Getting credit accounts with suppliers as a new business

[MrMonster]

Good afternoon everyone,

I'm just about to set up my new business as a brokering service for construction related products but i'm struggling to find a way around my biggest problem which is credit accounts. As a new business my credit history will probably limit me to a generous £1000 of credit with most suppliers and it's not uncommon for a single order to exceed that volume.

As i'm starting on a shoe string budget, can anyone offer advice on how to get around this without taking out a large loan to pay early and build my trading history with the suppliers?

Thanks

 

[Ashley_Price]

Have you spoken to the suppliers and explained to them your situation?

 

[Mark T Jones]

You may find suppliers will increase their limits with a (reasonably supported) PG

However, the central point here is that credit costs money. In this case, offering your customers credit is costing you, so why not offer discount for early payment?

Alternatively, factoring might help the situation.

 

[Mr D]

Good afternoon everyone,

I'm just about to set up my new business as a brokering service for construction related products but i'm struggling to find a way around my biggest problem which is credit accounts. As a new business my credit history will probably limit me to a generous £1000 of credit with most suppliers and it's not uncommon for a single order to exceed that volume.

As i'm starting on a shoe string budget, can anyone offer advice on how to get around this without taking out a large loan to pay early and build my trading history with the suppliers?

Thanks

The suppliers take a risk giving you credit. Over time with a trading history they may be willing to take bigger risks. Still a risk and if you go under they lose money.

Would you lend more than a grand to a new customer?

 

[MrMonster]

Have you spoken to the suppliers and explained to them your situation?

Not yet we haven't as the suppliers we need will be dependant on what enquiries we generate and we didn't want to put it out there too soon

You may find suppliers will increase their limits with a (reasonably supported) PG

However, the central point here is that credit costs money. In this case, offering your customers credit is costing you, so why not offer discount for early payment?

Alternatively, factoring might help the situation.

We had this exact option in mind regarding early payment, and we were looking to target cash customers at first but the industry is very much credit account orientated. We're also investing in a credit check system which will help us avoid late payers and affect our cash flow.

The suppliers take a risk giving you credit. Over time with a trading history they may be willing to take bigger risks. Still a risk and if you go under they lose money.

Would you lend more than a grand to a new customer?

I fully agree and understand and that's why i'm seeing if there is a solution out there as i'd be reluctant to do the same if i were to take on a new customer with limited trading history

 

[Ashley_Price]

I fully agree and understand and that's why i'm seeing if there is a solution out there as i'd be reluctant to do the same if i were to take on a new customer with limited trading history

This is why I have suggested you speak to the suppliers, as you will find they all have different ways of handling your situation.

When I bought the office supplies business (no longer operating), I had three main suppliers all of whom had different ways of giving me credit, even though I was unknown to them. They wanted references or said I had to have a guarantor, or to pay an amount on deposit.

Not yet we haven't as the suppliers we need will be dependant on what enquiries we generate and we didn't want to put it out there too soon

You don't want to leave it until you have enquiries, because you could end up letting a customer down if they order something from you, but you then find you can't get it from the supplier unless you pay upfront.

 

[The Byre]

new business as a brokering service for construction related products

That's a triple whammy!

New Business - bad risk.
Brokering Service - very bad risk.
Construction Related - OMG, they are the worst!

Each and every customer has a running profit score and a supplier will often assign a credit rating to that customer, as a percentage of his/her profit score. That way, if you turn your trouser pockets inside-out and show them the old 'White-Eared Elephant' further down the line, they are not going to have made a total loss.

 

[Toby Willows]

You’ll probably be on pro-forma for the first few ordered at least. But as you don’t have the wherewithal to do that it’s probably best seek financing before proceeding any further.