For businesses that order many goods and services in a typical year, having access to net 90 vendors is useful for managing cash flow and dealing with unexpected trends in sales. Here’s how net 90 payment terms work and what companies currently offer it.
What Are Net 90 Vendor Accounts?
Any time you do business with a supplier or service provider, you owe them money. Some require payment at the time of your order, while others allow you more time to pay in the form of short-term business credit.
They may check your report from business or personal credit bureaus to decide.
When a company gives you up to 90 days to pay the invoice, it’s considered a net 90 vendor account. It’s among the most lenient of payment terms, compared to paying instantly or waiting 30 or even 60 days.
This “buy now, pay later” approach can help small business owners free up cash for other things.
This vendor credit is also called “trade credit.” Not everyone may qualify for trade credit, and not all suppliers or service providers offer it.
If they do, it’s likely they have an application process somewhere on their website or in their accounts department that you can start to see if you qualify.
Net 90 vendor accounts can make a big difference in your business. By having up to 90 days to pay your bill, for resellers or retailers, it’s possible for you to sell goods even before you have to pay for them from the original supplier.
Vendor credit creates a positive cash flow situation that’s good for long-term growth.
What Does Net 90 Payment Terms Mean?
The term “net 90” means that you have 90 days from the time you place your order until your bill to them is due. Some vendors may start the clock at the time customers place their orders, while others wait until they ship your goods to begin the 90 days.
In most situations, there’s no additional charge for this 90-day grace period, provided you pay the entire amount owed by the 90-day due date.
If your accounts payable doesn’t remit in time, the remaining balance is charged to a business credit card on file or even subjected to additional fees or interest.
Still, other vendors could have a discount for early payment. If you can pay your bill before the 90 days is up, you might save money on your order, get free shipping, or earn additional offers that can help you stretch your budget further.
Always inquire about any benefits for paying your balance before it’s due.
The vendor may also have a limit to how big a balance you can put on 90-day net payment terms. Similar to a credit limit on a business credit card or line of credit, you can’t borrow more than this amount until you’ve paid some of the trade credit off.
Different Types of Vendor Accounts
Net 90 accounts are the most sought-after type of account, as they give you the most time to pay. They aren’t the only ones out there, however.
Net 30
As the name implies, net 30 vendors give you 30 days to pay your bill with the supplier or service provider from the date of order or shipment. Net 30 terms aren’t a very long time but could be enough to help you manage your money matters and free up some cash.
Net 30 vendors are the most common and are more likely to work with new businesses by offering smaller business credit lines. Most will ask you to place the order and keep a credit card on file, which will be charged if the 30 days pass and you owe anything from the original invoice.
Note that business credit cards and some personal credit cards come with a minimum of a 21-day grace period for purchases. When added to the original 30 days from the vendor, this could give you 51 days to pay your bills without interest or fees.
Net 30 payment terms are the default in businesses, but some may require payment upon receipt. With a better payment history, vendors could qualify you for a longer payment term.
Just be sure you never make a late payment, and ask if there’s an early payment discount for prepaid accounts.
Net 60
Net 60 vendors give you twice as long as the more typical net 30 accounts. With two months to pay your bills, you can more easily manage other expenses, like payroll or utilities.
It is also more likely that you’ll sell the items you purchased with the net 60 terms, and you can then repay the vendor back directly.
Companies that offer net 60 invoice terms to customers usually work with more established companies that have a history of paying their bills.
If they accept new businesses, it’s likely that they will start you with a smaller business credit limit first, then watch how you handle it before offering more.
Net 60 vendors are common in all industries, from wholesale goods to web services. Getting 60 day credit terms is a benefit for working with these companies and something you should seek out if you need more time to pay your purchase order balance.
Those, with a very good or excellent credit file through Experian or other credit bureaus, are more likely to get this perk, as well as those who have shown customer loyalty to the vendor through regular orders.
Net 90
Net 90 vendors aren’t as common, and they generally work with companies who have stellar business credit reports. The application process for working with these companies may be more rigorous, and they will require a backup way to pay if your invoice goes unresolved.
For a net 90 vendor relationship to work, you should track your orders and mark the date on which your final invoice will come due. As you pay off your bill, you may get access to that same amount to place new orders, which will also come with a new 90 days to pay.
Over time, it’s possible for retailers and resellers to manage their inventory to let the net 90 vendor relationship help them grow their sales. More products on the shelves are always ideal for those hoping to boost revenue numbers.
List of Net 90 Vendors
Net 90 day vendors aren’t widely advertised, and you won’t be able to just web search to find companies that offer this perk. That doesn’t mean you are without options, however. With a little ingenuity and effort, it’s possible to get net 90 invoice terms using these methods below:
Option 1 – Negotiate for Net-90 Terms With Your Current Suppliers
If you’ve already been paying on time and have a great relationship with a supplier, it doesn’t hurt to ask what invoice options are currently available. They may have a net-90 program you can apply for over time.
Some may be open to giving you 60 days to start, then work with you to transition for longer.
In any case, it’s always a good idea to keep making on-time invoice payments to build your reputation and your credit score. An added benefit of handling your finances well is that your current vendors will be more likely to say “yes” when you ask for 90 days to pay.
Option 2 – Put Net-60 Vendors on a Credit Card
Another possible solution is to use your existing personal credit card or business charge card in tandem with a 60-day invoice term to get that full 30 account benefit.
You’ll only be able to do this if your credit card on file has a 28-day grace period, and not all do. Good credit history is also usually required.
Check your business credit card terms to see just how long you’ll get before payment comes due.
Like the example above, your supplier is more likely to grant you additional time to pay an invoice if you’ve shown reliability in the past. If you haven’t been good about paying on 30 day invoice terms, they won’t likely approve something as long as 60.
New clients have less of a chance of getting this done.
Option 3 – Put Net-30 Vendors on a 60-Day Credit Card
Finally, some business credit cards, like the Amex Plum Card and Brex eCommerce Card, have 60-day interest-free terms. When combined with your supplier’s net 30 account terms, this gets you a full 90 days to pay your bills before interest accrues.
Most suppliers are net 30 vendors by default, so you won’t likely need to ask for these extra business credit benefits. This is also a great option for businesses working with a new vendor account since you won’t have the established history with them to ask for longer than 30 days.
You’ll also get your on-time payments reported to the business credit bureaus from paying your business credit cards on time.
Business owners who make these payments every month will see their business credit score increase, and this alone may give them access to tradelines and offers they didn’t see before.
How to Choose the Right Vendor Account
At first glance, it may seem that picking a vendor based on invoice payment terms is essential. Certainly, 30, 60, and even 90-day perks are alluring and may get you to settle on a vendor on that perk alone.
There is more to a vendor relationship than just the invoice terms, however. The quality of merchandise and services should always win out, as this is what gets passed along to your customers.
You should also see if your on-time payments get reported to business credit bureaus, like Experian, as this helps you qualify for small business loan products, working capital offers, and other small business financial solutions that can ease cash flow problems down the line.
If picking between two similar vendors, vendor credit can always be considered, but the reputation of your offerings should be priority number one.
Keep in mind that you can also ask for more flexible payment terms down the road when you have become a trustworthy business credit risk with a higher business credit score.
CreditStrong for Business is the only 0% interest business credit builder in the nation