For-profit business owners have the benefit of using their personal credit to build their business credit, however, since a nonprofit organization does not have an owner or shareholders, it does not have the same benefit of building credit. Therefore, nonprofit leaders have to work to build an organizational financial history and build credit. As a nonprofit leader, it is necessary to keep your personal credit and finances separate from the organization's credit and finances and use business credit responsibility.
Here are the steps you can take as a nonprofit leader to build organizational credit:
Get a DUNS Number
DUNS is short for Dun & Bradstreet. The D-U-N-S Number is used to establish your nonprofit's D&B® file, which can help potential partners and lenders learn more about your organization, and may also help them make more informed decisions about whether or not to work with you as a client, supplier, or partner. You can register your organization using the legal business name for free at dnb.com.
Apply for Credit with Vendors
"Vendor credit lines also known as trade credit is when a company extends credit to your company in order to allow you to buy its products and services upfront but defer the payment for a later date.
After you purchase a product they will issue an invoice which must be paid according to the terms of your agreement. If you’re a startup company or have no business credit then most net 30 vendors will have net 10 or net 15 day terms initially. Keep in mind these terms can be extended to net 30, 90 or even 120 day terms if you continue to build a solid payment history with your vendors." (Source: Business Credit Blogger)
In addition to building business credit for a nonprofit organization, vendor credit can help with conserving your organization's cash flow.
Nonprofits can also acquire business credit cards. According to Fundera, here are the best credit cards for nonprofit organizations:
Chase Ink Business Cash
Capital One Spark Cash Select for Business
American Express Blue Cash Business
Bank of America Business Advantage Cash Rewards Mastercard
Capital One Spark Miles Select for Business
American Express Blue Business Plus
Chase Ink Business Preferred
Brex for Nonprofits
Capital One Spark Classic for Business
Wells Fargo Business Secured
BBVA Compass Secured Visa Business Credit Card
Again, it's extremely important that nonprofit leaders use business credit responsibility. Misuse of business credit can trigger IRS audits or can result in fraud.
I hope you found this to be helpful! If so, let me know!