Business Credit Types You Should Know About: A Comprehensive Guide

Published April 5, 2024
By Digital Web Chef Staff

Different Types of Trade Credit


When people start a business, they need money to keep it going and make it bigger. The money they borrow is called credit. Businesses can use five types of credit, and each one is different. Some types of credit have special rules for paying the money back; some are more risky than others. To be good at managing money, business owners need to understand all the different types of credit.
 

Business trade credit has five categories:

1. Vendor Credit (aka Starter Vendors)

Vendor credit occurs when a vendor (a business from which your business buys goods or services) extends payment terms to a customer (you/your business).

When people buy things from a vendor, sometimes the vendor will let them pay later instead of right away. However, they can only do that if they follow the rules that the store and the bank set. These rules say how many days they have to pay back the money. It could be 15 days, 30 days, 60 days, or 90 days. For example, if they have 30 days to pay, they must pay everything they owe within 30 days.

When you buy something from a store, you can pay for it immediately or pay some of it and leave some for later. When you leave some for later, it's called revolving credit. Some stores allow you to do this. 
 
But if you have vendor credit, you can only use it at the store where you got it. It's not like a credit card that you can use anywhere. So, vendor credit is only good for the store and not really good for you.


2. Retail Credit (aka Walmart, Costco, Office Depot)

Stores give out a special kind of money called retail credit. This money can only be used at the store that gave it to you, usually with a special card. When you apply for this card, the bank will need your Social Security number.

When a company wants to borrow money or get a credit card, they need to have a good record of paying back loans. This is called a business credit report. To have a good business credit report, they need to have at least three times where they borrowed money and paid it back on time. Sometimes, if they are new or don't have a good history, a personal guarantee may be needed. They may need to put down some money as a deposit to show they will pay back what they owe.


3. Fleet Gas/Maintenance Credit Cards (aka Arco, Wex, Valvoline)

Fleet credit comes from companies that issue credit for purchasing fuel and the repair and maintenance of vehicles. Often, these are gas cards. Even businesses that don't have large fleets of vehicles can still benefit from fleet credit. There may be time in business, credit history, or business revenue requirements. If you cannot meet some or all of those criteria, you may be able to offer a PG instead or secure your credit with a monetary deposit.

Since these cards tend to be ultimately issued by banks, your Social Security number must be on your credit application. This is in accordance with Federal law.
Terms can be either net or revolving.


4. Service Credit (aka Auto Repair, Machine Repair)

A service provider issues service credit to pay for their services only. There may be time in business, credit history, or business revenue requirements. If you cannot meet some or all of those criteria, you may be able to offer a PG instead or secure your credit with a monetary deposit.

Since these credit cards tend to be ultimately issued by banks, your Social Security number must be on your credit application. This is in accordance with Federal law. Terms can be either net or revolving.


5. Business Credit Cards (aka Chase, Amex, Cap One)

If you want to get a credit card for your business, sometimes you need to show that your business has a good history or has made enough money. But if you can't do that, you might be able to use a special promise called a Personal Guarantee or put some money in the bank to help you get the credit card. 
 
When you apply for a business credit card from a bank, you need to give them your Social Security number because it's the law. The credit card usually works like a magical revolving door, where you can borrow money, pay it back, and then borrow more again.


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