Supplier trade credit (negotiated payment terms)
Agree with your suppliers to pay them some time after they deliver. It works like a short, interest-free loan, but suppliers set the limits and may want a track record first.
- No security
How it works
When a supplier lets you pay 30, 60 or more days after delivery, you can often sell the goods or finish the job before the bill is due. That gap is free money for the business.
- Default terms: if no date is agreed, a business payment is late 30 days after the customer gets the invoice or the goods or service.
- Agreed terms: businesses can agree payment within 60 days. Longer terms are allowed, but they must be fair to both sides. Public bodies must usually pay within 30 days.
- Asking for more: suppliers decide how much credit to give and for how long. They usually look at how long you have traded, your credit record and how reliably you pay.
Large companies must publish how quickly they pay their suppliers twice a year, and you can search these reports on GOV.UK. Some also sign up to the government's Fair Payment Code. The Code's Gold award means paying at least 95% of all invoices within 30 days.
Upsides and downsides
Upsides
- Free if you pay on the agreed date
- No application to a lender, no security and no shares
- Grows naturally as you buy more from the same suppliers
Downsides
- Suppliers set the terms, and new businesses may get little or none
- Only covers what you buy from suppliers, not wages, rent or tax
- Paying late damages the relationship and can cost you statutory interest
Risks
- A supplier can cut your credit limit or ask for payment up front at short notice
- Paying late can hurt your credit record and lead to supplies being stopped
- Relying on long terms can hide a cash problem until several bills fall due together
What it costs
- How it is priced
- Free if you pay on time. You may give up an early-payment discount
- Costs that are easy to miss
- Early-payment discounts you give up by taking the full credit period
- Statutory interest and compensation if you pay late
- Suppliers may raise prices for customers who take long terms
Set by each supplier, usually as a credit limit based on your order size and payment record.
Does it fit?
Could fit when
- You buy stock, materials or services regularly from the same suppliers
- You have traded long enough to show a payment record
Unlikely to fit when
- You are new, so suppliers may want payment up front at first
- Your main costs are wages, rent or tax, which suppliers cannot help with
Who can use it
- Business types: Sole trader, Partnership, Private limited company, LLP, Public limited company, Community interest company, Co-operative or community benefit society, Charity
- Suppliers decide whether to offer credit, and how much
- New businesses may be asked to pay up front until they have a payment record
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all own cash and no-cost
0%
0 of 4 ticked
- A good payment record
- A clean business credit file
- A forecast of what you will buy
Regulation and protections
A commercial agreement between businesses. The Late Payment of Commercial Debts (Interest) Act 1998 sets default terms and lets suppliers charge interest if you pay late.
The Small Business Protections Bill (in Parliament as the Commercial Payments Bill) would cap payment terms for large firms at 60 days. It was not yet law when last checked.
Types of provider: Your existing suppliers; Wholesalers and trade merchants with credit accounts.
Also consider
Sources
- GOV.UK: Late commercial payments: charging interest and debt recovery · checked 7 October 2026
- GOV.UK: Check when large businesses pay their suppliers · checked 7 October 2026
- Office of the Small Business Commissioner: Fair Payment Code criteria · checked 7 October 2026