A wise person once said, you can't hit a target you don't have!

We'll talk again soon!

Take care - be well!

Much Success!