Supplier trade credit: the funding piece you already have

Every time a supplier delivers goods and lets you pay later, they’re lending you money. It doesn’t feel like borrowing — there’s no application, no loan agreement, usually no interest — but supplier trade credit is one of the largest sources of funding for New Zealand small businesses. In a remix, it’s typically the first fader you push.

How does supplier credit work as funding?

Picture a café that buys $8,000 of coffee, milk and food each month on 20th-of-the-month terms. On average, the café has the goods for around five weeks before paying for them. That’s roughly $8,000 to $10,000 of funding at any time, provided by suppliers, at no direct cost. If one supplier agreed to 45-day terms instead, the café would hold even more of its own cash.

Now scale that up to a builder buying materials for a large job, or a retailer bringing in a season’s stock. Supplier terms can carry tens or hundreds of thousands of dollars — and they flex up and down with your activity, which a fixed loan doesn’t.

What can you ask a supplier for?

Ask	How it helps	When it suits
Longer standard terms	More days before each invoice is due	Steady, long-standing accounts
Seasonal dating	Stock delivered now, payment due after your peak	Retail, horticulture, tourism
Credit limit increase	Bigger orders without paying sooner	Growth or a large contract
Staged payments on a big order	Deposit, then balance over months	One-off bulk buys
Consignment or sale-or-return	Pay only for what sells	New lines, slow movers
Payment plan on overdue invoices	Catch up without losing supply	Short-term cash squeeze

How to make the ask

Suppliers say yes more often when you:

1. Ask early. A request before an order reads as planning; a request after an invoice is overdue reads as trouble.
2. Show your record. If you’ve paid on time for two years, say so.
3. Explain the reason. A seasonal build or a contract win is a good story; it means more orders for them.
4. Offer something. A bigger committed order, an exclusive line, paying part upfront.
5. Get it in writing. An email confirming the new terms protects both of you.

What does supplier credit really cost?

Usually nothing in interest, but there can be hidden costs:

• Lost early-payment discounts. If a supplier offers a discount for paying within seven days, taking the longer terms means giving that up. Compare the discount with what other funding would cost.
• Price. Some suppliers build their credit risk into pricing, especially for longer terms.
• Concentration. Relying heavily on one supplier’s terms means a change in their policy hits you hard.
• Interest and fees on late payment. Most terms of trade allow the supplier to charge for overdue accounts.

Do suppliers take security over your goods?

Often, yes. Many New Zealand terms of trade include a security interest over the goods supplied (and sometimes over more), and suppliers may register a financing statement on the Personal Property Securities Register. The Companies Office explains that registration gives priority over creditors who haven’t registered, and over those who register later.

That matters when you mix funding. If a lender also takes a general security interest over your business, the supplier’s registered interest in its own goods may rank ahead. Lenders know this and will look at the PPSR. Our guide on who ranks first when you mix funding explains how it fits together.

Illustrative example: a Hamilton garden centre’s spring build

Illustrative only; describes no real business.

A garden centre in Hamilton needs $70,000 of spring stock delivered in August, but most sales come in October to December. It asks its two main suppliers for seasonal dating: payment for August deliveries due at the end of November. One agrees for $40,000 of stock; the other offers 60 days on $20,000. The remaining $10,000 comes from the owner’s cash. No loan needed.

If your suppliers can only go so far and you need to cover the rest, you can ask a real person about the gap — there’s no credit check to start.

When does supplier credit stop being enough?

Supplier credit has natural limits. It only covers what that supplier sells, it can’t fund wages or rent, and credit limits are set by the supplier’s own risk appetite. It also fails when a business uses supplier credit to plug other holes — paying wages with money that should go to suppliers — and then falls behind.

At that point, other pieces need to come in: customer deposits for work you’re doing, a line of credit for general working capital, or a loan for a one-off build. The page on ordering your funding sources shows where supplier credit typically sits in the sequence — usually right at the front. For worked examples, see the stock remix and the big contract remix.

How do you protect your supplier credit?

• Pay exactly when agreed — not early unless there’s a discount, and never late without warning.
• If you can’t pay on time, call before the due date and propose a plan.
• Keep a simple schedule of every supplier’s due dates in your cash flow forecast.
• Review terms once a year and ask for improvements when your record is strong.

Need a piece that supplier terms can’t cover?

Supplier credit is a brilliant first piece, but it rarely carries a goal alone. Once you know how far your suppliers will go, tell us the goal and the gap that’s left. There’s no credit check to start, your enquiry stays with one real person rather than going out to a list of lenders, and we’ll talk through whether a loan, line of credit or another piece fits. Please fill in the form accurately — it’s how we find the right route on the first call.