Supplier Terms

Supplier Terms

One form of debt that can be used to help you build your DTC business is the terms you have with your suppliers — whether net-30, net-60 or longer. “That’s not debt!” you might argue. Actually, it is. Your supplier is lending you money, so it is by definition debt. Moreover, supplier terms are often the best financing you can possibly get. Terms can almost always be negotiated, and doing so can have a big impact on your cash flow. Remember the negative cash conversion cycle from above?  This is one of the ways to do it. Always negotiate for better terms!

Pros:

• Supplier terms are often negotiable, as long as you are willing to ask.
• This is hands down the cheapest financing you can get.
• Supplier terms allow you to build relationships with key suppliers because your suppliers will be more likely to extend terms with more commitment or transparency on your part.

Con:

• Supplier terms are measured in days, so the money is short-term.
• This type of debt can require larger order volumes or commitments, so be careful not to over-order just to get credit or extended terms.
• You’ll likely need to share financials with suppliers in order to negotiate.
• You can get locked in, either by order minimums or commitment to the supplier.

Best For:

• Everyone at every stage.

Pairs With:

• Everything.

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