The 4 Tiers of Business Credit

There are 4 tiers when it comes to business credit lines. Each tier works to establish financial support for business owners, but they all have different terms and requirements. Here we've created a quick breakdown of what each tier represents.

Tier 1- 

The most accessible line of credit for new businesses. Many Tier 1 vendors require only an EIN to start a tradeline account. Tier 1 vendors typically offer a credit line that can be used to purchase supplies or services directly through them with no interest and a 30 day repayment plan (hence the name "Net 30"). 

Tier 2-

Often referred to as "Advanced Trade Credit", Tier 2 vendors offer higher credit limits with more flexible repayment options than Tier 1 (Net 60 or Net 90). Most Tier 2 vendors require established credit and a company's revenue history. Businesses that don't meet the minimum revenue requirements may still be approved with a personal guarantee.   

Tier 3-

This is the tier most businesses are working to qualify for, as they offer direct financing capital rather than just products and services. Tier 3 credit refers to financial tradelines such as loans and business credit cards. While these accounts are more difficult to qualify for, businesses who have utilized tradelines from Tiers 1 & 2 to build their Paydex score will have better chances of being approved.

Tier 4-

Businesses searching for investors are looking for Tier 4 funding. Unlike Tiers 1-3, investors provide capital in exchange for business equity rather than repayment. Investors aren't typically concerned with credit scores, but a strong business plan is required and they will usually research a company's management team to predict success and return on investment.

The bottom line? Tier 1 Vendors Help Build Business Credit

By using these vendors and paying on time, you can:
✔️ Boost your business credit scores
✔️ Qualify for higher credit tiers to access funding & business credit cards
✔️ Separate your personal and business credit

Check out our list of Tier 1 Vendors with easy approval to start building your business credit today.

Want to learn more about business funding? 

Get a free copy of The Funding Playbook. Join our email list to claim yours today.